Employers: Are You Ready for the 2026 Employment Law Changes?
- Niina Palaja
- May 22
- 6 min read
Employment law is changing, and many of the upcoming reforms give employers more flexibility in practice. The 2026 changes are especially relevant in the following areas:
greater flexibility in the use of fixed-term employment contracts
a lower threshold for dismissal on personal grounds
shorter time limits related to temporary lay-offs
a narrower re-employment obligation for employers
In this article, I explain what the 2026 employment law reforms mean for employers in practical terms. At the end, I also outline the impact of the amendments to the Co-operation Act that entered into force on 1 July 2025.
Fixed-Term Contracts May Soon Be Used Without a Justified Reason
Under Chapter 1, Section 3 of the Employment Contracts Act, a fixed-term employment contract currently requires a justified reason. However, the Government has proposed that, under certain conditions, an employer could conclude a fixed-term employment contract of up to one year without a justified reason. According to the proposal, this would be possible even where the employer’s need for labour is permanent. The proposal was submitted to Parliament on 15 January 2026 and has since advanced in the legislative process, making this a reform employers should monitor closely.
A fixed-term contract concluded without a justified reason could last for no more than one year. It could be renewed no more than twice within one year of the first contract, provided that the combined duration of the contracts does not exceed one year in total. Once the employment has lasted at least six months, either party would be entitled to terminate the contract.
Before the fixed-term employment contract ends, the employer would be required to provide the employee with a reasoned explanation of the possibility of continuing the employment relationship either as a permanent contract or as a fixed-term contract concluded for a justified reason. The explanation would have to be provided in writing at the employee’s request.
In practice, a reasoned explanation means that the employer tells the employee whether there will be a continuation of the employment relationship after the fixed term ends and what that assessment is based on. For example, the explanation could state that the employer has permanent work available, that the employment could continue under a new fixed-term contract for a justified reason, or that no further work is available because the need for labour ends with the fixed term. If, for instance, the employee was hired to cover a peak period, the explanation could state that there is no longer a need for additional labour after the fixed term. If, on the other hand, the employee’s duties continue but the organisation is assessing the possibility of making a permanent recruitment, the explanation should say so and explain the timetable on which the matter will be decided.
In addition, the employer would have an obligation to offer work to an employee with whom a fixed-term employment contract has been concluded without a justified reason. This obligation would arise if the contract is about to end and the employer is considering hiring a new employee for the same or a similar position. The amendment was originally intended to enter into force on 1 April 2026, but the legislative preparation has continued and it did not enter into force at that time. The aim, however, is for the amendment to come into force during 2026.
Lowering the Threshold for Dismissal on Personal Grounds
Under the Employment Contracts Act, dismissal on grounds relating to the employee previously required a proper and weighty reason. Since the beginning of 2026, however, the requirement of a weighty reason has been removed, and a proper reason related to the employee is sufficient for dismissal. Such a proper reason may exist, first, where the employee breaches or neglects obligations affecting the employment relationship.
Examples may include situations such as failure to follow the employer’s instructions, neglect of work duties, unjustified absences, inappropriate conduct, or lack of due care at work. Second, the ground may relate to the fact that the employee’s ability to work has changed substantially and the employee is no longer able to perform the work duties. The legislative amendment entered into force on 1 January 2026.
Easing of Temporary Lay-off Time Limits
The Government has proposed that the lay-off notice must be given to the employee no later than seven days before the start of the lay-off instead of the current 14 days. If the employer follows a normal collective agreement or a universally binding collective agreement that provides for a longer notice period than the law, it would be possible at the workplace to agree on using the shorter seven-day notice period.
According to the proposal, a lay-off notice delivered electronically or by letter would be deemed to have come to the employee’s attention on the seventh day after dispatch, whereas currently the employer must, where necessary, be able to prove that the notice has actually been served on the employee. The amendment concerning the lay-off notice has not yet entered into force, and the exact date of entry into force has not been confirmed. However, the amendment is expected to progress during 2026.
Removal of the Re-employment Obligation for Companies with Fewer Than 50 Employees
Under the Employment Contracts Act, an employer must offer work to a former employee if that employee was dismissed on production-related and financial grounds and the employer later has the same or similar work available.
According to the Government proposal, the re-employment obligation would in future apply only to employers who regularly employ at least 50 employees. In practice, this means that the obligation would be removed for companies with fewer than 50 employees. The amendments were intended to enter into force on 1 April 2026, but the legislative preparation is still ongoing. The exact date of entry into force is not yet known, but the amendment is expected to enter into force during 2026.
Amendments to the Co-operation Act
Amendments to the Co-operation Act entered into force on 1 July 2025 concerning the threshold for the application of the Act and the duration of change negotiations. In addition, the Government is preparing an amendment to the threshold for the application of employee representation in administration. It is intended to enter into force on 1 July 2026.
Raising the Application Threshold of the Act to Companies with 50 Employees
Before the amendments entered into force, the Co-operation Act applied to undertakings and entities that regularly employed 20 employees. The threshold for the application of the Act was raised, and it now applies only to undertakings and entities that regularly employ at least 50 employees.
However, certain obligations under the Co-operation Act continue to apply to undertakings and entities with 20–49 regular employees. These obligations include, among other things, continuous dialogue, the organisation of change negotiations in certain situations, and compliance with provisions concerning transfers of business, mergers, and demergers. The amendment entered into force on 1 July 2025.
Shortening the Minimum Duration of Change Negotiations
The minimum duration of change negotiations under the Co-operation Act was shortened to three weeks or seven days. The applicable minimum period depends on the matters discussed in the negotiations and the number of employees in the undertaking or entity. The amendment entered into force on 1 July 2025.
Time Reserved for Clarifying Employment Services
The Co-operation Act also introduced an entirely new provision on the time that must be reserved for clarifying employment services. If the employer has submitted a negotiation proposal concerning a plan to dismiss at least 10 employees on production-related and financial grounds, the employer may not terminate the employment contracts of those employees until 30 days have passed since the negotiation proposal was delivered to the employment authorities. The amendment entered into force on 1 July 2025.
Employee Representation in Administration
Under the Co-operation Act, companies employing at least 150 employees in Finland must apply the provisions on employee representation in administration. However, the Government has proposed that in future the scope should be extended to companies with at least 100 employees. This means that the threshold would be lowered from companies with 150 employees to companies with 100 employees. The amendment is intended to enter into force on 1 July 2026.
This article is a general overview of the legislative amendments and does not replace a case-specific legal assessment. Each situation should be assessed separately together with a lawyer.
I would be happy to help assess how these changes affect your company’s operations specifically and how best to prepare for them in practice.
Niina Palaja
Attorney-at-Law
Email: niina.palaja@palaja.fi
Phone: +358 40 706 1673
