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When firms lay people off, who goes first? Unions, employers ponder changes

Autumn could see a wave of redundancies in Finland.

ulosmarssi Nokian Salon tehtaalla
Workers leave Nokia's Salo plant. Image: Mauri Ratilainen / AOP
Yle News

The blue-collar trade union confederation SAK is proposing rules requiring employers to take four factors into account when laying people off: professional skills, length of service, number of dependents, and whether employees have lost their ability to work in the line of service.

The model has been understood to protect older workers at the expense of their younger counterparts, but SAK chair Jarkko Eloranta denies that charge.

"Professional skills and number of dependents are in there," says Eloranta. "The young do better on those measures than those who have been in working life for longer."

SAK's preferred order of redundancies rose up the agenda this summer, soon after discussions on removing the so-called 'pension pipeline' (eläkeputki in Finnish) that gives enhanced benefits to older workers who become unemployed close to retirement.

That arrangement is seen as a reason for lower employment rates among older workers, and is under threat as the government looks for ways to raise total employment rates.

Redundancy arrangements are also topical this summer, as the corona crisis has forced many firms to cut costs. The autumn could bring a wave of permanent job losses.

Many sectors already regulate redundancies

Finland's labour markets are already highly regulated, with a sector-specific agreement between unions and employers defining the rules around pay and conditions of work.

In many sectors, those contracts already include defined criteria when redundancies have to be made. Eloranta says that SAK wants to apply those rules more widely by getting them written into law..

The employer would decide who gets made redundant, but the contract would contain criteria to guide that choice.

According to the industrial sector's agreement, the last to be laid off or furloughed are those whose skills and abilities are most important to the company. Also among the last to be laid off are those who have been injured at work.

Length of service and number of dependents are also taken into consideration.

Jyrki Virtanen of the Industrial Union says that the regulations are rarely invoked, and when they are it is usually to protect a worker who has been injured at work.

"When it's been invoked, it's been adhered to," said Virtanen. "There have not been many disputes."

Pension pipeline opens for older workers

The 'pension pipeline' allows older workers to effectively retire early by extending their entitlement to income-based unemployment benefits.

At present workers can join the pension pipeline between the ages of 60 and 62, depending on their year of birth. The minimum age has been raised consistently, and at the start of the year was raised to 62 for those born in 1961 or later.

The pipeline has the effect of encouraging employers to lay off older workers when making job cuts, as their income level will be protected.

If this arrangement was ended, older workers would be in the same boat as their younger counterparts. Re-entering the workforce is harder for older workers, though.

SAK: We don't want intergenerational conflict

Ilkka Kaukoranta, SAK's chief economist, says that union members believe redundancies can be made in an inconsistent and non-transparent way. Employers are free to choose who they let go.

The confederation emphasises that they do not want intergenerational conflict. Even so, younger workers find it easier to get work than older ones.

"The longer someone has been in the same job, the more likely it is that their expertise serves that company," says Kaukoranta. "If you have been there for less time, it is easier to switch to another company."

Eloranta says other measures are needed to improve employment rates among older workers.

"Finns are not at the same level as Swedes in terms of health or fitness to work, there's a lot to do on welfare at work and maintaining capability to work," said Eloranta.

STTK not on the same page as SAK

The white collar trade union confederation STTK does not support SAK's proposal.

"It does not strengthen young people's position in working life," said STTK chair Antti Palola. "In addition it makes labour markets more rigid, when the movement of labour and desire to change workplace reduces."

Both Palola and Eloranta say the pension pipeline is likely to be under discussion when labour market organisations negotiate ways to increase employment rates this autumn.

Those talks are scheduled to take place after government talks to finalise next year's state budget. Unions are watching the pandemic situation carefully, in case a second wave of the virus hits Finland.

They had conceded ground in the spring to make furloughs quicker to agree, and if further flexibility is demanded to handle the pandemic, it could be difficult to compromise on other issues.

Palola says that any removal of the pension pipeline must be accompanied by measures to protect the position of older people in working life.

One option could be to allow them the right to switch to part-time working. Palola says another option would be to make it more expensive to cut jobs, as he claims redundancies are currently 'easy and cheap'.

EK: Employer knows best

The industrial employers' association EK says that it does not see any reason to legislate on redundancy criteria.

EK chair Jyri Häkämies says that while he would like to get rid of the pipeline, talks are not at the stage where they might discuss any kind of compensatory measures.

"The redundancy criteria proposal that's been put forward is toxic for us," said Häkämies. "We are sticking to the position that the employer evaluates the position themselves. Inside the company they know each person's significance to the firm's future."

Häkömies points out that whenever the minimum age is raised for eligibility for the 'pension pipeline', employment rates among that age group have increased.

Pipeline originally for 53-year-olds

According to the Finnish Centre for Pensions, Häkämies is right.

For example employment among 55-59-year-olds is currently significantly better than for other age groups, at 79.1 percent. The average overall is 72.6 percent. Employment rates among that group have risen as the pension age and the minimum age to access the 'pipeline' has risen.

The rate among 60-64-year-olds is just 55 percent.

The pipeline was introduced in the 1980s when unemployment had risen as a way of easing older workers out of the workforce to make way for their younger counterparts.

At first 53-year-olds were eligible, and the retirement age was 55.

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