What is agreed upon in an employment contract?

All agreed employment terms should be included in a written employment contract.

Working duties

  • An employment contract should include a mention of the contents of the working duties.
  • In the event of a dispute, you will then have some evidence of the agreed job description.

Work location

  • Daily allowance, for example, is calculated based on the agreed work location.
  • Work location refers to the municipality in which the work is mainly carried out.

Duration of employment

  • An employment relationship may be established for a fixed period or until further notice. In the latter case, the contract is terminated by giving notice.
  • In order to establish a fixed-term employment contract, an employer must have an acceptable reason, such as the seasonal nature of the work or substituting for an employee on maternity leave.
  • In a fixed-term employment contract, a termination clause can be included, in which case the parties can give notice to terminate the contract after an agreed notice period. A clause of this kind must be expressly written down in the employment contract.
  • Even if the possibility of termination has been agreed upon, an employer cannot give notice to an employee without lawful grounds.

Collective agreement

  • If the collective agreement of a certain field is applied in an employment relationship, the terms and conditions of the said collective agreement, such as holiday bonus, become part of the employment contract.
  • Check the contents of the collective agreement to know your rights.
  • Not all fields have a collective agreement.

Trial period

  • Applying a trial period requires agreement according to the Employment Contracts Act.
  • A trial period of a maximum of four months can be agreed upon.
  • If a work-related training lasting for a continuous period of over four months is organised, a trial period of no more than six months may be agreed on.
  • If a fixed-term employment relationship is shorter than eight months, the trial period may not exceed 50 per cent of the duration of the employment period.

Cancellation of employment contract during trial period

  • During a trial period, an employment contract may be cancelled without notice by either party.
  • The employment will end during the day on which the trial period cancellation is notified.
  • Note that an employment relationship cannot be terminated by virtue of the trial period condition before actually beginning the work.

Pay

  • You should agree upon the amount of pay, pay period and payday in writing.
  • In addition to monetary remuneration, a salary includes various fringe benefits received by the employee, such as a telephone benefit.
  • If provision-based pay has been agreed upon in addition to a monthly salary, the bases for provision determination should be entered in the employment contract or its appendix in detail.
  • It is especially useful to agree upon the way that provisions are paid upon the termination of the employment.

Working hours

  • When establishing an employment contract, the person's regular working hours are agreed upon and the application of the Working Hours Act is discussed.
  • According to the Working Hours Act, overtime is compensated for with overtime pay as specified in law. 
  • With separate agreement, overtime can also be compensated for with corresponding time off. Unless otherwise agreed, overtime is compensated for in money.
  • Compensated overtime requires an order by the employer and consent by the employee.
  • A managing director's work is excluded from the application area of the Working Hours Act, as are also positions that must, based on the duties related to them or otherwise based on the employee's status, be regarded as management of a company, community or foundation or an independent part thereof or as an independent duty closely parallel to such a management duty.
  • As regards those excluded from the application area of the Working Hours Act, compensation for overtime may also be taken into account in salary formation.
  • In this case, the employer and salaried employee should make clear how the compensation has been taken into account and how it will be taken into account in salary development throughout the duration of the employment.

Annual holiday and holiday bonus

  • Annual holiday accrues according to the Annual Holidays Act.
  • Employees mainly accumulate 2–2.5 days of annual holiday per full month at work.
  • Should an employee have accrued unused annual holidays upon the termination of his/her employment, they will be paid as holiday compensation in the final salary payment.
  • Holiday bonus is not a statutory benefit. Holiday bonus must be separately agreed upon in a collective agreement or an employment contract. Holiday bonus payment may also be a practice applied by the employer. The payment bases for holiday bonus are determined according to agreement.

Travel expenses

  • If your work involves a lot of travelling, you should agree upon the compensation for travel expenses and travel time in your employment contract.
  • The payment of daily allowance should also be agreed upon.
  • If a collective agreement is applied in the sector, it may contain provisions on these issues.
  • The employer may also have travel rules that apply to all employees.
  • Before going on a trip at the latest, see what has been agreed upon travel expenses.

Termination of employment contract

  • The length of a notice period can be agreed upon regardless of the duration of the employment relationship, and it can be longer for the employer than for the salaried employee.
  • A notice period of a maximum of six months can be agreed upon.
  • Unless otherwise agreed, the notice periods to be observed by the employer are determined according to the Employment Contracts Act as follows:

 

Duration of employment Notice period
up to one year 14 days
more than one year but no more than four years one month
more than four years but no more than eight years two months
more than eight years but no more than 12 years four months
more than 12 years six months

 

  • Unless otherwise agreed, the notice period to be observed by the employee according to the Employment Contracts Act is 14 days if the employment relationship has continued for no more than five years, and one month if the employment relationship has continued for more than five years.
  • As a main rule, a fixed-term employment contract cannot be terminated.

Agreement of non-competition

  • A non-compete clause included in an employment contract or a separate agreement of non-competition limits the employee's employment after his/her employment relationship has ceased.
  • Non-competition can be imposed due to a particularly weighty reason related to the employer's operations or the employment relationship, in consideration of the quality of the employer's operations, the need for protection and the employee's position and duties.
  • Non-competition must be expressly agreed upon before or during the employment in order to enable invoking it.
  • An agreement of non-competition mainly limits the employee's right to conclude an employment contract with competing companies or to engage in the trade concerned during the agreed period.
  • According to law, the main rule is that the maximum duration of non-competition is six months.
  • An agreement of non-competition does not bind the employee if the employment relationship has been terminated for a reason deriving from the employer.

Non-disclosure

  • According to the Employment Contracts Act, an employee may not disclose the employer's business secrets during employment.
  • If the employee has obtained a business secret unlawfully, the prohibition continues after the termination of the employment relationship.
  • According to the Crimes Act, a violation of a business secret is a penal offence during employment and two years after the end of the employment relationship (see the Crimes Act, Chapter 30, Section 5).
  • A separate non-disclosure clause is often included in employment contracts.
  • The purpose of non-disclosure agreements is to protect the employer's own trade and business secrets as well as those of other companies belonging to the same group, clients and cooperation partners.
  • A good non-disclosure clause or agreement specifies the confidential materials in detail and does not impose unnecessary expansions on the scope of non-disclosure.
  • It is essential that the confidentiality obligation has not been expanded to cover the employee's professional competence or previous experience.
  • The law contains no provisions on the contents of a non-disclosure clause or agreement.
  • A non-disclosure agreement may remain valid for an undefined period of time after the end of the employment relationship. It is justifiable to limit the validity of a non-disclosure stipulation to, for example, 1–2 years from the end of the employment relationship with an agreement, as when time passes by, the need for confidentiality decreases and there may not necessarily be a need for non-disclosure at that point.

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