2000 Annual Review for Finland

This record reviews 2000's main developments in industrial relations in Finland.

Political developments

The presidential elections held in February 2000 saw the election of the Social Democrat, Tarja Halonen, as President - the first woman in Finnish history to hold this office. She won the election by a very small margin against her main competitor, the Centre Party candidate Esko Aho. The result was 51.2% for Ms Halonen and 48.8% for Mr Aho.

The "rainbow" coalition government consisting of left- and right-wing parties – the Social Democratic Party (Suomen Sosialidemokraattinen Puolue), the conservative National Coalition Party (Kansallinen Kokoomus), the Left-Wing Alliance (Vasemmistoliitto), the Greens (Vihreä Liitto) and the Swedish People's Party (Svenska Folkpartiet) - remained in power. Municipal elections were held in October and the Centre Party (Suomen Keskusta, KESK) became the largest party at the municipal level, increasing its share of the ote by 2.1 percentage points to a total of 23.9%. This pushed it ahead of the Social Democrats, who gained 23.0% of the vote. In Helsinki, the Greens sprang a historic surprise and came in second place behind the National Coalition Party and ahead of the Social Democrats.

Collective bargaining

The 2000 collective bargaining round was conducted on a sectoral basis, following the collapse of national intersectoral negotiations in the autumn of 1999 following opposition to a central agreement from the Chemical Workers' Union (Kemianliitto), the Transport Workers' Union (Auto- ja Kuljetusalan Työntekijäliitto, AKT) and the Paper Workers' Union (Paperiliitto) (FI9910124N). The spring of 2000 saw strikes or strike warnings by a number of powerful trade unions, such as those in chemicals, transport, and paper. These key unions were seen as endeavouring to take by force what they had not been able to obtain through negotiations, and their efforts proved successful. They achieved settlements in excess of the general wage increase norm of 3.1%. In addition, the bargaining system seemed to move towards greater decentralisation (FI0005147F).

Pay

The sectoral bargaining round was opened by the metalworking industry, with the Metalworkers' Union (Metalli) - along with the Construction Trade Union (Rakennusliitto) - setting the general trend by obtaining wage increases equivalent to a 3.1% rise in labour costs (FI0001133F). Many sectors followed this lead, and bargaining seemed to be developing into a form of centralised settlement when over 90% of the wage earners involved soon approved deals at that level (FI0002135N). This pay increase was widely considered as moderate, even though employers stated that it was too high in the light of EU Economic and Monetary Union (EMU).

The bargaining round continued without problems for some time after the opening settlements. However, the negotiations involving the strongest unions came last and, as expected, proved difficult: it was awkward sectoral problems in these industries that had scuppered the prospects of a central deal, because these problems could not be dealt with in a national incomes policy agreement. These unions played a waiting game, finally putting their demands onto the table long after the others (FI0004142F). It was nevertheless somewhat unexpected that unions called strikes in key sectors - notably in chemicals, transport and paper (see below under "Industrial action") - and thus achieved pay settlements higher than the general trend. In chemicals, the agreement - lasting more than three years - increased the wages of the employees in the heavy chemicals, oil, gas, petrochemicals, plastics and chemicals product industries by 3.9% in the first year. For the two years after that, the intention is to follow the general trend in industry as a whole.

The new agreement in transport runs for three years and covers nearly 30,000 employees. The cost effect for the first year was about 4.9%. The aim for the other two years is to follow the general trend, plus an additional 1.4% pay rise. The agreement in the paper sector is valid for three years, and the cost effect of the wage increase for the first year was under 4%. Wage increases for the second and third years were left open for subsequent agreement. Settlements catering to various sector-specific problems were also concluded (FI0004145N).

Following the sectoral level bargaining round, industrial relations stabilised again in late 2000. The social partners began to discuss the possibility of a new central accord and, on 15 December 2000, a new comprehensive incomes policy agreement was signed (FI0012170F). This new two-year national wage agreement will mean an increase in labour costs of 3.1% in 2001 and 2.3% in 2002. The agreement covers about 2 million wage earners, or some 90% of Finnish employees. The main pay-related points of the new central accord, which will run until January 2003, and was subsequently implemented at sector level, are as follows:

• in 2001, there will be a general pay rise of FIM 1.20 per hour or FIM 200 per month, with a minimum increase of 2.1%. There will also be an additional amount of 0.5% to be distributed in subsequent negotiations within sectors in line with particular circumstances, and an "equality allowance" of 0.6% to be used to improve the position of women and lower-paid workers in sectors. The overall effect will be a 3.1% increase in labour costs;

• in 2002, there will be a general pay rise of FIM 1.07 per hour, or FIM 179 per month, with a minimum increase of 1.9%. There will be an additional 0.3% for sector-level distribution. The overall effect will be a 2.3% increase in labour costs;

• an indexation clause has been introduced, under which if inflation exceeds 2.6% over the period from January 2001 to December 2001, pay will be increased by the corresponding percentage. However, minor increases in prices of up to 0.4 percentage points over 2.6% will not result in pay increases. Thus, in practice, if inflation reaches 3.1%, this will trigger a pay increase of 0.5%; and

• an incomes progression clause has been introduced, aimed at ensuring that there is an equal wage development for those sectors that fall behind the average wage development for all workers. A special committee, consisting of the national conciliator and one representative from each sector's employer and trade union organisations, will monitor developments over the period April 2000-April 2002 and decide on any possible additional pay increase by 30 August 2002.

Working time

A number of working time-related developments were considered in the 2000 sectoral bargaining round. The Metalworkers' Union had sought a working time reduction of one day per year, but with no success, due to outright rejection of this proposal by the employers, which argued that Finnish metalworkers already had one of the shortest working weeks in Europe. However, the Chemical Workers' Union succeeded in its demand of making Saturday after Ascension Day a paid holiday - which means a cut of one shift (ie eight hours) in annual working time.

The new central incomes policy agreement for 2001-2, concluded in December 2000, provides that Ascension Day will become a national paid public holiday in 2002, for those employees who do not already have a holiday on this day. This provision does not include shiftworkers. Further, the accord provides that projects will be set up to promote good working time practices

Job security

Job security provisions did not feature strongly in the 2000 bargaining round, which concentrated mainly on pay and working time. However, the new central incomes policy agreement provides that the existing "job rotation" sabbatical leave scheme (FI9704110F) will be continued for two years.

Training and skills development

A number of training elements were included in the 2001-2 central incomes policy agreement. For example, the agreement states that measures will be taken to promote employees' "ability to cope" at work (FI9911127F) and to promote training. Further, the accord includes a clause stating that projects will be set up to promote lifelong learning.

In January, a working group of the central social partner organisations presented its proposals on the implementation of a training benefit scheme for persons of working age (FI0002134N). The benefit, equal to about 80% of unemployment benefit, would be granted only for full-time vocational training of up to one and a half year's duration, undertaken at the initiative of employees. In order to receive the benefit, the applicant would have to be employed by the same employer for at least one year altogether (either continuously or in separate periods) and to have a working history totaling at least five years. This third phase of the so-called "training guarantee scheme" is a sequel to the first and second phases, which were intended for unemployed and long-term unemployed people. The proposal requires government action to implement it.

Legislative developments

In September 2000, the long-running dispute between the government and the social partners concerning the reform of the Employment Contracts Act was resolved. The Employment Contracts Act - known as the "working life constitution" - is a cornerstone of Finnish employment law, covering basic issues such as drawing up contracts of employment, the rights and duties of employers and employees, terms and conditions of employment, the grounds for termination of employment, the procedure to be observed on termination, and rules on the application of collective agreements. A tripartite committee with the task of reforming the Act was set up in 1995 (FI9706116F). The preparation of the proposed amendments involved many disagreements and, during the final stage, disputes centred especially around changes concerning the "general validity" of collective agreements, and temporary agency work (see below under "New forms of work").

General validity means the binding application of collective agreements on all employees and employers in a sector, irrespective of whether or not they are members of the signatory organisations. Under the proposal finally agreed, the general validity of a collective agreement will be determined not just on the basis of statistical data on the membership of employers' organisations (the agreement is considered generally applicable within a sector when about half the employees in that sector work for an employer which is bound to that agreement under the terms of the Collective Agreement Act), but also in the light of other criteria, such as the established practice of collective agreements in the sector and the general level of membership of both trade unions and employers' organisations. The committee submitted its compromise proposal for a new Employment Contracts Act in February 2000 (FI0003138F), a compromise was reached in September (FI0009161F) and parliament passed the Act in December 2000.

The government decided in May on the content of a bill concerning opening hours in the retail trade (FI0005148F). The bill provides for an extension of opening hours, with the aim of improving the competitiveness of smaller shops. The bill would permit grocer's shops – ie establishments selling mainly food supplies - with a floor area of up to 400 square metres to open on Sundays between 12.00 and 21.00. Other retail outlets would be permitted to open on Sundays in May and November, in addition to June, July, August and December as currently permitted. This was submitted to parliament in December.

The organisation and role of the social partners

In November 2000, four service sector trade unions affiliated to the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) merged to form Service Unions United (Palvelualojen Ammattiliitto, PAM). The unions involved were: the Union for Commercial Employees (Liikealan ammattiliitto); the Hotel and Restaurant Workers' Union (Hotelli- ja Ravintolahenkilökunnan Liitto, HRHL); the Caretakers' Union (Kiinteistötyöntekijäin Liitto, KTTL); and the Technical and Special Trades Union (Teknisten ja Erikoisammattien Liitto, Tekeri). This new union has over 200,000 members, and is Finland's second largest after the Trade Union for the Municipal Sector (Kunta-alan ammattiliitto, KTV).

Industrial action

The final agreements in the spring 2000 sectoral collective bargaining round were hastened by a number of strikes. The first significant industrial action took place in March in the chemicals industry, where an agreement was achieved after a week-long strike (FI0004142F). This was followed by a major nationwide five-day strike in the transport sector. The scope of this dispute was widened following a lock-out by employers, although an agreement was reached on 3 April. Finally, a deal in the paper sector was reached on 19 April, following a nationwide strike lasting more than a week (FI0004145N). In the first six months of 2000, a total of 72 strikes took place, involving 73,565 employees. The number of working days lost was 246,763.

Some significant disputes took place in Finnish seafaring during 2000. In May, the Finnish Seafarers' Union (Suomen Merimies-Unioni, SM-U) held a boycott and sympathy strike in a dispute over the application of a Finnish collective agreement to an Italian-registered ship with a mainly Estonian crew. The conflict provided an outlet for underlying worries about the future of Finnish seafarers' jobs. Under an amendment made to the Maritime Act in early 2000, the registering of Finnish ships under the flag of another EU or EFTA country is now possible without ownership being transferred from Finland. According to the Finnish Shipowners' Association (Suomen Varustamoyhdistys, SVY), this practice can be prevented only by increasing state subsidies and cutting taxation (FI0005149F). Despite a government decision to grant subsidies to shipowners, tensions over "outflagging" and the use of foreign labour in Finnish merchant shipping continued until August 2000, with a dispute over a shipowner hiring Polish seafarers. The Finnish Seafarers' Union considered these contracts of employment invalid and boycotted the vessels concerned (FI0008156F). In August 2000, however, the Seafarers' Union reached an agreement, following conciliation, which ended its dispute with the shipowner. Under the deal, the pay and conditions of the Polish seafarers will be increased so that they are more in line with Finnish levels (FI0009159N).

National Action Plan (NAP) on employment

The social partners participated actively in the working group drawing up the Finnish NAP for 2000, in both an official and unofficial capacity. In the area of equal opportunities (the fourth pillar of the EU Employment Guidelines) a unanimous proposal for a three-part programme to promote equality was approved. Two of the programme's parts will look at how to eliminate labour market segregation, while the third part will comprise a wage survey.

Equal opportunities and diversity issues

The 2001-2 national incomes policy agreement reached in December 2000 provided for a special wage increase for women and low-wage earners (see above under "Pay"). In addition, the social partners have decided to pursue an "equal workplace" project in cooperation at 12 workplaces in 2001. The project has already introduced a number of new areas for discussion and action. Furthermore, tripartite discussions have occurred on the possible appointment of an official "discrimination ombudsman". As noted above, an equality programme has also been agreed in the context of the Finnish NAP.

Information and consultation of employees

There were no legislative or any other significant developments in the area of the information and consultation of employees in Finland in 2000. However, a significant factory closure initiated some debate about information and consultation. Fujitsu Siemens decided to shut down a profitable computer-assembly plant in Finland and move production to Germany (FI0002136F). Following the closure (attempts to find a prospective buyer failed), 450 employees were made redundant by the end of March 2000. The employees were anxious to ascertain whether laws and agreements had been violated, as had been the case in the closure of Renault's Vilvoorde plant in Belgium in 1997. However, it became clear that nothing could prevent the closure, though the significant electronics industry cluster that has been established in Finland should provide work for those made redundant. After the redundancies took effect, the Ministry of Labour - and later also the employees - asked the police to undertake an investigation as to whether the Cooperation Act had been violated, in that proper negotiations may not have occurred over the closure. Investigation of a possible criminal act was still under way at the end of the year, while unions prepared to sue the company on behalf of redundant workers. Commentators note that this case clearly indicates the potential threats of globalisation.

New forms of work

In the area of temporary agency work, the new Employment Contracts Act which was enacted in 2000 (see above under "Legislative developments") regulates employment contracts for this kind of work, requiring temporary agency workers to be subject to the regulations of the generally binding collective agreement applicable to the user company, if the temporary agency is not bound by another collective agreement.

In the area of teleworking, it is estimated that 17% of the Finnish workforce telework at least sporadically. Of all the different categories of telework, it is call-centre work which seems to have grown most rapidly. There are as yet no specific collective agreements regulating telework, although telework is regulated in the new Employment Contracts Act. Furthermore, the new and expanding category of economically dependent workers – those who are not employed, but rely on one employer as their main source of income - are covered by the new Employment Contracts Act.

Outlook

Like its 1998-9 predecessor (FI9801145F), the new centralised incomes policy agreement for 2001-2 has attained a wide coverage, estimated at more than 90% of Finnish employees. The agreement can be considered a "solidaristic" one which supports both wage earners' purchasing power and employment. Despite the centralised nature of the agreement, there has been a continuing incorporation of flexible elements, which take sectoral and workplace-level needs into consideration. An unusual feature of this incomes policy round was the decision of the Confederation of Unions for Academic Professionals (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA), which represents highly educated professionals, to remain outside the agreement. However, despite this decision, almost all of AKAVA's member unions signed the agreement. Some of the unions that remained outside the deal had been thought likely to take some sort of industrial action to press their demands in 2001, with the problems focused on low-paid groups such as kindergarten teachers working for the municipalities (though events in early 2001 indicated that these groups, with the exception of doctors, were settling in line with the central agreement without industrial action). The Prime Minister, Paavo Lipponen, has already promised to support the idea that the municipalities should launch a study of wage structures.

After the conclusion of the 2000-1 central deal, it can be concluded that the Finnish industrial relations model seems to be functioning well in the new environment of EMU. Finland's competitiveness is so high at the moment that the agreed wage increases will presumably not represent any threat to the predicted strong continuation of economic growth.