Finland: Latest working life developments – Q2 2016

The Competitiveness Pact and the reform of unemployment benefits are the main points of interest of this article. This country update reports on the latest developments in working life in Finland in the second quarter of 2016. 

Tripartite Competitiveness Pact signed and tax cuts promised

The tripartite Competitiveness Pact was finally signed in June 2016. There had been several failed attempts since May 2015 to reach an agreement, but in March 2016 the peak-level social partners agreed the terms and conditions of the Pact. This established the terms on which sectoral collective agreements were then negotiated. The sectoral negotiations were dramatic and many large and influential trade unions came close to withdrawal from discussions a number of times. The Metalworkers’ Union (Metalli), the biggest of the industry unions, was under particular pressure since many other unions made their agreement to the pact conditional on the metalworkers’ acceptance. A few sectors decided to stay outside the pact, most notably the Transport Workers’ Union (AKT), a key partner for all export industries.

Prime Minister Juha Sipilä had demanded that at least 90% of Finland’s employees be covered by collective agreements that complied with the terms of the Pact. If this minimum was not reached, he said, the pact would be cancelled and the government would introduce budget cuts and taxes worth up to €1.5 billion. In the end the government made a small concession since, when the pact was finally signed, its coverage was estimated at 86.5%. Sipilä announced that other sectors could still join before the government budgetary negotiations start in August. If coverage rises to 90%, taxes will be lowered by €515 million in 2017; with the current lower coverage, tax cuts of €415 million are promised. The pact is also expected to lead to the creation of 40,000 new jobs.

Unions and employers express dissatisfaction with the Pact

The Pact is exceptional as a negotiated settlement that weakens employee working conditions to this extent. It freezes wages for 2017, transfers part of the liability for social security contributions from employers to employees and introduces an annual working time extension of 24 hours without additional compensation. This last condition was the hardest for the employee-side negotiators to accept. Jarkko Eloranta, the newly elected President of the Central Organisation of Finnish Trade Unions (SAK), commented that the Pact places a heavy burden on employees’ shoulders. He said he hoped there would be no further demands on them from the government and pointed out that union trust in the government is currently low. Meanwhile, the employer’s side and the centre-right government partner, the National Coalition Party, remain dissatisfied with the inclusion of local bargaining in collective agreements rather than being regulated by law. The Federation of Finnish Enterprises (Suomen Yrittäjät), which represents around 115,000 small and medium-sized enterprises, refused to sign the Pact because of this.

Changes to unemployment benefits

The government also presented a wide range of amendments in April to unemployment security legislation, weakening benefits and tightening their regulation. Employers’ terms, on the other hand, are to be slackened to make both recruitment and firing of workers simpler. The amendments upset trade unions, especially the large white-collar Trade Union Pro, which said the plans were unfair, particularly since they were framed outside the Competitiveness Pact framework. Government reassurances that unreasonable clauses would be avoided finally convinced Pro not to withdraw from the Pact. The amendments are expected to be approved in Parliament during the autumn of 2016.



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