Government proposal submitted to Parliament on lower dismissal threshold

According to the government proposal, employers would be able terminate an employment contract where a proper reason exists. To determine whether proper reasons for dismissal exist, comprehensive consideration would still be used as a basis for assessment.

“Our aim is to remove barriers to employment and encourage recruitment. This is an important change for small businesses, which find the legal risks associated with dismissals to be significant barriers to hiring staff. We want to remove barriers to employment for companies so that as many people as possible can find work,” says Minister of Employment Matias Marttinen.

The Government submitted its proposal to Parliament on 23 October 2025. The proposal would amend the provisions of the Employment Contracts Act and the Seafarers’ Employment Contracts Act concerning dismissals based on individual employee-related grounds. The amendments are based on the Programme of Prime Minister Petteri Orpo’s Government.

Proper reason required for dismissal – arbitrary grounds remain prohibited

At present, an employer can terminate a contract of indefinite duration for proper and weighty reasons related to the employee. Under the Government proposal, the grounds for terminating an employment contract would be met if a proper reason exists. 

A proper reason could at least be deemed to exist in situations where 

• an employee breaches or neglects obligations affecting the employment relationship or
• an employee’s capacity to perform work has changed so significantly that they can no longer manage their duties.

In practice, the neglect of obligations could include failure to comply with the employer’s instructions, neglecting work, absences for no valid reason, inappropriate conduct or carelessness in performing work.

Not every instance of reproachable behaviour or inadequate performance would constitute sufficient grounds for dismissal. The existence of sufficient grounds would continue to be determined on the basis of a comprehensive consideration of the circumstances of both the employer and the employee.

As is the case a present, the employer should also take into account other obligations that apply to both employers and employees and the prohibited grounds for dismissal. Termination of employment on arbitrary or minor grounds would still not be permitted.

An employee could not be dismissed without first being given a warning and the opportunity to amend their conduct. Exceptions would apply in cases of serious misconduct where the employer could not reasonably be expected to continue the employment relationship.

At present, an employer must investigate whether the employee could be reassigned to other duties before dismissal. In future, the employer’s obligation to reassign the employee would apply only in cases where the employee’s capacity to work has changed during the employment relationship. This would apply, for example, if the employee’s ability to work had deteriorated due to illness, injury or occupational accident.

Legislative amendments to enter into force at the beginning of 2026

In September 2024, the Ministry of Economic Affairs and Employment appointed a tripartite working group to prepare the amendments. The working group was not unanimous. The group’s report was circulated for comment in spring 2024, after which the Ministry continued working on the preparations.

The Government proposes that the amended legislation enter into force on 1 January 2026.

Inquiries:
Jaakko Aromaa, Special Adviser to the Minister of Employment, tel. +358 295 047 110 (questions for the Minister of Employment)
Nico Steiner, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 295 049 001