Labour market and agreement system

The terms and conditions of working life are controlled by three factors: labour laws, collective agreements made by employer and employee organisations and agreements made locally at companies and workplaces.

Labour legislation

Labour legislation creates a basis for the standing, rights and duties of an employee and for the terms of employment. Key laws of this kind include the Employment Contracts Act (service relationships have their own acts), Working Hours Act and Annual Holidays Act.

Employees’ standing in working life is also secured through the Occupational Health and Safety Act, Non-discrimination Act and Act on Co-operation within Undertakings, for example.

Pensions and unemployment cover are also based on legislation. The labour market’s employee and employer organisations play a major role, in addition to Finland’s government, in shaping labour market legislation (tripartite preparation). At this level of labour market negotiation, JHL’s members are represented by SAK.

Collective agreements

The national labour market organisations formed by employers and employees agree on collective agreements. In the public sector, these are similarly agreed on in collective agreements for central government.

The above-mentioned agreements can be used to set labour market rules and terms of employment, usually, for employees, to a level above that offered by legislation. Finland does not have a law concerning a minimum wage in euros and pay is determined based on collective agreements.

These agreements are valid for a period of time agreed on by the organisations (agreement period). When the agreed time period draws to a close, the parties to each collective agreement renegotiate the terms of the agreement. The basis for these agreement negotiations is usually the stipulations of the previous agreement.

Changes in the agreement-based pay and other employment terms result in a cost impact, which partly determines, limits and depicts the size of the changes and impacts on the employer’s labour costs.

Employment terms are thus not renegotiated starting from square one during each negotiation round. In the end, collective agreement activities are, for the employees, about selling their work input for labour market peace and, for employers, buying the work input and guaranteeing labour market peace by committing to the employment terms laid down in the agreement.

JHL signs altogether some 60 national collective agreements applying to different sectors and companies.

Local agreements

National parties to collective agreements agree on which employment terms can be locally re-evaluated at companies and workplaces (options to deviate from agreements).

The parties to a local agreement are usually the employer and a shop steward for the trade union making the collective agreement.

Local agreements allow the parties to better take into account the nature of the company’s and workplace’s operations so that both the employer and employees benefit.

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