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Collective Bargaining

Collective bargaining covers almost all Finnish employees and until recently it was largely centralised with a national agreement setting the framework for pay increases at lower levels. In the 2007 pay round, bargaining appeared to have permanently shifted to industry level with increasing room for company level bargaining on top. However, the economic crises that have hit Finland since then have led to a return to centralised bargaining, for some periods at least.

The framework


For almost 40 years up to 2007 collective bargaining in Finland used to take place at three levels, national, industry and company. The national level agreements (the general incomes policy settlements), covered the whole economy, and normally produced recommendations to negotiators at industry level, who then implemented them, with the possibility for some improvements at company level. The government often played a key role in these national-level negotiations, for example making changes in taxation or social security, dependent on their outcome. Although the system did not work every time – sometimes the negotiators could not agree at national level and there were only industry level agreements  – and although there was no legal requirement to negotiate in this way, from 1968 to 2006 national bargaining was central to pay setting.


However, since 2007, when the private sector employers’ association EK refused to negotiate a new national agreement, this system has broken down. At the time, the employers insisted that negotiations should be at industry level to take account of their specific situations, and in May 2008 EK, the main employers’ association, issued new guidelines saying it would not return to national pay negotiations in the future. But in fact, since the publication of those guidelines, there have been long periods when national-level bargaining has resumed its central role.


These include a national two-year framework agreement, which was signed in October 2011 as a response to the economic crisis, the three-year Pact for Employment and Growth in 2013 which was also signed in a period of economic difficult for Finland, and the one-year Competitiveness Pact, signed in February 2016 in response to a government plan to cut public spending and raise taxes. All of these settlements followed the traditional pattern of involving government measures, generally in return to union concessions on pay, as well as negotiations between the national union confederations and the main employers’ association.


Since the ending of the Competitiveness Pact in 2017 – the precise date varied between agreements – subsequent negotiations have seen a return to industry-level rather than national bargaining. However, recent experience suggests that there is no guarantee that this will continue indefinitely


Whether the overall level of pay increases is set nationally or in individual industries, it is industry level agreements which set the rates paid and basic conditions. These rates and conditions apply to employers who are members of the employers’ association which has signed the agreement and there is also a mechanism to extend the agreement to all employers in the industry concerned. Since 2001 this has involved an independent commission, which formally decides whether an agreement should be generally binding on all employers (and employees) in the industry. The decision is largely based on whether the agreement covers more than half the employees in the industry concerned – calculated on the numbers employed by the members of the signatory employers’ association – or whether it is well-established in some other way. Disputes over the commission’s decisions can be taken to the labour court.


A study of the collective agreements signed in 2013-14 carried out for the Finnish Ministry of Employment and the Economy found that, of the 198 industry-level agreements in the private sector and for state-owned companies, 165 had been extended to all employers in the industry concerned.[1] Making agreements generally binding increased the number of employees covered by these agreements from 922,997 to 1,175,285, and raised the collective bargaining coverage of employees in the private sector and state-owned companies from 75.5% (based just on employers belonging to signatory employers’ associations) to 84.3% (once employers covered by the generally binding declarations are added in).  


As all employees of central government and the municipalities are covered by collective bargaining, this increases the overall coverage of collective agreements to 89.3% of employees in 2014. This is a slightly higher figure than 2008 when, using the same basis for calculation, collective bargaining coverage was 87.5%.


Below industry level there are company negotiations, which have become more important in recent years, and are generally conducted within the framework of industry level agreements rather than as stand-alone settlements. They can produce improvements on the industry settlement, but may also involve other changes. Employers have for some time pressed for greater flexibility at company level, and this has been accepted in some cases. For example, a number of 2018 and 2019 settlements, including the key agreement covering 100,000 in the technology industries, allowed the distribution of part of the increase to be negotiated locally.


As well as periodic national-level bargaining in the context of pay increases, unions and employers are also involved in the tripartite Economic Council of Finland. This is chaired by the Prime Minister and composed of key government ministers, the chief of the Bank of Finland, the heads of the main union confederations and representatives of the main employers’ associations and the agricultural and forestry producers. It meets more or less monthly, other than in the summer, and, among other things, it discusses the country’s economic development, use of national resources and competiveness, employment policy, the role of the public sector and welfare.


Who negotiates and when?


Negotiations at national level, when they take place (see above), are between the national union confederations and the national employers’ associations – primarily EK. Negotiations at industry level take place between the unions and the industry federation for that industry. They are normally negotiated by the affiliates of each confederation separately – for example, the study on the 2013-14 bargaining round found that, in the private and state-owned company sector, SAK affiliates had signed 114 agreements, STTK affiliates 49 and AKVA affiliates 13. Only 17 agreements had been signed jointly by unions from more than one confederation.[2] At company level individual employers bargain with their local union organisations.


Negotiations used to set terms and conditions for between two and a half and three years. However, this is not fixed and, since 2009, agreements have been signed for shorter periods. For example, the Competiveness Pact signed in 2016 was for a year. The agreements signed in 2017-18 have mostly been for two or three years and this pattern may again be returning.


The subject of the negotiations


Negotiations at national level typically involve commitments from the government, as well as agreements on pay and conditions between the unions and the employers. Recent national-level negotiations have produced changes in tax and social security  arrangements and had an impact on government spending plans. In the past, some of the key developments in Finnish industrial relations, such as rights for trade union representatives, or protection against dismissal, as well as broader labour market issues, like training rights, have been the subject of national negotiations.


Industry and company level agreements cover normal pay and conditions issues, and, in some cases, incorporate wider issues.


There is no system in Finland for setting a single national minimum wage. However, most employees are covered by the rates set out in the collective agreement covering the industry in which they work, either because their employer is a member of the employers’ associations that has signed it, or because the agreement has been made binding on to all employers in the industry under the extension procedure (see above). For those without an agreement, the Employment Contracts Act provides that employees must receive “normal and reasonable pay” for the work performed.


[1] Työehtosopimusten kattavuus vuonna 2014 (2016) by Lasse Ahtiainen, Työ- ja elinkeinoministeriön julkaisuja 11/2016 https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/74850/TEMjul_11_2016_web_22032016.pdf (Accessed 20.12.2018) and Coverage of collective agreements (2016) by Lasse Ahtiainen, Ministry of Employment and the Economy, Employment and entrepreneurship 11/2016 (English summary) in Finnish Labour Review 2 / 2016 https://tem.fi/documents/1410877/2874993/tak022016.pdf/d5a4e2d6-93c8-4d78-a757-cd28b3c35c24 (Accessed 28.07.2019)

[2] Työehtosopimusten kattavuus vuonna 2014 (2016) by Lasse Ahtiainen, Työ- ja elinkeinoministeriön julkaisuja 11/2016. There were also five agreements signed by other unions, including the Finnish journalists union SJL. https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/74850/TEMjul_11_2016_web_22032016.pdf (Accessed 28.07.2019)

L. Fulton (2021) National Industrial Relations, an update (2019-2021). Labour Research Department and ETUI (online publication). Online publication available at http://www.worker-participation.eu/National-Industrial-Relations.