EMCC European Monitoring Centre on Change

Temporary layoff

Finland
Phase: Management
Тип:
  • Response to COVID-19
  • Income support for workers
  • Working time flexibility
Last modified: 07 July, 2020
Native name:

Lomautus

English name:

Temporary layoff

Coverage/Eligibility

The instrument is available for employers who need to (temporarily) reduce their workforce due to lack of business.

Main characteristics

A temporary layoff scheme, or an obligatory unpaid holiday, is the Finnish version of flexible protection of employment.

According to the Employment Contracts Act of 2001, the term 'laying off' means a temporary interruption of work and payment of wages (either for a fixed or indefinite period of time), while the employment contract in other regards remains in force.

The measure applies to situations where:

  1. the employer could (as an alternative to the temporary layoff) dismiss the employee because the work to be offered has diminished substantially and permanently due to financial or production-related reasons, or for reasons arising from reorganisation of the employer’s operations; or
  2. the work or the employer's potential to offer work has diminished temporarily (expected duration maximum 90 days); and
  3. the employer cannot reasonably provide the employee with other suitable work or training.

The employer may make the layoff decision unilaterally, or it may be negotiated with the employee(s). Employers are responsible for informing the employees about the lay-offs. The notice period preceding the layoffs is 14 days. Employers with a staff of at least 20 people must commence cooperation negotiations (yhteistoimintamenettely) if the employer is considering layoffs. These negotiations last either 6 weeks or 14 days. The temporary layoff can be either on a full-time basis, or it can involve a reduction in regular working hours. During the layoff period, the employee is allowed to work for other employers and/or is entitled to unemployment benefits. The maximum duration of an indefinite layoff (when work is permanently diminished) is undefined by law.

A fixed-term employee may only be temporarily laid off if she/he is substituting a permanent employee who could be temporarily laid off. 

When 20 or more employees are affected, the employer must also draw up an action plan together with the employees. 

During the COVID-19 emergency, to facilitate businesses' adaptation to the new market situation, the right to temporary layoff has been temporarily extended to cover fixed-term employment contracts. In addition, the notice period is currently 5 days instead of 14 days. Also the duration of cooperation negotiations is temporarily shortened from 6 weeks or 14 days to 5 days. 

These temporary provisions are applicable to all employers who need to temporarily lay off personnel during the period for which the temporary provisions are in force. The same conditions apply as in the case of temporary layoff of employees with a permanent contract. Workers may be laid off when the potential of the employer to offer work to its personnel has diminished (either temporarily or permanently) and the employer cannot provide the employee with other suitable work or training. In addition, the notice period and the length of co-operation negotiations were shortened.

These extensions do not cover the public sector. These provisions are in force for the period 1 April 2020 - 31 December 2020. 

These COVID-19 related temporary provisions to the temporary layoff scheme were part of the joint proposal presented by the peak-level social partners to the government in March 2020. This joint proposal included several policy measures that could be used to support both employees and employers to adapt to the new market situation. A majority of these measures were implemented by the government. In May 2020, the peak-level social partners proposed that these implemented policy measures, including temporary provisions to the layoff scheme, could be extended until the end of the year instead of the planned timeframe, end of June 2020 (Confederation of Finnish Industries, 2020). The extension was accepted by the Parliament in June 2020. 

Funding

  • National funds
  • Employees
  • Companies

Involved actors

National government
Funding (unemployment benefits)
Public employment services
Temporarily laid off employees are entitled to the same public employment services as those who have been made redundant, such as vocational labour market training, personalised job mediation, and skills development.
Other
Temporary layoffs must by law be preceded by information given to employees and by negotiations between the employer and the employees. The exact rules vary according to the size of the company and the number of employees threatened by layoffs.

Effectiveness

Temporary layoffs constituted the principle means by which Finnish enterprises tried to minimise dismissals and to survive the recession following the economic crisis in 2008-2016. The number of employees who have been temporarily laid-off on a full-time basis has decreased steadily between 2015-2019: 

  • some 30,500 employees were laid-off in February 2015;
  • some 23,300 employees were laid-off in February 2016;
  • some 17,000 employees were laid off in February 2018;
  • some 16,000 employees were laid off in February 2019.

The majority of layoffs last a fixed period of time, and the average duration was 58 days in 2017.  

 COVID-19 measure: 

The effects of the COVID-19 pandemic have significantly increased the number of employees that have been laid off either on a full-time basis or whose working hours have been shortened. In April 2020, the number of employees who were laid-off on a full-time basis was 164,000. This is 152,000 employees more than in April the year before. The number of employees whose working hours had been temporariy reduced was 20,300 which is 14,500 more than in April the year before (Ministry of Economic Affairs and Employment, 2020). 

Strengths

The system brings benefits both to employers and employees, as temporary lay-offs are usually found preferable over dismissals. The instrument acknowledges the company's need to keep its competent workers, even during periods when they cannot be offered work.

 

 

Weaknesses

Although temporary layoffs offer an alternative to redundancies in situations where an economic upswing is anticipated, there is never certainty of when such an upswing might happen.

The instrument has received a number of critical remarks by trade unions, especially during the years of the Great Recession. At the beginning of the economic downturn, trade unions found that employers took to the instrument too lightly, without considering alternatives such as training their staff. On the other hand, in 2014 the Social Democratic then-Minister of Labour Lauri Ihalainen argued that companies do not know labour legislation well enough and therefore dismiss employees too easily instead of utilising temporary lay-offs in the form of reduced working hours.

Trade unions have furthermore estimated that employers sometimes simply transfer the workload and make the non-laid-off employees work more without proper compensation.

Examples

No information available.
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