How are co-operation negotiations held upon personnel reductions?

The Act on Co-operation within Undertakings aims to promote interactive co-operation procedures between a company and its personnel and to make cooperation between the employer, personnel and labour authorities closer in order to improve the status of employees and to support their employment in the event of operational changes in the employer company.

The personnel elect a personnel representative to represent them in co-operation negotiations.

Co-operation procedure upon labour use reductions

The Act on Co-operation within Undertakings is applied in companies with at least 20 regular employees. An employer must arrange co-operation negotiations when considering measures which may lead to notice of termination, lay-off or reducing a contract of employment to a part-time contract of one or several employees on financial or productive grounds.

The employer may not make a decision on possible measures leading to personnel reductions before the co-operation procedure is followed through. Whether the decision leading to notice of termination is made by the employer or the controlling undertaking does not affect the co-operation liability. The measures considered by the employer may be, for example, business decisions resulting in personnel reductions, such as the closure of the undertaking or any part thereof, its transfer to another place, or an expansion or reduction of its operations.

An employer may terminate an employment agreement when the amount of available work has been essentially and permanently reduced due to financial or production reasons or as a result of the employer's operational restructuring measures. The employer does not have the right to give notice if an employee can be transferred to or trained for other duties, if the restructuring of tasks has not resulted in actual reductions in work amount or if a new employee has been hired for similar duties before or after giving notice.

Co-operation negotiation procedure in more detail

Personnel impacts and related work arrangements caused by changes in business activities.

(Act on Co-operation within Undertakings, Chapter 6)

  • Changes due to adjustments in business operations and work arrangements that the employer can make within its scope of power of management.
  • No notices of termination, lay-offs or reducing contracts of employment to part-time contracts; no pay cuts are possible either.
  • The terms of individual employment contracts cannot be unilaterally changed.

Co-operation negotiations that may lead to notices of termination and lay-offs

(Act on Co-operation within Undertakings, Chapter8):

  • The amount of work must have essentially and permanently reduced due to financial or production reasons or as a result of the employer's operational restructuring measures.
  • The representation of one's own personnel group in negotiations must be ensured (usually, a shop steward, an elected representative or a co-operation representative).
  • The negotiator needs support from other active people.
  • Sufficient time must be reserved for the negotiations. 
  • In the negotiations, alternatives must be sought to limit the scope of personnel reductions (training and redeployment options, work and working hour arrangements etc.).
  • Solutions and decisions are always reached during and after the process, not beforehand.

Change security

The objective of change security is to speed up re-employment.

  • If an employment contract is terminated due to production and financial reasons, the employee is entitled to a paid employment leave during the period of notice.
  • The employee may use the leave to prepare an employment programme or to participate in labour market adult education, a traineeship or on-the-job training, to seek a new job or to attend a job interview or redeployment training in accordance with the programme.
  • The maximum duration of the leave is 5–20 working days depending on the employee's notice period.

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