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Workforce Flexibility and Government Incentives in times of Covid-19 - Finland

Short-Term Work State Aid

Covid-19 Questionnaire

Are there any regulations in place providing an employer with possibility for flexible workforce planning such as part-time work/temporary leave which are triggered in a situation similar to a pandemic outbreak as Covid-19?


If YES on question 1, please describe which type of regulation. Please confirm if and to what extent such leave can be supported by state aid and/or other extra-ordinary governmental support.

The Employment Contracts Act provides provisions on furloughs, i.e. how an employer may lay off employees. As a consequence of Covid-19 the minimum negotiation times laid down in the Act of Co-operation within Undertakings in the event of layoffs will be temporarily reduced to 5 days in all situations (this provision is in force until 30 June 2020).

The notice period for layoffs will also be temporarily reduced to 5 days. The right to lay off is temporarily extended to cover fixed-term employment contracts to the same extent as for indefinite employment contracts. Laid off employees will have a right to terminate their fixed-term contracts regardless of its original term. Also these provisions are in force until 30 June 2020.

The Act on Co-operation within Undertakings permits that the employer may deviate from the co-operation obligations if particularly weighty and unforeseeable reasons which are causing damage to the production or service activities of the company preclude the co-determination negotiations.

The government and the Labour market organisation’s have agreed, that the sudden and severe drop in demand for a company’s products or services caused by coronavirus, leading to the need to lay off employees, constitutes an exceptional situation under the Act on Co-operation within Undertakings.Assessment of the applicability of the exception shall, however, be made on a case-by-case basis.

When grounds for deviating from the co-operation obligation do not exist any longer, the employer must immediately commence the co-determination negotiations.

Layoffs are not directly supported by the state but laid off employees are primarily compensated by unemployment funds. Furthermore, according to the latest legislation updates, employee who has been laid-off shall have improved entitlement to the unemployment benefit until 31 July 2020.

As regards terminations of employment, also regulated in the Employment Contracts Act, the following measures have been implemented in the employment legislation due to Covid-19 (legislation valid until 30 June 2020, unless otherwise stated below):

  • Cancellation of an employment contract (immediate termination without notice) during the trial period is temporarily allowed on financial and production related grounds.
  • The employer’s re-employment obligations are temporarily extended. If an employee has been dismissed on financial and production related grounds during the period of the proposed temporary changes to employment laws, the employer’s obligation to re-employ a dismissed employee if workforce is needed to perform the same or similar duties to those of the dismissed employee is extended to nine (9) months.
  • Employers are obligated to notify the TE Office of dismissal of ten employees or more on financial or production-related grounds. The obligation also applies to employers who dismiss ten employees or more as a result of restructuring proceedings or bankruptcy (this notification obligation is valid until further notice).

if YES on question 1, please describe which contacts that may need to be initiated with trade unions and/or works councils. Must a special process be followed?

No contact with the trade unions or works councils is required. In case of the lay-offs, the employer shall fulfil the negotiation obligation described above and prepare a written notification of lay off to each affected employee.

Are there any governmental programs if a company needs to close totally or partially for a certain time period?

The Finnish Government has prepared an extensive package to support companies and to alleviate the negative effects of the coronavirus epidemic. - The Government will make additional financing of EUR 10 billion available to businesses through Finnvera. The principal operating model is offering guarantees to banks that grant loans. In addition, the state will increase its coverage of Finnvera’s credit and guarantee losses from 50% to 80%. - Additionally, funding services for SMEs and mid-cap companies operating in Finland whose companies are impacted negatively by the coronavirus epidemic are provided through Business Finland. Mid-cap companies are large companies with a turnover or group-wide turnover of up to EUR 300 million. The funding cannot be granted to large enterprises, private traders, public organizations, foundations, association or companies registered in Åland. The funding is provided especially to the tourism industry, supplementary services for the tourism industry, creative industry and performing arts, and all industries whose subcontracting chains have been or will be impacted by the coronavirus epidemic.

Additionally, mid-cap companies with at least 10 mEUR turnover and at least 50 employees, which have run into temporary difficulties due to Covid-19 may apply for funding from the Finnish Industry Investment Ltd in order to secure the continuation of the business.Small companies with maximum of five employees can apply for funding from the Finnish Centre for Economic Development, Transport and the Environment, if the company’s business has been disturbed by Covid-19.

If state aid and/or other extra-ordinary governmental support is available, please describe the necessary prerequisites to qualify for such state aid.

Please see the answer to question 2.

If state aid and/or other extra-ordinary governmental support is available, please describe the application procedure for such state aid (e.g. how and when is the application filed with the government etcetera; what shall such application include).

The funding must be applied from the competent body (listed under question 2) and by following the required procedure for the funding type in question.

Please note that the COVID-19 scenario is constantly changing and that this information is current as of 09 April 2020. This publication should not be regarded as offering a complete explanation of the legal matters referred to and is subject to changes in the law and other applicable rules.