Background for Finland

The economy of Finland has gone through a turbulent couple of years. After the effects of the COVID-19 pandemic, Finland experienced a strong recovery at the beginning of 2022, but later that year Finnish households were subjected to reduced purchasing power due to high inflation and rising interest rates. The inflation level was at 9.1% in December 2022 (Statistics Finland, 2023a), a dramatic spike after a decade of moderate inflation levels (Statistics Finland, 2023b). In 2021, Finland’s real gross domestic product (GDP) growth was 3%, compared with the EU average of 5.4% (World Bank, 2023), and is estimated to have been around 2% in 2022 (European Commission, 2023). The employment rate in Finland has nevertheless steadily increased since 2012, by 5.4 percentage points from 2012 to the end of 2022, when it was 79.8%. The employment rates of men and women are almost the same and both have increased to their highest points in 10 years. Unemployment figures have seen a slight decrease over recent years, from 7.9% in 2012 to 6.8% in 2022 (Statistics Finland, 2023c).

The working conditions of employees are determined on the basis of legislation and collective agreements. The most important legislation regarding employment relationships in Finland are the Employment Contracts Act 55/2001 (Työsopimuslaki), the Annual Holidays Act 162/2005 (Vuosilomalaki) and the Working Time Act 872/2019 (Työaikalaki). A new Working Time Act entered into force in 2020, which in turn was amended in 2021. The Employment Contracts Act saw several amendments in 2022. Several acts safeguard non-discrimination and diversity at work. These laws apply to all employees working for Finnish employers, regardless of their nationality.

The most important laws governing labour market organisations and collective bargaining include the Collective Agreements Act 436/1946 (Työehtosopimuslaki), which sets the framework for the agreement system, and the Act on the Labour Court 646/1974 (Laki työtuomioistuimesta) and the Act on Mediation in Labour Disputes 420/1962 (Laki työriitojen sovittelusta), which are designed to settle disputes in relation to collective agreements. The latter was amended in 2022/2023. In 2022, a new Co-operation Act 1333/2021 (Yhteistoimintalaki) entered into force, with the purpose of improving dialogue practices in the workplace. Labour market legislature is drafted in a tripartite manner, with trade unions and employer organisations involved in the process.

Finnish industrial relations are highly centralised. The various trade unions and employer organisations cooperate closely through peak-level organisations. The Finnish system of collective bargaining was first implemented in 1940, when the labour market organisations first recognised each other as negotiating partners; the process of tripartite cooperation began fully in 1968. In addition to employment issues, the Finnish labour market organisations are also key actors in developing other policy areas, such as the pension scheme. With a tradition of consensus, the government usually consults the social partners in detail over any proposed amendments to the laws that affect working life.

Finland has traditionally had a three-tier system, with collective bargaining normally taking place at national, sectoral and local levels. This practice, however, is currently in a state of change: following a change to its internal rules in 2015–2016, the peak-level Confederation of Finnish Industries (EK) (Elinkeinoelämän keskusliitto), Finland’s principal employer organisation, opted out of participating in central-level collective bargaining. Thus, the 2016 Competitiveness Pact (Kilpailukykysopimus), a major tripartite labour market agreement entailing a wage freeze for 2017 and a 24-hour extension of annual working time, among other things, may have been the last of the large, centralised agreements. The collective bargaining rounds of 2017–2018 were negotiated directly at sectoral level, without being preceded by a centralised agreement.

In addition to the formally negotiated collective agreements, the social partners engage in mutual working life discussions during the agreement period through the ‘continuous negotiation system’. This practice has grown increasingly common during the last decade.

The bargaining round of 2020 was concluded successfully despite increased economic uncertainties due to the COVID-19 pandemic. One of the contributing factors was the close cooperation among the peak-level social partners. In March 2020, the partners made a joint proposal to the government (Akava, 2020). Several of the measures included in this proposal were implemented, and these added flexibility to the labour market during the first year of the COVID-19 crisis. In 2021, the role of the social partners shifted from being a driving force behind measures directly tackling the immediate consequences of COVID-19 to focusing on long-term measures to support the recovery and resilience of Finland. Instead of ad hoc measures, the social partners focused on tripartite processes related to wider labour market and other reforms. The key issue in collective bargaining in 2021 was not the COVID-19 pandemic, although the crisis did have an accelerating effect on the negotiations. Instead, the major issue was the ongoing shift towards a more decentralised bargaining system (Eurofound, 2022). However, 2022 was marked by increased employer coordination in the collective bargaining rounds, as negotiations were halted while employers across sectors waited for the technology sector to come to an agreement. The technology industry is by tradition the pacesetter in collective bargaining for wages. In 2022, industrial action by the nurses’ unions also took place, which resulted in the Act on Securing Essential Health Care and Home-based Care during Industrial Action 826/2022 (Laki välttämättömän terveydenhuollon ja kotihoidon turvaamisesta työtaistelun aikana). This temporary act specified that nurses could be mandated to work during industrial action, to avoid life-threatening labour shortages in the critical healthcare field. The temporary act was in force until 31 January 2023.

The government’s cross-governmental social and healthcare reform was finalised in 2022. This had implications for collective bargaining within the welfare sphere, as thousands of employees were transferred from the collective agreement covering municipalities to the agreement covering the new welfare regions.