What changed in Finland's dismissal rules from 1 January 2026?

The Employment Contracts Act was amended to replace the “proper and weighty reason” standard for person-related dismissals with a lower threshold requiring only a “proper reason.” This means employers no longer need to separately demonstrate that the grounds are “weighty,” though the reason must still be objectively justified, proportionate and procedurally supported.

When do the Co‑operation Act and unemployment‑security amendments come into force?

The dismissal-threshold amendment took effect on 1 January 2026. Selected amendments to the Co‑operation Act and unemployment-security legislation followed on 1 March 2026, introducing revised consultation timelines, employer reporting duties and unemployment-service notification requirements.

Do employers still need to give warnings before dismissing an employee?

Yes. Despite the lowered threshold, warnings remain a standard and expected part of the dismissal process. Trade unions, including PAM, have emphasised that dismissal for minor or isolated issues without a prior warning is likely to be deemed unfair. Only exceptionally serious misconduct, such as theft or violence, may justify immediate termination without warning.

How should employers run co‑operation negotiations in 2026?

Employers should prepare a detailed written negotiation proposal, deliver it to employee representatives with adequate lead time, conduct structured negotiation meetings covering business rationale and alternatives, document every session thoroughly and issue a final decision only after the statutory negotiation period has been observed.

What are the practical steps to reduce dismissal-related litigation risk?

In-house teams should: (1) update internal policies to reflect the 2026 standard, (2) maintain rigorous documentation at every stage of performance management and discipline, (3) ensure warnings are issued and improvement periods are allowed, (4) genuinely consider alternatives to dismissal, (5) use the step-by-step HR checklist before every termination and (6) engage external counsel for high-risk cases involving executives, mass redundancies or immigration-linked employment.

How do the 2026 amendments affect fixed‑term contracts?

The proper-reason amendment does not directly change fixed-term contract rules, but employers should audit current arrangements. Repeated renewals without genuine justification risk reclassification as permanent employment, subjecting the employer to the full scope of dismissal protections. Contracts should include a clear, documented reason for the fixed term and a defined end date.

When should employers involve external counsel?

External counsel should be engaged for any high-risk dismissal scenario, including terminations of senior executives, mass redundancy programmes, cases involving non-EEA employees whose residence permits are linked to employment, situations where the applicable collective agreement imposes complex procedural requirements and any matter where litigation appears probable.

Labour Law Finland | Global Law Experts

Finland’s labour law landscape shifted significantly on 1 January 2026 when an amendment to the Employment Contracts Act replaced the long-standing “proper and weighty reason” (asiallinen ja painava syy) standard for individual dismissals with the lower threshold of a “proper reason” (asiallinen syy). The reform, confirmed by the Finnish Government in late 2025, represents the most consequential change to dismissal rules in over two decades. A second wave of amendments, targeting the Co‑operation Act and unemployment‑security legislation, followed on 1 March 2026, requiring employers to update consultation processes, reporting timelines and notification procedures.

For general counsel, HR directors and in-house teams of multinational companies operating in Finland, understanding these changes is no longer optional: it is an immediate compliance obligation with material litigation exposure for non-compliance.

Executive Summary, What Employers Need to Know About Labour Law Finland in 2026

The 2026 reforms to labour law Finland affect every employer with Finnish-based staff. At their core, they lower the evidentiary bar for person-related dismissals while simultaneously reshaping how collective redundancies and co‑operation negotiations must be conducted. Employers that fail to update internal protocols risk unfair-dismissal claims, back-pay liability and reputational damage in an employee-friendly jurisdiction.

The statutory threshold for termination on personal grounds, such as performance deficiencies, breach of duties or misconduct, no longer requires employers to demonstrate that the reason is both proper and weighty. A “proper reason” now suffices, meaning conduct or capability issues that previously fell below the dismissal threshold may now, depending on the overall assessment, justify termination. The Finnish Government’s stated policy objective is to encourage hiring by reducing the perceived risk of employment relationships for smaller employers in particular.

In parallel, the Co‑operation Act amendments effective 1 March 2026 refine consultation obligations, employer reporting duties to the employment services and the timing of unemployment-security notifications. Industry observers expect these changes to accelerate restructuring timelines for larger organisations while also increasing regulatory scrutiny of procedural compliance. Employers should treat the period between now and their next scheduled headcount review as an urgent window for policy updates, manager training and contract auditing.

The sections below set out the legal detail, practical checklists and risk-mitigation steps that in-house teams need to act on immediately.

What Changed in Finland’s Dismissal Law, the “Proper Reason” Test (Termination Finland 2026)

Before 1 January 2026, Chapter 7, Section 1 of the Employment Contracts Act required a “proper and weighty reason” for the employer to terminate an employment contract on personal grounds. The dual requirement meant that even where an employer had a legitimate reason, for example, repeated lateness or underperformance, the courts would separately assess whether that reason was sufficiently weighty to justify the ultimate sanction of dismissal. This two-part test gave employees robust protection and set a high bar for employers.

Legal Text and Statutory Citation

The amendment to the Employment Contracts Act, published in the Finlex statutory database and announced by the Finnish Government (Valtioneuvosto), removes the word “weighty” (painava) from the legal standard. The operative provision now requires only that the employer has a “proper reason” for dismissal relating to the employee’s person, conduct or capability. The Government’s announcement confirmed this change takes effect on 1 January 2026.

Practical Effect, Lower Threshold Explained

The likely practical effect will be most visible in borderline cases, scenarios where, under the old law, conduct or performance issues were considered insufficient to meet the “weighty” element. Consider the following illustrative hypotheticals:

Persistent minor policy violations. An employee who repeatedly disregards workplace protocols (for example, health-and-safety procedures) but whose conduct does not cause measurable harm. Under the old standard, dismissal would often fail the “weighty” test. Under the proper reason dismissal standard, a documented pattern may now suffice if the employer has issued warnings and the employee has failed to correct the behaviour.
Underperformance despite support. An employee whose output consistently falls below agreed targets despite coaching, retraining and a formal performance-improvement plan. The removal of the “weighty” requirement is expected to strengthen the employer’s position provided the procedural steps are documented.
Trust deficit after a single serious incident. A breach of confidentiality or duty of loyalty that materially undermines the employment relationship. The amended test may permit termination more readily without requiring evidence of the kind of systemic misconduct previously needed to cross the “weighty” bar.

It is important to note that the reform does not create an at-will dismissal regime. Finnish labour law still requires a genuine, objectively justifiable reason, and dismissal remains a measure of last resort where less intrusive alternatives have been properly considered.

Key Dates and Transitional Provisions

Employers must track two critical implementation dates, and one set of transitional rules, to ensure compliance. The timeline below summarises the legislative milestones, as published by the Finnish Government and the Ministry of Economic Affairs and Employment (TEM).

Date	Legislative Provision	Employer Effect
1 January 2026	Employment Contracts Act amendment, “proper reason” (asiallinen syy) replaces “proper and weighty reason”	Individual person-related dismissals assessed against the lowered threshold from this date; update HR decision protocols, dismissal templates and manager guidance
1 March 2026	Selected Co‑operation Act and unemployment‑security amendments enter into force	Revised consultation timing, employer reporting to employment services and unemployment-notification procedures take effect; update co‑operation playbooks
Transitional rules	Cases initiated before 1 January 2026 are assessed under the former “proper and weighty” standard	Any dismissal process begun before the effective date should be documented under the old test; do not retrospectively apply the new threshold to pending matters

Employers with ongoing performance-management cases should take particular care to record the date on which the dismissal decision was made and the standard applied, to avoid disputes about which test governs.

The Legal Standard: Proper Reason vs Proper and Weighty, How to Apply the Test

Under the reformed provision, the assessment of whether a proper reason dismissal is lawful remains a holistic evaluation. Courts will examine the nature and seriousness of the employee’s conduct or deficiency, the circumstances in which it occurred, the employee’s overall record and length of service, the employer’s own conduct and any mitigating factors. What has changed is the removal of a discrete second hurdle: the employer no longer needs to prove that the reason rises to the level of “weighty.”

This does not mean that trivial complaints will justify dismissal. The legislative preparatory materials and government communications consistently emphasise that the proper-reason test retains a requirement of proportionality. The employer must still consider whether the objective of correcting the employee’s behaviour or performance could be achieved through less severe measures, a warning, reassignment, retraining or a temporary adjustment to duties.

Common Employer-Claimed Reasons

Misconduct. Breach of workplace rules, insubordination, dishonesty or violation of the duty of loyalty. A single serious act may suffice; minor infractions typically require a documented pattern plus at least one prior warning.
Performance. Persistent inability to meet clearly communicated, objectively measurable targets despite adequate support, training and a formal improvement plan.
Capability and health. A substantially and permanently reduced work capacity, although strict protections apply to disability and illness-related dismissals under both Finnish and EU law.
Redundancy (financial/production reasons). Not covered by the proper-reason amendment (redundancy grounds are separately regulated) but often arise alongside person-related assessments where employers restructure roles.

Early indications suggest that Finnish courts will scrutinise whether the employer exhausted alternatives before invoking the new threshold. Employers should not treat the reform as a licence to dismiss more freely; rather, it marginally widens the range of conduct or performance issues that can lawfully support dismissal where the correct procedure has been followed.

Procedural Requirements and Fair Process, Warnings, Documentation and Burden of Proof

Even with a lower statutory threshold, the procedural requirements for a lawful dismissal under labour law Finland remain stringent. The burden of proof rests on the employer. If challenged, the employer must demonstrate that: (a) a proper reason existed, (b) the employee was given a reasonable opportunity to correct the issue, (c) alternatives to dismissal were genuinely considered and (d) the process was fair and well-documented.

Trade unions, including the Service Union United (PAM), have emphasised that warnings remain a usual precondition for dismissal under the amended law. The union’s public guidance on the 2026 changes notes that employers are still generally expected to issue at least one written warning and allow a reasonable improvement period before proceeding to termination. Dismissal without a prior warning is likely to be considered unfair unless the misconduct is exceptionally serious, for example, theft, violence or a fundamental breach of the duty of loyalty.

Employers should structure every performance-management or disciplinary case around the following process:

Step 1: Investigation. Gather facts impartially before reaching any conclusion. Interview the employee, witnesses and review documentary evidence.
Step 2: Hearing. Provide the employee with a clear written statement of the concerns and an opportunity to respond, accompanied by a union representative or support person if requested.
Step 3: Written warning. If the issue is substantiated, issue a formal written warning specifying the expected improvement and timeline.
Step 4: Improvement period. Allow the employee adequate time, typically several weeks to months, depending on the nature of the issue, to demonstrate improvement.
Step 5: Re-assessment and decision. If improvement is insufficient, document the continuing deficiency, confirm alternatives have been considered and make the dismissal decision with proper notice.

Evidence Checklist for Dismissal Files

The following documents should be in the employer’s file before any termination notice is issued:

Written record of the investigation findings, including dates and witness statements
Copy of the formal warning(s) issued, with proof of delivery and employee acknowledgement
Performance-improvement plan or corrective-action document, with clear targets and timelines
Notes from the hearing/meeting at which the employee was given an opportunity to respond
Internal assessment of alternative roles, redeployment possibilities or modified duties
Confirmation that the applicable collective bargaining agreement procedures were followed
The final termination letter, specifying the proper reason, notice period and effective date

Employers operating in Finland through a subsidiary or branch should also ensure that group-level HR teams understand the Finnish procedural requirements, which may differ materially from home-jurisdiction norms. For a broader overview of termination principles, see our earlier guide on termination of employment under Finnish law.

Co‑operation Act Changes and Collective Redundancies in Finland 2026

The amendments to the Co‑operation Act that entered into force on 1 March 2026 affect how employers manage collective consultations, restructurings and redundancies. The co‑operation procedure Finland framework requires employers above certain headcount thresholds to negotiate with employee representatives before implementing decisions that materially affect the workforce, including mass redundancies, outsourcing, relocations and significant changes to working methods.

When the Co‑operation Procedure Is Triggered

The obligation to initiate co‑operation negotiations arises when an employer is considering measures that would lead to:

Redundancies, lay-offs or reductions in working hours on financial or production-related grounds
Significant changes to job duties, work arrangements or organisational structure affecting one or more employees
Outsourcing or transfer of business functions that may result in changes to terms of employment or headcount reductions
Closure or relocation of a workplace or business unit

The 2026 amendments refine the content and timing requirements for the employer’s initial negotiation proposal, the minimum negotiation period and the documentation that must be provided to employee representatives. Industry observers expect that the revised rules will place greater emphasis on the employer demonstrating, in writing, that meaningful consultation took place before a final decision was reached.

Employer Steps and Sample Co‑operation Agenda

Employers approaching a co‑operation process should follow these key procedural steps:

Prepare the negotiation proposal. Outline the reasons for the contemplated measures, the estimated number of affected employees, the proposed timeline and any alternatives to redundancy.
Deliver the proposal to employee representatives. Provide adequate time for representatives to review the proposal and prepare for negotiations.
Conduct negotiation meetings. Agenda items should include: review of business rationale, discussion of alternatives (redeployment, retraining, voluntary measures), assessment of social impacts and agreement on mitigation measures.
Document all sessions. Maintain minutes of each meeting, recording attendees, topics discussed, proposals made and responses received.
Issue the final decision. Only after the statutory negotiation period has been observed and genuine consultation has taken place.

The table below summarises employer obligations by organisation size, reflecting both the statutory thresholds and practical first-response actions for redundancies Finland 2026 compliance.

Employer Size / Scenario	When Co‑operation / Notification Is Required	Practical Action (First 7 Days)
Fewer than 10 employees	No statutory co‑operation negotiation thresholds in small units, check applicable collective bargaining agreement for sector-specific obligations	Internal review; document business rationale; consider redeployment before proceeding
10–49 employees	Co‑operation procedure may be required for operational changes affecting employees, verify against the Co‑operation Act and collective agreement	Notify employee representatives; prepare written negotiation proposal and agenda
50 or more employees	Full collective-redundancy rules and statutory notification thresholds apply; notification to employment services required for mass dismissals	Initiate formal co‑operation procedure; notify employment service and prepare comprehensive negotiation documentation

Redundancies, Mass Dismissals and Unemployment‑Security Amendments

Redundancy on financial and production-related grounds remains separately regulated under the Employment Contracts Act and is not directly affected by the “proper reason” amendment. However, the unemployment-security amendments effective 1 March 2026 change the reporting and notification obligations that employers must fulfil when making employees redundant.

Employers contemplating mass dismissals, typically defined as the dismissal of ten or more employees within a 30-day period, must notify the relevant employment and economic development office (TE office) within the statutory timeframe. The 2026 amendments adjust the timing and content of these notifications, aligning them with updated employment-service processes. Employers should also be aware that employees dismissed on redundancy grounds may be entitled to participate in an employment programme funded partly through employer contributions, depending on the size of the organisation and the terms of the applicable collective agreement.

Public guidance from the Työmarkkinatori (Finnish public employment service) provides detailed templates and step-by-step instructions for employers navigating the lay-off and dismissal notification process.

Fixed‑Term Contracts, Renewals and Conversion Risk in Finland

The 2026 amendments do not fundamentally alter the rules governing fixed‑term contracts Finland, but employers should review their use of temporary arrangements in light of the broader reform context. Under Finnish law, a fixed-term employment contract requires a justified reason, such as a specific project, seasonal demand or substitution for an absent employee. Using fixed-term contracts without genuine justification, or repeatedly renewing them in circumstances that suggest a permanent need, may result in the contract being deemed an indefinite employment relationship by a court.

If a fixed-term contract is reclassified as permanent, the employer becomes subject to all dismissal protections, including the proper-reason test. Employers should audit their current fixed-term workforce and ensure that each contract includes a clearly articulated justification for the fixed term, a defined end date or event and appropriate renewal protocols. Where a role has become permanent in substance, the prudent course is to convert the arrangement proactively rather than face reclassification claims.

Employer Obligations Finland, Reporting, Notifications and Immigration Considerations

Beyond the core dismissal and co‑operation obligations, employer obligations Finland in 2026 encompass several ancillary duties that in-house teams must not overlook:

Employment contract updates. Review all template employment agreements to ensure they reflect current statutory language. References to the old “proper and weighty” standard in termination clauses should be updated.
Unemployment-service notifications. Where required by the 1 March 2026 amendments, employers must notify the TE office of redundancies and lay-offs within the prescribed timeframe and format.
Immigration reporting. Employers of non-EEA nationals must comply with the obligations set out by the Finnish Immigration Service (Maahanmuuttovirasto/Migri). This includes notifying Migri when the employment of a residence-permit holder terminates, as the permit may be linked to a specific employer or role.
HR policy and handbook updates. Internal policies on disciplinary procedures, performance management, warnings and termination should be revised to reflect the 2026 legal standard.
Manager training. Line managers who make day-to-day decisions about performance and conduct need practical guidance on the new threshold, documentation requirements and escalation procedures.

Litigation Risk and Dispute Resolution, Claims, Remedies and Settlement Options

An employee who believes they have been unfairly dismissed may bring a claim before the district court. Remedies typically include compensation, calculated as a number of months’ salary, with the amount depending on factors such as length of service, the nature of the breach and the employee’s age and re-employment prospects. Finnish law does not provide for reinstatement as a standard remedy, though the possibility exists in exceptional circumstances.

Industry observers expect that the volume of unfair-dismissal litigation may initially increase as both employers and employees test the boundaries of the reformed proper-reason threshold. Employers can mitigate exposure by maintaining rigorous documentation, following the procedural steps outlined above and engaging in early settlement discussions where the merits of a case are genuinely uncertain.

Settlement agreements, often involving a negotiated severance payment, a positive reference and mutual confidentiality obligations, remain the most common method of resolving dismissal disputes in Finland. For broader guidance on structuring exit packages, see our severance and termination overview.

Practical HR Checklist for Lawful Dismissals, Step by Step

The following checklist distils the procedural and substantive requirements into a single reference tool for HR teams managing dismissals under the 2026 framework:

Identify and document the proper reason. Record the specific conduct, performance or capability issue, including dates, evidence and business impact.
Conduct an impartial investigation. Interview the employee and any relevant witnesses; preserve documentary evidence.
Hold a formal hearing. Give the employee written notice of the concerns and an opportunity to respond, with representation if requested.
Issue a written warning. Clearly state the expected improvement, the timeline and the consequences of failure to improve.
Allow an adequate improvement period. Monitor and document progress (or lack thereof) against the agreed targets.
Assess alternatives to dismissal. Consider redeployment, retraining, modified duties or a temporary adjustment before concluding that dismissal is the only option.
Check the collective bargaining agreement. Many sector agreements contain additional procedural or substantive requirements that must be observed.
Verify co‑operation obligations. If the dismissal forms part of a wider restructuring, confirm whether co‑operation negotiations are required.
Deliver the termination notice. Issue a written notice specifying the reason, the applicable notice period and the employee’s last day of employment.
Complete post-termination reporting. File any required notifications with the TE office, Migri (for non-EEA employees) and pension/insurance providers.

Employers in the Finland region can connect with qualified employment law specialists through the Global Law Experts lawyer directory for tailored guidance on complex or high-risk cases.

Conclusion and Next Steps for In-House Teams

The 2026 reforms to labour law Finland present both opportunity and risk. Employers benefit from a more flexible dismissal framework, but only if they invest in the procedural rigour that Finnish courts continue to require. The priority actions are clear: update employment contracts and HR policies to reflect the proper-reason standard, train managers on documentation and escalation, audit fixed-term contracts for conversion risk, prepare co‑operation playbooks for the 1 March 2026 amendments and engage specialist Finnish employment counsel for senior-executive terminations, mass redundancies or any case with cross-border complexity.

Need Legal Advice?

This article was produced by Global Law Experts. For specialist advice on this topic, contact Katja Halonen at Magnusson Law, a member of the Global Law Experts network.