Finland's incomes policy settlement substantially improves position of redundant employees

Agreement has payroll costs impact of 2.5 and 2.1 per cent

A comprehensive incomes policy settlement was signed in Finland on 16 December 2004. The settlement incorporates the main goals of the Central Organisation of Finnish Trade Unions - SAK for the bargaining round. SAK is Finland's largest national labour confederation, representing the interests of about one million employees. The settlement covers about 90 per cent of the national workforce and will remain in force until autumn 2007.

In the negotiations SAK and the national salaried employee confederation STTK managed to resist efforts by the employers to abandon the principle of solidarity in wage settlements. The final accord substantially improves the security of workers threatened with redundancy and reinforces the status of elected employee representatives at the workplace. Increased liability of parties that subscribe to labour without employing workers and an independent right of trade unions to bring civil lawsuits against employers were also important objectives for SAK in the bargaining round. Progress was also made in these areas.

The Confederation of Finnish Industries (EK), which represents employers in Finland, was initially unwilling to begin the bargaining round, and delayed it for many months. Throughout the summer and early autumn the employers remained highly critical of the comprehensive incomes policy arrangement, expressing strong objections to such aspects as overly rigid adherence to the principle of solidarity in wage policy. Progress was brisk when the negotiations finally got under way, however.

The principle of solidarity is respected in various ways in the pay rises for both of the years covered by the settlement. To the very last stages of the bargaining process, the employers pushed for a flat rate percentage increase across the board and an end to the gender equality allowance for industries employing a high proportion of women. These objectives were not achieved, however. Efforts by the employers to incorporate wage components payable at individual enterprise level without regard to trade union demarcations were similarly unsuccessful.

The net effect of pay rises and tax cuts arising from the settlement will be an annual increase of between 1.5 and 2.0 per cent in the purchasing power of employees. The impact of the settlement on the payroll costs of employers will be 2.5 per cent in the first year and 2.1 per cent in the second year. This means that labour costs will increase more rapidly in Finland than in the rest of the Euro zone in 2005, but at approximately the same rate in 2006. The settlement will remain in force for a slightly longer period than usual, beginning on 16 February 2005 and ending on 30 September 2007.

This was the second bargaining round in which improving the security of employees threatened with redundancy was a prime objective of SAK. The new accord almost entirely satisfies the organisation's aims in this respect. The social and economic liability of employers in situations of business restructuring will clearly increase and the rapid re-employment prospects of redundant workers will improve. Employer liability in business restructuring situations has fallen short of the level achieved in many other European Union Member States. The new security package for employees threatened with redundancy will now give multinational enterprises pause for thought when considering Finland as a target for workforce downsizing measures.

The liability of parties that subscribe to labour without becoming employers will be enlarged through both collective agreements and new legislation during the period covered by the settlement. Despite strong objections of principle on the part of the employers, the settlement also includes an entry on the independent right of labour market organisations to take institute civil legal proceedings. Subscriber liability has already been introduced through a variety of instruments used in several European Union Member States.

Incomes policy settlement in short