Finland Dismissal Law 2026, Employer Checklist to Comply and Avoid Wrongful‑dismissal Claims

On 1 January 2026, an amendment to Finland’s Employment Contracts Act entered into force, lowering the threshold for person‑related dismissal from a “proper and weighty” reason to a “proper” reason. The change, approved by Parliament in December 2025 by a vote of 108–54, represents the most significant shift in dismissal law Finland has seen in decades, and it demands immediate attention from every employer operating in the country. While the lower threshold makes it easier to justify certain terminations, it does not remove the obligation to follow a fair, documented process before any dismissal is carried out.

This practical checklist is designed for general counsel, HR directors, foreign employers with Finnish staff and in‑house legal teams who need a clear, step‑by‑step compliance framework under the 2026 rules.

Legal Background, What Changed in Finland’s Dismissal Law on 1 January 2026

The Statutory Change in Brief

The Finnish Government confirmed on 22 December 2025 that the amendment to Chapter 7, Section 2 of the Employment Contracts Act would take effect on 1 January 2026. Previously, an employer needed a “proper and weighty” reason (asiallinen ja painava syy) to dismiss an employee on person‑related grounds. The amended provision now requires only a “proper” reason (asiallinen syy). According to the Ministry of Economic Affairs and Employment (TEM), termination on arbitrary or minor grounds is still not permitted, and the legal provision will continue to reference the employee’s obligations arising from the employment relationship as the benchmark for assessing whether a proper reason exists.

What This Means Practically for Employers

The practical effect is nuanced. Industry observers expect the change to have its most significant impact in borderline cases, situations where an employee’s conduct or performance fell short of the previous “weighty” threshold but clearly breached contractual obligations. The Government’s explanatory guidance emphasises that employers must still, as a rule, issue a warning and give the employee an opportunity to amend their conduct before dismissal. Exceptions apply only in cases of serious breaches where it would be unreasonable to expect the employment relationship to continue. The likely practical effect will be that more dismissals survive judicial challenge, provided the employer’s documentation and process are robust. Process failures, however, remain the single most common reason Finnish courts rule dismissals unlawful.

Quick Compliance Decision Matrix for Dismissal Law Finland

Before initiating any termination, use this decision matrix to determine whether the situation calls for further investigation, redeployment or formal dismissal. A premature decision, particularly one without documentation, is the fastest route to a wrongful dismissal Finland claim.

This matrix is a first‑pass screening tool. Every case that reaches the “proceed” column should be reviewed by legal counsel before the employer takes a final dismissal decision. The decision matrix applies to permanent employment contracts; fixed‑term contracts generally cannot be terminated before expiry unless this was specifically agreed at the outset.

Step‑by‑Step Employer Termination Checklist Finland

The following checklist covers the full dismissal procedure HR Finland teams should follow for person‑related terminations under the amended Employment Contracts Act. Each step is designed to build the evidentiary foundation that Finnish courts examine when assessing whether a dismissal was lawful.

Step 1, Pre‑Decision Investigation and Evidence Gathering

No dismissal should be initiated without a thorough investigation. This is the stage where most employer cases are won or lost.

• Identify the specific obligation breached. Reference the relevant clause of the employment contract, workplace rules or collective agreement.
• Collect contemporaneous evidence. Gather emails, performance records, attendance logs, customer complaints, system logs and any other documentary evidence that shows what happened and when.
• Interview witnesses. Record witness statements in writing, dated and signed. Ensure interviews are conducted promptly while events are still fresh.
• Build a chronological timeline. Courts scrutinise whether the employer acted consistently and without undue delay. A clear timeline demonstrates that the employer treated the matter seriously from the outset.
• Verify multiple instances. A single minor lapse is unlikely to constitute a proper reason for dismissal. Document a pattern of conduct or a single incident of sufficient gravity.
• Give the employee an opportunity to be heard. Before any decision is made, the employee must be informed of the grounds being considered and given the chance to present their version of events. This is a mandatory procedural step.

Step 2, Warnings, Performance Improvement Plans and the Opportunity to Amend

As a rule under the amended Employment Contracts Act, the employer must warn the employee before dismissal and thereby give the employee an opportunity to amend their conduct. The TEM guidance is explicit: dismissal without a prior warning is permissible only where the breach is so serious that it would be unreasonable to expect the employer to continue the employment relationship.

A written warning should contain the following elements:

• Description of the breach. State the specific conduct or performance shortfall, with dates and evidence references.
• Required standard. Clearly set out what the employer expects going forward.
• Consequences. State explicitly that failure to improve may result in termination of employment.
• Improvement period. Set a reasonable and measurable timeframe (typically two to four weeks for conduct issues; longer for performance improvement plans).

Sample warning wording: “This written warning is issued because [describe conduct/performance issue with dates]. You are required to [state expected standard]. If your conduct/performance does not meet this standard by [date], your employment may be terminated. You have the right to respond to this warning in writing within [number] days.”

Step 3, Formal Dismissal Decision

If the employee has failed to improve following a warning and the proper reason threshold is met, the employer may proceed to formal dismissal. The following sign‑off checklist should be completed before the termination is communicated:

• Legal review. Have employment counsel confirm that the grounds meet the “proper reason” standard and that the procedure has been correctly followed.
• Collective agreement compliance. Check whether the applicable collective agreement imposes additional procedural requirements, such as consultation with a shop steward.
• Notice period calculation. Confirm the correct notice period based on the employee’s length of service and the Employment Contracts Act or applicable collective agreement. Statutory notice periods for employer‑initiated terminations range from 14 days (employment of up to one year) to six months (over 12 years).
• Communication plan. Prepare a written termination notice and plan a face‑to‑face meeting. The notice should state the grounds for dismissal, the applicable notice period and the last day of employment.
• No statutory severance obligation. Finnish law does not mandate a general statutory severance payment for lawful dismissals. However, if a court finds the dismissal unfair, compensation for dismissal or summary dismissal may be ordered.

Step 4, Procedural Fairness and Documentation to Preserve Evidence

The burden of proving that a dismissal was lawful falls squarely on the employer. Finnish courts place heavy weight on contemporaneous documentation, records created at or near the time of the events, rather than assembled after a dispute arises.

• Maintain a dedicated HR dismissal file. This should include the investigation memo, witness statements, warning letters, PIP documents, the employee’s responses, meeting minutes and the final termination notice.
• Minute all meetings. Every meeting with the employee relating to the conduct or performance issue should be documented with a written record signed by participants.
• Retain records for the statutory limitation period. Keep the complete file for a minimum of two years following termination, and longer if litigation is anticipated.
• Consistency is critical. Ensure that the same standards are applied across the organisation. Dismissing one employee for conduct that others engage in without consequences is a common ground for unfair dismissal claims.

Step 5, Exceptions: Gross Misconduct and Immediate Dismissals

In exceptional cases, such as theft, serious dishonesty, violence or a fundamental breach of trust, the employer may cancel the employment contract immediately without notice and without a prior warning. The Government guidance confirms that these exceptions remain narrow and must be assessed on a case‑by‑case basis. For further background, see this overview of termination of an employment agreement under Finnish law.

Redundancy Versus Person‑Related Grounds Under Dismissal Law Finland

The 2026 amendment applies specifically to person‑related dismissals. Redundancy (economic) dismissals operate under separate rules and were not changed by the January 2026 amendment. However, employers frequently conflate the two, creating significant legal exposure. The following comparison table clarifies the distinction.

Employers should never disguise a person‑related termination as a redundancy. Finnish courts will look through the stated reason and examine the true motive. If the real reason is the employee’s conduct, the dismissal must follow person‑related grounds procedures. For more detail on the economic route, see downsizing legal requirements, process and employee rights.

Foreign Employees and Work‑Permit Consequences After Dismissal

The dismissal of a foreign employee holding a work‑based residence permit triggers additional considerations that are often overlooked. Since June 2025, an employee working in Finland on a work‑based residence permit has three months to find a new job if the employment relationship ends prematurely. If the permit holder does not find new work within that window and there are no other grounds for remaining in Finland, the permit may be cancelled.

Employers should take the following steps when terminating a foreign employee:

• Inform the employee in writing about the three‑month (or, in certain cases, six‑month) window and the potential consequences for their residence permit.
• Coordinate with immigration counsel. Timing the termination so that the notice period and any garden leave overlap with the employee’s job‑search window can mitigate hardship and reduce reputational risk.
• Document the notification. Retain a signed copy of the employee’s acknowledgment that they have been informed of the permit implications.

Early indications suggest that failure to inform a foreign employee about permit consequences, while not a direct ground for unfair dismissal, may be used by claimants to argue bad faith in litigation.

Litigation Risk and Common Pitfalls in Wrongful Dismissal Finland Cases

Even under the lower “proper reason” threshold, employers lose dismissal disputes when process and documentation fall short. The most common pitfalls include:

• Inadequate or absent warnings. Proceeding directly to dismissal without a documented warning, unless gross misconduct applies, remains the single most frequent cause of an employer losing at trial.
• Poor investigation quality. Relying on hearsay, undocumented verbal complaints or incomplete evidence undermines the employer’s case from the outset.
• Inconsistent enforcement. Dismissing one employee for behaviour that other employees engage in without consequence creates an obvious vulnerability.
• Failure to consult. Where a collective agreement requires shop steward involvement or prior consultation, skipping this step can render a dismissal procedurally defective regardless of the substantive merits.
• Delayed action. Waiting months after a known incident before initiating the process suggests the employer did not consider the matter serious, and courts may agree.

Mitigation strategies include implementing a mandatory legal sign‑off for all dismissals, maintaining a regularly updated dismissal procedure HR Finland manual and considering alternative dispute resolution or negotiated settlement before proceeding to formal termination.

Practical Templates and Sample Wording

Having standardised templates significantly reduces the risk of procedural errors. Employers operating in Finland should maintain the following documents as part of their HR toolkit:

• Investigation memo template. A structured form for recording the allegation, evidence gathered, witnesses interviewed and preliminary findings.
• Written warning template. Covers the required elements: description of breach, expected standard, consequences and improvement timeline.
• Performance improvement plan (PIP). A detailed plan setting measurable objectives, support offered, review dates and escalation triggers.
• Dismissal letter, person‑related grounds. States the proper reason, references prior warnings, confirms the notice period and sets out the employee’s right to challenge the decision.
• Dismissal letter, redundancy. States the economic grounds, summarises the consultation process, confirms redeployment efforts and sets out the notice period.
• Settlement offer template. A without‑prejudice framework for negotiated exits where litigation risk is elevated.

These templates will be published as a downloadable resource pack. In the interim, employers should ensure all template language is reviewed by Finnish employment counsel to confirm compliance with the current Employment Contracts Act provisions and any applicable collective agreement.

Remedies and Damages for Wrongful Dismissal in Finland

If a court determines that a dismissal lacked a proper reason or that the process was fundamentally flawed, the primary remedy is compensation. Under the Employment Contracts Act, compensation for wrongful dismissal Finland cases can range from a minimum of three months’ pay to a maximum of 24 months’ pay, assessed on a case‑by‑case basis. Factors influencing the amount include the employee’s length of service, the severity of the procedural failure, the employee’s age and prospects for re‑employment, and any contributory conduct on the employee’s part. Reinstatement is theoretically possible but is rarely ordered in practice. Employers and employees may also agree on compensation for groundless termination without court proceedings.

The employer’s exposure is therefore primarily financial, but the reputational impact of a public wrongful dismissal finding should not be underestimated. For a deeper analysis, see compensation for dismissal or summary dismissal.

When to Seek Counsel and Recommended Next Steps

Not every dismissal requires external legal involvement, but certain triggers should prompt immediate escalation to specialist employment counsel:

• The employee holds a senior or protected position (pregnant employees, employee representatives, employees on long‑term disability leave).
• The employee is a foreign national whose residence permit depends on continued employment.
• The case involves allegations of discrimination, whistleblower retaliation or union activity.
• Prior documentation is thin and the employer is uncertain whether the “proper reason” standard is met.
• The employee has indicated an intention to challenge the termination or has already engaged a lawyer.

As a practical internal escalation framework: line managers should report conduct issues to HR, HR should assess documentation and initiate the warning process, and any decision to proceed to dismissal should receive sign‑off from in‑house or external counsel. Compliance with dismissal law Finland rules is ultimately an organisational discipline, not a last‑minute exercise conducted under pressure.

Sources

1. Finnish Government, Valtioneuvosto: Lower threshold for dismissal
2. Ministry of Economic Affairs and Employment (TEM): Lower threshold for terminating employment
3. Työsuojelu, Occupational Safety and Health Administration: Termination of the employment relationship
4. Suomi.fi: Termination of employment
5. PAM (Service Union United): New dismissal law 2026
6. Castrén & Snellman: The threshold for dismissal is lowered
7. Employment Fund: Disputes over termination of employment
8. InfoFinland: End of employment
9. Yle: Finland approves law to ease job dismissal grounds