Increasing flexibility of fixed-term employment contracts and other changes to the Employment Contracts Act

The aims is to remove barriers to hiring employees and to improve the operating environment, especially for small and medium-sized enterprises.

Currently, a fixed-term employment contract may be concluded for a justified reason. In addition, a fixed-term employment contract may be concluded without a justified reason with a long-term unemployed person.

The working group proposes that in future it would be possible to conclude a fixed-term employment contract without a justified reason in cases concerning the first employment contract between an employer and an employee. Moreover, a fixed-term contract could be concluded without a justified reason if the employee had been employed by the same employer more than five years ago.

A fixed-term contract could be concluded for a maximum of one year without a justified reason.

The contract could be renewed up to two times during the year following the conclusion of the first fixed-term employment contract. In total, a maximum of three fixed-term employment contracts could be concluded without a justified reason. The combined total duration of the contracts could not, however, exceed one year.

At the end of the fixed-term employment contract, the employer would be required to give the employee a reasoned explanation of the possibility to hire the employee for an employment relationship of indefinite duration or for a fixed-term employment relationship concluded for a justified reason. The requirement to provide an explanation to the employee aims to prevent possible abuses of fixed-term contracts concluded without a justified reason.

A fixed-term employment contract concluded in violation of the proposed regulation would be considered to be valid until further notice.

The amendment proposed by the working group is not in itself estimated to weaken the protections against discrimination. This is because non-discrimination laid down in the Equality Act also applies to fixed-term employment contracts concluded without a justified reason under the new regulation. Under the Act, the action of an employer is considered to constitute discrimination if the employer, when deciding on the 
duration or continuation of an employment relationship, acts in a way that the employee finds herself/himself in a less favourable position on the basis of pregnancy, childbirth or family leave.

The employee and the employer would have the right to terminate a fixed-term employment contract concluded without a justified reason that has lasted for at least six months. This would increase flexibility for both employers and employees. For example, an employee could resign before the end of a fixed-term contract concluded without a justified reason if the employee was offered an employment contract for an indefinite term.

This is the period of notice given to an employee before a layoff. The purpose of the notice period is to give employees the opportunity to prepare for interruptions in work and pay.

Under the current Act, the employer must give an employee a personal notice of layoff no later than 14 days before the layoff begins. In addition, collective agreements may specify a notice period of 14 days in accordance with the Act or longer.

As per the working group’s report, the notice period laid down in the Act would be shortened to seven days. The possibility of local collective bargaining would also be added to the Act. The employer and the representative of the employees, or if no such representative has been selected, the employees or a group of employees together, could agree to observe the seven-day notice period instead of the longer notice period included in the collective agreement. The agreement must be in writing.

The re-employment obligation refers to a situation where an employer needs employees for the same or similar tasks for which the employer has dismissed an employee four months earlier for financial or production-related reasons. If the dismissed employee is a jobseeker, the employer is required to offer the employee the work in question. However, the obligation to re-employ is six months for employment relationships that have lasted at least 12 years.

The working group proposes that in future the re-employment obligation would only apply to employers with at least 50 employees.

Fixed-term employment contracts are regulated by e.g. the EU Fixed-term Work Directive (the so-called Framework Agreement on fixed-term work). The Framework Agreement requires Member States to prevent the abuse of fixed-term employment contracts. Member States may choose different ways to do this. The agreement does not require Member States to regulate the first fixed-term employment contract with an employee. 

There are no binding international agreements or EU regulations on the re-employment obligation and the period of notice for layoffs.

To the extent that legislation aims to authorise derogations from collective agreements offering better protections with the means of local collective bargaining, the regulation must consider international agreements on the freedom of organisation and the right to collective bargaining (e.g. ILO) and the provisions of the Constitution safeguarding these rights.

The proposals are expected to lower the threshold for employers to hire employees, to increase legal certainty and to reduce the administrative burden to some extent.

The change is expected to increase the use of fixed-term employment relationships. 

Research data on the topic does not indicate that the reform has a clear impact on employment or unemployment.

On 6 September 2024, the Ministry of Economic Affairs and Employment appointed a tripartite working group to prepare the legislative amendments in accordance with the Government Programme. The tripartite working group that prepared the legislative amendments was not unanimous in its work. Dissenting opinions were submitted by the Confederation of Finnish Industries EK and the Local Government and County Employers KT, the Federation of Finnish Enterprises as well as the employee confederations the Central Organisation of Finnish Trade Unions SAK, the Confederation of Unions for Professional and Managerial Staff in Finland Akava and the Finnish Confederation of Professionals STTK.

The Ministry of Economic Affairs and Employment is organising a consultation round on the working group’s report between 2 June–28 July 2025.

Following the consultation round, a summary will be drawn up of the comments received and the preparation of the reform by public officials will continue. The Government plans to submit its proposal to Parliament in early autumn 2025. 

According to the working group’s report, the legislative amendments would enter into force on 1 January 2026.