News - 01.03.2016 klo 10.51

A broad labour market pact is born - and the burden will be heavy for employees

The labour market organisations finally agreed on a broad labour market pact. It makes working hours a bit longer and will cut the income of employees.

Trade union confederations are, however, ready to swallow the pact as it might provide the stimulus for Finland to find a way out of its recent economic difficulties and improve employment prospects. One precondition for the pact becoming effective is that the Government abandon its plans to restrict freedom of bargaining by legislative measures.

The pact - which is called the competitiveness contract - is a result of a long and winding road. The centre-right Government of Prime Minister Sipilä announced in September 2015 of their plans to impose serious restrictions on collective bargaining rights, holidays and wages through dint of legislation

After strong popular reaction Mr. Sipilä was forced to open the way for labour market organisations to negotiate an alternative to the Government plans. This has now, after several failed attempts, produced an agreement.

24 hours more work in a year

The pact will make the annual working time 24 hours longer on existing wages. The holiday pay for those working in the public sector will be cut by 30 per cent for the next three years.

These changes should be conducted separately in each of the some 300 collective agreements before the end of May. The unions can negotiate which is the best way to add 24 more working hours in their various fields.

Employees' pension insurance contribution will be raised by 1.2 percent. And the  employers share of the contribution is to be cut by the same amount. The unemployment insurance payment for the employees will also be raised by 0.85 percent.

The average salary before tax in Finland last year was 3,284 euro per month. According to the calculator set up by the public broadcasting company Yle a person on this salary would lose 1,367 euro a year as a result of this pact.

If she or he is working in the public sector the loss would be 1,860 euro a year.

The pact would see the existing collective agreements last an additional 12 months and freeze wages for this period.

The pact also includes a new crisis clause to help businesses overcome extraordinary difficulties. At a company level it would be possible to adapt terms of employment in order to help the company over the crisis.

What this means in practical terms is not yet sure. Prime Minister Sipilä also said he wants to know more about how this would work in practise.

If the Government accepts the pact, it will cancel 1.5 billion euro budget cuts and tax hikes which would hit wage and salary earners hard. It also pledges to make good on one billion euro in income tax reductions.

Better than the Government plans

Sture Fjäder, Chairperson of Akava, the Confederation of Unions for Professional and Managerial Staff in Finland stresses that the pact is in any case better than the Government legislative package would have been. Akava board agreed to accept the pact.

”This is a more evenhanded and lasting solution than cutting wages or cutting one week of holiday for women working in the public sector on a low salary”, Fjäder says.

Antti Palola, Chairperson of the Finnish Confederation of Professionals STTK says that  with this pact the responsibility as regards Finland’s future would be borne more equitably than it would be under the planned Government legislation.

He also sees it as important that the pact stresses the importance of trilateral negotiations and respects the views of all parties in labour market.

When speaking of local bargaining Palola says that in order to advance it the position of employees must be better. Local bargaining must be fair and based on mutual understanding, he adds.

STTK board has accepted the pact.

The board of the Central Organisation of Finnish Trade Unions SAK send the pact to its member unions asking these to reply in a week. It will make its decision after considering comments from member unions.

SAK Chairperson Lauri Lyly says that the most difficult issue is extending the annual working time. Also, the question of the crisis clause opens many questions.

It is, however, probable that most, if not all, of SAK unions will accept the pact. Trust in the Government is so low that the unions are determined not to give it a free hand and stipulate labour market laws any way they see fit.

Read more:

Rules on local bargaining under intense negotiation (25.02.2016)

Finland is heading towards major insecurity in the labour market (07.12.2015)

Written by: Heikki Jokinen