Competitiveness Pact

The Finnish labour market organisations agreed on a broad labour market pact on 29th February, 2016. It makes working hours a bit longer and cuts the income of employees.

The Competitiveness Pact increases annual employee working time by 24 hours. There are no wage increases in 2017, liability for some employer contributions are transferred to the employee, and the holiday bonuses of public sector employees are temporarily reduced.

Further opportunities are provided for collective bargaining of terms and conditions of employment at the workplace and employees enjoy greater redundancy security.

Seeking new job creation

The Competitiveness Pact aims to:

  • improve the competitiveness of labour and businesses in Finland,
  • boost economic growth,
  • create new jobs,
  • support fiscal adjustment, and
  • promote local collective bargaining via national collective agreements.

The Competitiveness Pact requires the Finnish government to:

  • revoke its mandatory legislation project,
  • cancel the additional package of EUR 1.5 billion in expenditure cuts and tax increases specified in the government programme as an alternative to the settlement, and
  • implement the income tax cuts referred to in the government programme.

Collective agreements to be extended for one year

  • Collective agreements are extended for a period of 12 months.
  • Wages and salaries are frozen for the duration of the extended agreement period.

Employee social insurance contributions to increase

  • The employee’s earnings–related pension contribution will gradually increase by a total of 1.2 percentage points between 2017 and 2010.
  • The employer’s earnings-related pension contribution will correspondingly fall by the same amount.
  • The employee’s unemployment insurance contribution will increase by a total of 0.85 percentage points between 2017 and 2018.
  • The average unemployment insurance contribution of employers will correspondingly fall by the same amount.
  • The employer’s social security contribution will fall by at least one percentage point between 2017 and 2019. As of 2020 the permanent reduction in the employer’s social security contribution will be not less than 0.58 percentage points.

Working time extension

  • Annual working time will be extended by an average of 24 hours in full-time work with no impact on earnings as of the start of 2017.
  • Implementation of the working time extension will be agreed by the trade unions and employers’ federations in each industry.

Temporary reduction in public sector holiday bonuses

  • Holiday bonuses will be temporarily reduced by 30 per cent in the public sector between 2017 and 2019.

Improved redundancy security

Improvements to employee security in enterprise downsizing will benefit workers who are made redundant after working for an employer for at least five years. These regulations will bind employers with not less than 30 employees.

  • The employer will recognise the right of a redundant employee to redeployment training.
  • The value of this redeployment training will correspond to the employee’s personal wage element, and be not less than the average monthly wage paid by the business or public sector organisation.
  • The dismissed employee will be entitled to continued occupational health care services for a further six months after the duty to work ends.

New collective agreement provisions to reform local collective bargaining

No special legislation will be introduced to regulate local collective bargaining. The trade unions and employers’ federations will instead negotiate new national collective agreement provisions to improve conditions for local collective bargaining. The topics covered by these negotiations will include:

  • A survival clause to help secure the employer’s operations and jobs by adjusting terms and conditions of employment when the employer runs into financial difficulties that jeopardise jobs.
  • Measures to improve conditions for the work of shop stewards when expanding opportunities for local collective bargaining.
  • Allowing local agreements to take effect without inter-federation approval.
  • An opportunity to deploy a working time bank system.

The national labour and employer confederations recommend only the following statutory amendments in relation to local collective bargaining:

  • Both organised and unorganised enterprises should have the same local collective bargaining rights and duties, irrespective of employers’ federation membership. (The amendment will not take an effect because of the resistance of the Federation of Finnish Enterprises)
  • Disputes arising from local collective agreements made by unorganised enterprises should also be open for settlement at the Labour Court. (The amendment will not take an effect because of the resistance of the Federation of Finnish Enterprises)
  • The earnings-related unemployment benefit and pay guarantee payable to employees should be governed by the wage rates that preceded any survival agreement.
  • The scope of the Act on Co-operation Within Undertakings should be broadened to include subsidiaries and branches.

The 2017 bargaining round

The collective bargaining round commencing in autumn 2017 will be conducted at industry level. The arrangements agreed in this bargaining round will boost growth and employment.

Adult education allowance to be guaranteed

The national labour and employer confederations will propose the following measures to the national government:

  • Abandoning the government’s proposal to convert the basic element of the adult education support grant into a loan.
  • Reducing the maximum duration of adult education subsidy from 19 to 15 months and cutting the basic support grant by 15 per cent.
  • The changes in adult education subsidy will take effect in 2017.

The national collective bargaining system

The national labour and employer confederations call on the government to prepare amendments to labour legislation and earnings-related social security on a tripartite basis with the social partners.

Negotiations on practicalities to be completed by the end of May 2016

  • The trade unions and employers’ federations will complete negotiations in each industry by the end of May with a view to including the amendments required under the Competitiveness Pact in their collective agreements.
  • The national labour and employer confederations will assess the coverage of the Pact and the associated supporting measures of the national government on 1 June.
  • The Competitiveness Pact will not take effect unless it has sufficient coverage and the government measures are adequate.

Employee purchasing power will fall as overall purchasing power rises

Effect of the Competitiveness Pact on purchasing power in 2017–2020

Diagram: Ilkka Kaukoranta / SAK

The diagram specifies the effects of the Competitiveness Pact alone on employee purchasing power. Numerous other factors will also affect purchasing power, such as:

  • future increases in wages and salaries
  • changes in personal wage income
  • the general rate of inflation
  • possible tax cuts, and
  • other taxation policy.

The rate of employment will depend on general economic growth.