Contract of Employment

An employment contract confers the rights and obligations under the Employment Contracts Act on both the employer and the employee.

There is no fixed format for a contract: it may be written, oral or electronic. As a rule, however, an employment contract should be written to avoid any later differences of interpretation on what was agreed. If you agree on employment orally, the employer must provide a written explanation of the key working conditions to the employer no later than the first payment of wages.

Employment Contracts Act

The Employment Contracts Act lays out the key rights and obligations of the employer’s and employee’s employment relationship. The Act includes rules on establishing an employment relationship, the obligation to pay wages, probation, payment of sick leave wages, family leave and terminating employment.

Read more: Employment Contracts Act (Finlex)

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Permanent or fixed term, full-time or part-time?

The main type of employment contract and employment relationship is valid until further notice, commonly called permanent. The contract and employment relationship are valid until further notice unless otherwise agreed.

An employment contract may also be for a fixed term. A justified reason is as a general rule necessary for the signature of a contract that is fixed-term contract on the employer’s initiative. A fixed-term contract that is signed without a justified reason is considered valid until further notice. Acceptable bases include a limited job (such as a specific project), a need based on season fluctuation, peak demand or substitution. A contract may also be signed for a fixed term on the employee’s initiative without specific grounds. You may also sign a fixed-term employment contract without justification when hiring a long-termed unemployed person.

Important points of an employment contract

The employment contract should be made in writing and it should be signed before work is begun. Legislation does not require a written employment contract, but the Employment Contracts Act requires that the employer provides the employee with a written report of the central terms and conditions of employment. This report must be issued within seven days at the latest, unless the terms and conditions are already included in the written employment contract. For this reason, the employer should always strive to make a written employment contract at the beginning of the employment relationship before work is begun.

Having the agreement in writing is especially crucial with regard to trial periods and possible fixed-term employment relationships. If the employee does not remember what has been agreed, or if the employee and the employer disagree on what has been agreed, it may be hard for the employer to demonstrate what the truth actually is without a written contract.

Terms of employment to be provided to the employee in writing

The employee must be given a written report of the central terms of employment as their work begins, unless the terms are already described in a written employment contract. This report is not required when a fixed-term employment contract is renewed with the terms remaining the same. The report is also not necessary in very brief employment relationships. These denote situations where the employee’s average working time is at most three hours per week for a period of four consecutive weeks.

The information listed in items 1–8 on the list below must be provided within seven days of the beginning of work at the latest. The information listed in items 9–15 must be provided within a month of the beginning of work at the latest. The information in item 16 must be given to the employee before they go abroad.

The employer must also provide a written report in the event that a term of employment changes. This report must be issued as soon as possible, or when the change enters into effect at the latest. If the change results from legislation or the collective agreement, this separate report is unnecessary.

The report must provide the following information:

  1. Employer, employee and their place of residence or business;
  2. Date and time the work is to begin;
  3. The date or estimated date of termination of a fixed-term employment contract and the justification for fixed-term employment or notification that the fixed-term contract has been made with a person whose unemployment is long-term;
  4. Trial period;
  5. Place of work, or if the employee does not have a primary fixed place of work, a report of the principles according to which the employee works on different sites or is free to define their own place of work;
  6. Primary work tasks of the employee;
  7. The grounds on which wage or other compensation is determined and the wage payment period;
  8. Working time;
  9. For employees adhering to varying working time:
    1. Situations that create a need for labour for the employer and the extent of this need;
    2. The days of the week and times of day when the employer may have work done according to Section 30 of the Working Time Act without agreement from the employee in each separate instance;
  10. Contract work;
    1. Name and place of business of the contracting company when they are known;
    2. Information about the reasons for and the duration or estimated duration of the contracting company’s order that the fixed-term employment contract is based on;
    3. Estimate of other work tasks in the company employing the fixed-term agency worker that match those work tasks agreed upon in the agency worker’s employment contract;
  11. Possible right to training provided by the employer that is based on legislation, agreement or practice;
  12. How annual leave is determined;
  13. Period of notice or the basis by which it is determined;
  14. Collective agreement applied to the work;
  15. Insurance institution through which the employer has arranged the employee’s pension security and insured the employee in case of work-related accident or occupational disease;
  16. When work is conducted abroad for at least one month:
    1. The country or countries where the work is done, the duration of the work, the currency in which monetary salary is paid, monetary compensations and fringe benefits that are payable abroad, and the conditions for bringing the employee home;
    2. Salary to which the employee sent to another EU country has the right to in the receiving member state, all bonuses that are paid for employees sent abroad, the compensation arrangements for travel, accommodation and food expenses, as well as a link to the national website of the receiving member state where the employee may find information about that country’s employment terms and conditions.

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You should always agree with your employee on work duties in the employment contract. The primary work duties agreed in the employment contract are thus the duties the employee is obliged to perform when employed. The employment duties are worth describing comprehensively in the contract. The contract may also state that the employee is obliged to perform other tasks as directed by the employer.

On employment conditions, the employer must, as a minimum, adhere to the generally binding collective bargaining agreement in force in the sector, if one exists. The employee must also be informed of the collective bargaining agreement being used, and this may be recorded in the employment contract

Probation is a trial period at the start of employment which allows both employer and employee to cancel the employment contract immediately without specific justification. However, the employment relationship may not be terminated during the probation period on a discriminatory or unjust basis.

You may agree on probation when signing both a permanent and a fixed-term contract. Probation at the start of a fixed-term contract may be no longer than six (6) months. Probation at the start of a fixed-term contract may be no longer than half the employment period and in no case longer than six (6) months. You should also check whether the relative collective bargaining agreement contains regulations on probation. Always remember to fix the length of probation in the employment contract.

Employment contracts generally define working hours as X hours/day or X hours/week.

However, an employment contract may define average working hours, periodical work hours, additional work, start and end times, floating working hours and Sunday work, depending on the situation.

An employment contract may also define “fluctuating working hours”. A clause on “fluctuating working hours” means a working hours arrangement in which the employee’s working hours in a specific period vary between the contractual minimum and maximum. It could also mean a working hours arrangement in which the employee commits to work for the employer when specifically asked to do so. However, fluctuating working hours may not be agreed on the employer’s initiative if the employer’s labour needs per the contract are permanent.

Note that the Working Hours Act is being amended as of 1 January 2020. The new Working Hours Act gives broader opportunities for floating working hours, “flexitime” and working hours banks. If you are unsure how you should agree on working hours, contact our advice service.

Naturally, the wages paid for work must be agreed in the employment contract. Employment legislation does not define minimum wages in euros, but the employee’s wages must be at least normal and reasonable. And even though the law does not define wages, collective bargaining agreements always specify minimum wages and other wage-related matters, to which exceptions cannot generally be made, even by agreement with your employee.

In addition, it is worth recording the day of wage payments and the basis for calculating wages in the employment contract.

Other conditions, such as sick leave wages, notice period, defining annual holidays, employment benefits.

There is good reason for also agreeing on things like pay during sick leave, notice periods, the definition of annual holidays, employment benefits and other employment conditions. In these matters, keep in mind that legislation and collective bargaining agreements often limit what employers and employees can agree on.

As a member, you can take advantage of ready-to-use document templates and forms

Contract of Employment (EN/FI/SV)
Non-disclosure Agreement (FI/SV)
Specification of Travelling expense (FI/SV)

Read about the obligations you have as an employer

Checklist for Employee orientation

Collective Bargaining Agreements