Insight

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The Finnish Pension Reform has entered into force – Will the pension liabilities increase in your company?
9 Jan 2017 The New Year ushered in several amendments to private and public sector pension Acts. Among the main amendments were an increase to the general retirement age and harmonization of the accrual percentage of employment pensions. This may have an effect on an employer's pension liabilities if the employer has promised employees a certain kind of pension benefit. Now is the time to check the contents of the pension promise especially if the employer has a supplementary pension arrangement that improves the statutory pension. The most significant change of the new Employees' Pension Act (69/2016) is that the minimum general retirement age will rise after a transition period. The risk is that the diminished statutory pension and a supplementary pension are not sufficient to cover an employer's pension promise under the new Act. The supplementary pension supplements the statutory pension and normally entitles an employee to retire prior to the statutory retirement age. The statutory pension and the supplementary pension together form the employee's overall pension security. If the employer has promised the employee a certain amount of overall pension, the employer may be liable to compensate the employee if the overall pension coverage is not fulfilled regardless of the statutory provision or the employer's agreement, for example, with a life insurance company on the arrangements of the benefit. The law does not contain separate regulations on employers' compensation liability. On the contrary, amendments concerning the statutory pension may entitle the employer to make amendments to its supplementary pension arrangements. The deciding factor is whether the level of the overall pension coverage is binding on the employer. If the employer has committed itself to a certain level of pension benefit,, this affects the employer's ability to change the contents of the pension arrangement and limits the employer's ability to influence its pension liabilities, for instance, by changing the terms of the pension arrangement to reflect the changes of the mandatory pension legislation. An employer's pension promise can be based on an express agreement, on the employer's unilateral announcement, commitment or on a long-lasting established practice. Therefore, it is important to clarify what kind of pension promise the employer has made in practice to its employees who are entitled to a supplementary pension benefit. Has the supplementary pension or the level of the supplementary pension been agreed on? Do the employment contracts contain terms on the pension benefit? How has the entitlement to the supplementary pension been communicated to the employees? It is worth checking these facts as they may lead to a situation where it is not possible to influence the pension liabilities just by altering the terms of the supplementary pension, and the compensation liability arises on grounds of the binding pension promise.
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Recent Changes in Finnish Employment Laws
2 Dec 2016 Public discussion around the Finnish employment legislation has recently focused on the Government driven Competitiveness Pact, bypassing the less dramatic legislative changes that have already taken place. These recent legislative changes should not be overlooked. The changes affect the daily working life, HR-processes and even personnel costs of majority of Finnish employers. The Waiting Period for the Right to Postpone Annual Holidays due to Sickness Reintroduced The employees' right to postpone annual holidays due to sickness has been strictened as of 1 April 2016. If an employee who has accrued full annual holiday (at least five weeks) is incapacitated for work during holiday, he/she has a right to postpone the 'lost' holidays only after a waiting period of up to six days, unless the applicable Collective Agreement states otherwise. The six waiting days are calculated on annual basis, i.e., the six waiting days can consist of consecutive six days' period or up to six separate sick days. The Accumulation of Annual Holiday during Family Leaves Shortened As of April 2016, the employees accumulate annual holidays only during the first six months of paternity, maternity, and parental leave unless the applicable Collective Agreement states otherwise. The new, stricter rule is applied when the family leave begins after 1 April 2016. New Obligation to Prepare a Non-Discrimination Plan The New Non-Discrimination Act imposes a new obligation to prepare a Non-Discrimination Plan on employers employing at least 30 employees in Finland. The Non-Discrimination plan should be prepared by 1 January 2017 and it should cover, e.g., concrete measures for promoting equal treatment at the workplace. The Employees' Right to Job Alteration Leave Strictened Since January 2016, an employment history of at least 20 years is a precondition for job alternation leave instead of the former 16-year-requirement. Also the maximum duration of the job alternation leave is shortened in half to 180 calendar days. Dividing the job alternation leave to separate leave periods is no longer possible. New Obligations Related to Posting of Workforce The new Posted Workers Act applies to arrangements where a Finnish employer temporarily uses foreign leased workforce, foreign employees from the employer's group companies or foreign subcontracting. The New Act imposes a practically significant new obligation. The employers are obliged to notify the authorities in advance of the posting of workforce to Finland. This obligation enters into force during 2017. Key Insights These are interesting times. Material legislative changes affecting the core of the Finnish working life will take place shortly. The Finnish Pension Reform will enter into force in the beginning of 2017. (Read More on D&I Quarterly Q1 2016). Also the Competitiveness Pact introduces new regulatory elements to Finnish working life, such as the possibility increase the yearly working time by 24 hours by (in most cases) concluding a local agreement at the workplace. Finnish employers should explore this possibility without delay. We will continue following the development of the Finnish employment legislation and keeping You informed on the practical effects of the changing regulatory framework.
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Suvi Knaapila Is the New Co-Head of D&I's Employment Practice
21 Jun 2016 Suvi Knaapila, the new Co-Head of D&I’s Employment, Benefits & Pensions practice, looks at her area of expertise also from the customer’s perspective and as a supervisor. When Suvi Knaapila began working as an associate at Ditmar & Indrenius in 2008, there were just a handful of lawyers working in the firm’s Employment, Benefits & Pensions practice. Now there are about a dozen, and Knaapila herself was appointed Co-Head of the practice in the beginning of 2016.According to Knaapila, the growth has been driven by high quality service, precedent setting cases as well as renowned employment law partners Petteri Uoti and Seppo Havia, whom Knaapila has had the opportunity to work with closely for her entire career.“It is great to work in a motivating environment where goals are set high and you can really focus on each customer and find practical, tailor-made solutions to their needs. I would say that we are the leading employment law practice in Finland,” Knaapila states.As to the employment law trends that currently are at the forefront of employers' minds, Knaapila immediately lists two: non-discrimination and equal treatment.“There aren’t really any HR-decisions where you don’t have to think about equal treatment and non-discrimination these days.” According to Knaapila, questions related to new forms of atypical work and EU/international employment law, such as posting of employees, are also more common now than before. These questions emerge from recent legislative developments and, on the other hand, unclear applicability of the traditional employment laws to non-traditional working arrangements. One of the most recent themes to crop up is legal challenges related to pensions, supplementary pensions in particular. "A typical example is that the employee and the company have a different interpretation on what was promised or agreed regarding voluntary pension benefits. Also the employer's right to amend the terms and conditions of the pension plan often causes confusion. The financial impact of supplementary pension benefits on the individual employee is typically significant. This further increases the likelihood of questions and conflicts.” The Value of Perspective When she came to D&I, Knaapila had just graduated from the University of Helsinki, but she had already managed to gain a wide range of work experience. She returned to Finland from the Netherlands, where she had worked for a private equity fund investing in microfinance in Asian and African countries. Her interest in employment law began earlier, when she became familiar with the field while working at another law firm specialized in employment law during her studies. Like all new employees at D&I, Knaapila spent the first two years at work visiting all practice groups of the company. This possibility to get acquainted with all the practice areas was one of the reasons she decided to enter the firm in the first place. “At D&I, you get to try out different areas of law for a half-year at a time, which, as I understand it, is quite exceptional in the law firm scene here. The fact that you get acquainted with other fields of law deepens your perspective on your own area of expertise and also helps you to see how colleagues with different specialisations look at things. The fact that we understand each other and speak the same language when working together is very valuable.”   Knaapila gained another new perspective on her work during a secondment period for Kesko having responsibility over employee relations at the group level. This gave her an even deeper understanding of the special questions and processes related to employment matters in a large corporation. “At a law firm, you get to work with high-level jurisprudence. For the customer, the focus is entirely different. Besides providing legally correct and insightful advice, we need to ensure that the solutions we propose are justified from HR and business perspective as well as efficient to administer. At Kesko, I was also working with group level cooperation with the representatives of the personnel. It was great to see how well common goals can be reached and justified decisions made in cooperation with the personnel.” The Importance of Active Management As Co-Head of the Employment, Benefits & Pensions practice, Knaapila herself is a supervisor. However, she views this position as a coaching role. People often think that experts "manage themselves", but Knaapila believes in the power of active management and motivation. “I want to be active in supporting my junior colleagues and being available to them, in terms of legal issues, wellbeing at work and professional development. I believe that active management has its place in this field. The question is not of interfering with the responsibilities and freedoms of the attorneys' independent roles, but rather of providing ‘supervisory services’.” Knaapila has also continued to study alongside her work: she is just a thesis away from completing her master’s degree in corporate governance from Hanken School of Economics. Questions of governance are above all topical. They are also closely linked to Knaapila’s current tasks. In addition, she is on the board of the Helsinki Bar Association (Helsingin Asianajayhdistys) and a member of the Delegation of the Finnish Bar Association. For her active role in Helsinki Bar Association, she was awarded the title of Lawyer of the Year 2014. “The legal profession has its own code and ethics, a sense of solidarity and respect for colleagues. The professional community is important—I am happy and proud that I get to be a part of it.”

Dittmar & Indrenius