Dismissal Law Finland: Step‑by‑step Checklist for Foreign Employers (2026 Reform)

Finland’s dismissal law underwent its most significant change in decades when the 2026 reform entered into force on 1 January 2026, replacing the longstanding “proper and weighty reason” threshold for person‑related dismissals with a lower “proper reason” (asiallinen syy) standard. For foreign employers operating in Finland, whether through a local subsidiary, branch office or Employer of Record arrangement, the reform demands an immediate review of termination processes, contract templates and evidence‑gathering protocols. This guide provides a practical, step‑by‑step dismissals checklist Finland‑based HR directors and international general counsel can use to execute lawful terminations under the new rules while minimising litigation exposure and union friction.

What the 2026 Reform Changed, the “Proper Reason” Test Explained

Before 1 January 2026, Finnish employment contract termination required the employer to demonstrate a “proper and weighty reason” (asiallinen ja painava syy) when dismissing an employee on person‑related grounds, such as misconduct, poor performance or breach of obligations. Courts interpreted the “weighty” element strictly, and employers bore a high evidentiary burden. The reform, announced by the Finnish Government and explained by the Ministry of Employment and the Economy, removed the “weighty” qualifier, leaving a single requirement: a proper reason.

The practical effect is a lower substantive threshold for proper reason dismissal. An employer no longer needs to prove that the employee’s conduct or capability failure was especially serious, only that it constitutes a genuine, non‑arbitrary ground connected to the employee’s person. However, the reform does not make dismissal automatic or unrestricted. Dismissal remains unlawful if the ground is trivial, discriminatory, retaliatory or unconnected to the employment relationship. The procedural obligations that surround every termination of employment Finland employers must observe, warnings, the opportunity to be heard and proportionality assessments, remain fully in force.

Previous vs New Test, Comparison

Industry observers expect courts to develop new case law clarifying exactly where the lowered threshold falls. Early indications suggest that procedural compliance, documented warnings, a fair investigation and a genuine opportunity for the employee to improve, will carry even greater weight as the substantive bar drops, because courts will scrutinise how the employer acted, not merely whether a ground existed.

Who and Which Dismissals Are Affected

The 2026 reform applies exclusively to person‑related dismissals, situations where termination is connected to the individual employee’s conduct, capability or breach of obligations. It does not alter the rules for economic or production‑related redundancies, which continue to follow the co‑operation procedure under the Act on Co‑operation within Undertakings (yhteistoimintalaki).

Fixed‑Term Contracts, Probation and Executives

• Fixed‑term contracts. A fixed‑term employment contract cannot ordinarily be terminated before its expiry date unless the contract itself includes an express termination clause. The 2026 reform does not change this principle.
• Probationary employees. During a probationary period, either party may terminate the contract on shorter notice and with a lower justification threshold. The reform does not directly amend probationary termination rules, but employers should still document reasons to avoid claims of discrimination or arbitrary treatment.
• Senior executives and managing directors. Managing directors (toimitusjohtaja) who are not in an employment relationship are generally outside the scope of the Employment Contracts Act. However, executives who are employees benefit from the same protections, and dismissal law Finland rules apply in full. Executive termination clause Finland drafting should reflect the 2026 changes.

Dismissal Law Finland, Step‑by‑Step Checklist for Lawful Terminations

The following checklist outlines the core steps every employer should take when contemplating a person‑related dismissal under the 2026 standard. Use this as a dismissals checklist Finland compliance teams can adapt to internal workflows.

Step A: Pre‑Action Assessment, Is There a “Proper Reason”?

Before initiating any formal process, the employer must identify whether a proper reason exists. Typical grounds include:

• Misconduct. Repeated or significant breach of employment obligations (e.g., insubordination, policy violations, dishonesty).
• Capability failure. Sustained inability to perform duties despite reasonable adjustments and support.
• Breach of trust. Conduct that fundamentally undermines the employment relationship (e.g., competing activity, disclosure of trade secrets).

Assess each case against the proportionality test: is the issue serious enough that a reasonable employer would consider termination, and have lesser measures (warning, reassignment) been exhausted or would clearly be futile? Record this assessment in writing.

Step B: Investigation and Interviews

Conduct a fair, documented investigation before making any dismissal decision. Finnish occupational safety and health authorities expect employers to gather evidence objectively.

1. Appoint an impartial investigator (HR lead, external counsel or compliance officer).
2. Collect documentary evidence: emails, performance reviews, attendance records, incident reports.
3. Interview the employee concerned and any relevant witnesses. Offer the employee the right to have a representative present (trade union representative or other trusted person).
4. Record findings in a written investigation memorandum, noting all evidence reviewed and the conclusions drawn.

Step C: Warnings and Improvement Plans

Under dismissal law Finland, the employer is generally required to issue a warning before terminating on person‑related grounds. The warning must:

• Identify the specific conduct or performance issue.
• State clearly that continued failure may result in termination.
• Give the employee a reasonable opportunity to amend their conduct.

A warning may be oral or written, but a written warning is far more defensible in litigation. Where the breach is so severe that it demonstrates the employee cannot reasonably be expected to amend their behaviour, a warning may be dispensed with, but this exception should be applied narrowly and documented in the investigation memorandum.

Sample warning letter, key elements:

• Date and employee’s name.
• Description of the specific conduct or performance issue, including dates and evidence.
• Reference to the contractual or policy obligation breached.
• Clear statement: “If the issue is not resolved within [specified period], the company may proceed to terminate your employment.”
• Signature of issuing manager and acknowledgement line for the employee.

Step D: Co‑operation Obligations and Union Representatives

Where the employee is a member of a trade union covered by a collective bargaining agreement, additional consultation obligations may apply. Employers with regularly at least 20 employees must observe the co‑operation procedure (yhteistoimintamenettely) for certain matters. While person‑related dismissals are not typically subject to the full co‑operation procedure, which is designed for redundancy process Finland situations, the employer must still:

• Notify the employee of the grounds for potential dismissal.
• Provide the employee with the right to be heard, and allow them to bring a union representative or other support person.
• Consider any collective agreement provisions that impose additional procedural steps.

Step E: Decision Meeting, Termination Notice and Template Wording

Once the investigation is complete, warnings have been issued (or justifiably waived) and the employee has been given an opportunity to respond, the employer may proceed to the termination decision.

1. Hold a formal decision meeting. Communicate the decision to the employee in person where possible.
2. Deliver a written termination notice specifying the grounds, the applicable notice period and the employee’s last day of work.
3. If the employee requests it, provide a written statement of the grounds for termination.

Termination notice, essential elements:

• Employee’s name and position.
• Date of the notice and effective termination date (calculated per the applicable notice period).
• Grounds for dismissal: brief, factual summary referencing the investigation and any warnings issued.
• Details on final pay, accrued holiday pay and any post‑employment obligations (non‑compete, confidentiality).
• Information on the employee’s right to challenge the dismissal.

Step F: Settlement, Garden Leave and Protective Measures

After delivering the termination notice, the employer should consider:

• Garden leave. If the employment contract or a separate agreement permits, placing the employee on garden leave during the notice period can protect sensitive information and reduce workplace disruption.
• Confidentiality and non‑compete. Review existing restrictive covenant clauses. Under Finnish law, post‑employment non‑compete agreements are enforceable only within defined limits (maximum duration, compensation requirement) and must be assessed separately.
• Severance. Finnish law does not mandate statutory severance pay for individual dismissals, but collective agreements or individual contracts may provide for it. Settlement offers are common in practice as a means of avoiding protracted litigation.
• Final settlement. All wages, accrued holiday pay and any contractual entitlements must be paid by the termination date or on the next regular payroll date, depending on the contract and applicable collective agreement.

Evidence Checklist, What to Retain

Special Considerations for Foreign Employers, EORs and Expatriates

The 2026 reform does not create a separate regime for foreign employers Finland termination scenarios, but practical complications are common when the employing entity is domiciled outside Finland. Key areas of risk include:

• Employer of Record (EOR) arrangements. If a foreign company engages Finnish workers through an EOR, the legal employer is the EOR entity. Dismissal instructions from the foreign parent do not automatically satisfy Finnish procedural requirements. The EOR must independently assess whether a proper reason exists and follow every step outlined above. Failure to do so exposes both the EOR and the client to liability.
• Work permits and immigration. Terminating an expatriate employee may affect their Finnish residence permit. Employers should coordinate with immigration counsel to ensure the employee receives timely notification and, where appropriate, assistance with permit cancellation or transition.
• Cross‑border contracts. Employment contracts governed by foreign law may still be subject to Finnish mandatory employment protections under the Rome I Regulation, including the new proper reason standard. A choice‑of‑law clause alone does not override Finnish dismissal protections when the employee habitually works in Finland.
• Tax and social security. Final settlement calculations must account for Finnish social security contributions and withholding tax obligations. Errors in cross‑border payroll during termination frequently trigger tax authority audits.
• Executive contracts. Senior hires on international packages should have an executive termination clause Finland practitioners have reviewed. The clause should clearly distinguish between termination for cause (proper reason) and without cause, allocating notice, severance and benefit continuation accordingly.

Contract Drafting and Executive Termination Clauses

The 2026 changes to dismissal law Finland make it essential to review employment contract termination Finland templates, particularly for senior hires. An effective executive termination clause should address the following:

• Cause vs no‑cause distinction. Define “cause” by reference to the statutory proper reason standard, and specify consequences for each scenario (severance multiples, benefit continuation, equity treatment).
• Notice period. The contractual notice period may exceed the statutory minimum but cannot be shorter for the employer. Typical executive notice periods range from three to six months.
• Garden leave. Include an express right to place the executive on garden leave during the notice period, with full pay.
• Dispute resolution. Specify Finnish courts or arbitration in Finland as the forum, and Finnish law as the governing law. This avoids jurisdictional uncertainty.

Recommended sample clause (adapted for 2026):

“The Company may terminate this Agreement by giving [X] months’ written notice. If termination is for cause constituting a proper reason under Finnish law, no severance shall be payable. If termination is without cause, the Executive shall be entitled to [Y] months’ base salary as severance, payable in a lump sum within 30 days of the termination date. During the notice period, the Company may place the Executive on garden leave at its discretion.”

Anti‑pattern, avoid this language:

“The Company may terminate employment at will at any time with or without reason.” This clause is unenforceable in Finland. “At will” termination does not exist under Finnish law, and relying on such wording exposes the employer to claims of unlawful dismissal.

Redundancy Process Finland, How It Differs from Person‑Related Dismissals

It is critical to distinguish person‑related dismissals (governed by the new proper reason test) from redundancy dismissals (economic, production‑related or organisational grounds). The redundancy process Finland employers must follow is governed primarily by the Act on Co‑operation within Undertakings (yhteistoimintalaki).

Key differences include:

• Co‑operation obligation. Employers with at least 20 employees must conduct formal co‑operation negotiations before implementing redundancies. The minimum negotiation period is 14 days or, if the planned measures affect at least 10 employees, six weeks.
• Re‑employment obligation. After a redundancy, the employer must offer re‑employment to dismissed employees for a defined period if suitable vacancies arise.
• No warning requirement. Unlike person‑related dismissals, redundancy dismissals do not require prior warnings or improvement plans, the focus is on proving that the work has genuinely diminished.

Misclassifying a person‑related dismissal as a redundancy, or vice versa, is a common and costly error. Courts examine substance over form.

Risks, Remedies and Likely Court Considerations

If an employer fails to meet the proper reason threshold or neglects procedural requirements, the employee may bring a claim for unlawful termination. Remedies in Finnish courts typically include compensation rather than reinstatement. Compensation for wrongful dismissal generally ranges from 3 to 24 months’ salary, depending on the severity of the breach, the employee’s length of service and other circumstances.

What Evidence Courts Weigh

Industry observers expect Finnish courts to focus on the following factors when evaluating dismissal law Finland cases under the 2026 standard:

• Whether a written warning was issued and whether the employee was given a genuine opportunity to improve.
• The quality and impartiality of the investigation.
• Whether the employee was heard before the decision was made.
• Proportionality: was dismissal the only reasonable option, or were lesser measures available?
• Consistency: was the employer’s response comparable to how similar cases were handled previously?

Quick Reference: Notice Periods, Summary Dismissal and Special Categories

Statutory notice periods for termination of employment Finland depend on the length of service. The following minimum periods apply to employer‑initiated termination:

• Up to 1 year of service: 14 days’ notice.
• 1–4 years: 1 month.
• 4–8 years: 2 months.
• 8–12 years: 4 months.
• Over 12 years: 6 months.

Summary (instant) dismissal remains available under the 2026 rules, but only where the employee has committed a particularly grave breach rendering the continuation of the employment relationship fundamentally untenable, for example, violence, theft or serious fraud. The standard for summary dismissal has not changed.

Key Legislative Dates and Rule Change Summary

Appendix: Templates and Checklist Downloads

The following template resources are designed to support compliance with the 2026 dismissal law Finland requirements. Each should be adapted to the employer’s specific circumstances and reviewed by Finnish labour counsel before use:

1. Termination decision template. A structured notice document covering grounds, notice period calculation, final settlement details and employee rights.
2. Warning letter template. Includes fields for the specific conduct or performance issue, the obligation breached, the improvement expected and the consequences of non‑compliance.
3. Executive termination clause sample. A model clause distinguishing cause and no‑cause termination, with garden leave, severance and dispute resolution provisions adapted to the 2026 standard.
4. Evidence checklist (printable). A one‑page checklist for HR teams listing every document type to gather and retain during the dismissal process.

These templates serve as starting points. Given the significance of the 2026 reform to dismissal law Finland compliance, employers should seek qualified Finnish labour law advice before executing any termination to ensure every procedural and substantive requirement is met.

Sources

1. Government of Finland (Valtioneuvosto), Lower threshold for dismissal
2. Ministry of Employment and the Economy (TEM), Lower threshold for terminating employment
3. Occupational Safety and Health Administration (Työsuojelu), Termination guidance
4. Suomi.fi, Termination of employment
5. PAM (Service Union United), Termination of employment
6. Borenius, Finland lowers termination threshold (legal alert)
7. Castrén & Snellman, Employment law analysis
8. Littler Mendelson, Global Guide Quarterly (Q4 2025)
9. Employment Fund, Disputes over termination of employment