Finland: Labor Market Reforms Could be Illegal, Finnish Unions Say

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By Marcus Hoy

Sept. 28—A raft of measures proposed by Finland's center-right coalition government could be subject to legal scrutiny, an official at the Confederation of Finnish Trade Unions (SAK) tells Bloomberg BNA. According to SAK head of international affairs Katja Lehto-Komulainen, the new proposals go against the norms of collective negotiations and could breach Finnish law and international agreements.

The government has proposed eliminating two paid vacation days, withdrawing the first day of paid sick leave, significantly reducing overtime pay and making it easier for employers to employ workers on temporary contracts. Should it be adopted, the new legislation would mean that these issues would not be open for discussion when collective agreements are negotiated

Addressing the ‘Sustainability Gap'

The main proposals are:

• two paid public holidays—Epiphany and Ascension—will become unpaid,

• employers' social insurance contributions will be reduced by 1.72 percentage points,

• the rules on sick pay will be overhauled so that the first day of sickness will become unpaid and employees will receive 80 percent of their salary for days two through nine,

• the standard overtime rate will be reduced by 50 percent and Sunday pay will be reduced from 200 percent to 175 percent,

• employers will be allowed to offer temporary contracts to employees with “no objective justification” if the contract is for a maximum of one year,

• the maximum vacation entitlement will be shortened from 38 to 30 working days,

• employees of companies employing more than 20 people will be offered in addition to redundancy pay the right to re-employment training with a value at least equal to the average monthly salary and

• companies employing more than 20 people will be required to provide occupational health care for a six-month period after redundancy.

 

The shortening of the vacation period would have the greatest effect in the public sector where 38 working days is the norm but would also affect private sector companies that abide by collective agreements allowing more than 30 days' vacation.

According to the Prime Minister's Office, the measures are necessary to alleviate a “very poor economic situation” characterized by a 10 billion euro ($11.2 billion) “sustainability gap.” While they would reduce employers' labor costs by 5 percent, the statement said, the measures would also serve to enhance employees' future job prospects when facing redundancy.

The proposal has received support from the Confederation of Finnish Industry, which said that the measures are needed to improve competitiveness and reduce unemployment.

“These decisions are tough, but when the economic situation becomes bleaker day by day, it becomes more and more important to do something,” confederation CEO Jyri Hakamies said. “The Finnish government was forced to take this matter into its own hands after it failed to reach a negotiated settlement with labor market organizations.”

Government ‘Inflexible on Key Issues'

SAK's Lehto-Komulainen told Bloomberg BNA that the proposals appear to breach freedom of association and collective bargaining rights contained in the International Labor Organization’s Conventions 87 and 98.

“We did not see a genuine commitment to negotiate from the government, as it was inflexible on key issues,” Lehto-Komulainen said.

“Ninety percent of the Finnish workforce is covered by collective bargaining agreements,” according to Lehto-Komulainen. “This is a major strength of the labor market, as it has traditionally led to calmness and predictability. Genuine tripartite negotiations have been a success in Finland. For instance, last autumn a large pension reform was negotiated on a tripartite basis.”

“It is detrimental that the government intends to propose new limits above which labor market organizations would not be able to negotiate,” Lehto-Komulainen said. “This goes against the right to freedom of association and freedom to negotiate collectively that are enshrined in the Finnish Constitution and in international conventions that Finland has ratified.”

‘Negative Effects'

“We have to assume that the package is ideological in nature,” Finnish-American Chamber of Commerce policy director Matthew Wood told Bloomberg BNA. “It is supposedly designed to improve export competitiveness, but its benefits will be less relevant for industries that operate domestically. It will largely affect those in service industries such as healthcare and education.”

“These measures will certainly have negative effects on employers as well as employees,” Wood said. “For example, the evidence is quite clear that discouraging sick employees from staying home will cause overall absence rates to increase and increase costs accordingly. Additionally, by unilaterally dismantling the tripartite system of labor negotiations, the government has ensured that labor relations will be strained for years to come.”

“The package should have an effect on multinationals, but no more so than domestic players,” Wood continued. “The measures will save money for domestic employers in some cases, but in my opinion these will mainly be public sector industries that are already facing large budget and staffing cuts, and as such they won't result in any expansion of investment or employment. I haven't heard from one of our members that is seriously considering expanding investments because it will become 12.5 percent cheaper to employ workers on Sundays.”

“The government seems determined to press forward, and the labor unions don't seem particularly inclined to bend,” Wood concluded. “I don't expect the law to face significant opposition in parliament, where the government has a strong majority. However, it's entirely possible that the government will back down in the face of sustained opposition and the proposal could certainly be revised.”

Amcham is one of the few employers' organizations that has opposed the government proposals.

According to the Helsinki Times, the government is expected to formally present its proposals to Parliament the week of Sept. 28.

To contact the reporter on this story: Marcus Hoy in Copenhagen at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

A summary of the new proposals is at https://www.sak.fi/english/news/government-hits-hard-against-freedom-of-agreement-with-their-new-legislation-for-cuts-2015-09-11, a statement from the SAK at https://www.sak.fi/english/news/government-hits-hard-against-freedom-of-agreement-with-their-new-legislation-for-cuts-2015-09-11, both in English.