Finland has reformed its Employment Contracts Act to lower the dismissal threshold on individual grounds, effective 1 January 2026. Under the amended legislation, employers no longer need a “proper and weighty reason” to terminate an indefinite employment contract for personal grounds—instead, a “proper reason” is sufficient. This change aims to remove hiring hesitations driven by complex legal barriers, particularly for small and medium-sized enterprises “our aim is to remove barriers to employment and encourage recruitment,” as discussed by Minister of Employment Matias Marttinen.
Despite the lower threshold, dismissals still cannot be based on minor or arbitrary reasons and employers are required to conduct a comprehensive assessment of the circumstances before taking action. The reform retains essential procedural protections: employers must issue a warning and give the employee a chance to correct their behaviour, except in cases of serious misconduct so grave that continued employment would be unreasonable.
The obligation to offer alternative work has also been refined under the new law. Now, redeployment efforts are only required when an employee’s work capacity has changed—for example, due to illness or injury—rather than for general conduct-related dismissals. This narrower scope reflects a more targeted approach to supporting employees whose ability to perform work has genuinely declined.
Timing is critical: if an employee’s conduct occurred entirely before 31 December 2025, the former “proper and weighty reason” standard applies. However, if the conduct spans into 2026, the new “proper reason” test comes into effect for the ongoing behaviour. This transition has been clearly outlined in both the government proposal and the press release announcing the legislation.
In practical terms, employers should continue to document expectations and performance, provide clear warnings and ensure employees have a genuine opportunity to improve. The reduction in dismissal reason requirements does not eliminate the need for fair, evidence-based decision making. The Ministry’s Q&A emphasises that “comprehensive consideration still applies and arbitrary reasons remain prohibited,” making diligence indispensable
Employees should also appreciate what the reform does not change: dismissals for discriminatory or trivial causes are still illegal and serious misconduct remains the only situation where a warning can be skipped. The stricter standards for economic or production-related dismissals also remain in place.
Leap 29 Perspective
“Across the market, strict dismissal rules have often led to what feels like organisational inertia—companies keeping employees who aren’t the right fit simply because the legal risk of letting them go is too high. Finland’s decision to lower the threshold could change that dynamic, encouraging quicker, more confident decisions and improving team alignment, especially in fast-moving sectors. But there’s a fine line: if businesses treat this as a license to “move fast and break trust,” they’ll pay the price in reputation, retention and recruitment costs. The organisations that truly benefit will be those that combine flexibility with fairness—anchoring every decision in clear documentation, constructive feedback and a human approach. That’s how you prove that agility and integrity can work hand in hand” Simon Duff – Director Leap29
Leap29 Finland EOR services
Finland is an increasingly attractive destination for businesses looking to expand into the Nordic region, thanks to its strong economy, skilled workforce and innovation-driven culture. However, navigating Finnish employment laws and compliance requirements can be challenging for companies without a local presence. Leap29’s Finland Employer of Record (EOR) service simplifies this process by handling payroll, taxes and statutory benefits on your behalf, freeing you to focus on growth and strategy.
