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Public sector employees face first 30% cut to holiday bonus

The government's heavily-promoted pact with labour unions and employers to improve Finland's market competitiveness has imposed a wage freeze and requires workers to work 24 hours more each year for the same compensation. It also temporarily cuts the holiday bonus of over half a million municipal and state workers by close to a third for three years.

Examples of holiday pay cuts.
Image: Yle Uutisgrafiikka

Public sector workers are facing a 30 percent cut to their holiday bonus this summer, the first in a series of three. Last year the centre-right government forged a tripartite competitiveness pact that it says will boost economic growth and create jobs. Figures predict that the move will strip these workers of half a million euros in holiday bonuses by the year 2019.

For a person who has worked steadily in the same job earning about two thousand euros per month, for example, the losses will be in the hundreds of euros.  

School kitchen worker Ritva Hagström from Porvoo has calculated that she'll earn 400 euros less this year.

"I had thought of buying new eyeglasses, but I guess that won't happen. It's nothing to laugh about," she says.

Public sector workers bear more of the burden

The pact's temporary cut to holiday bonuses will affect over 500,000 municipal and state employees between the years 2017 and 2019. Many public sector workers are angry and confused about why they have been singled out, when the idea was to encourage a collective belt-tightening that should have targeted all of Finland's residents.

The agreement, which was intended to boost Finnish competitiveness to Germany and Swedish levels, also included a salary freeze and a requirement for all employees to work an extra 24 hours a year for the same pay.

Municipal negotiator Sari Ojanen reminds workers that things could be worse. At one point, the government threatened to counter with even more punishing austerity measures if labour unions and employer representatives couldn't reach a settlement to cut unit labour costs.

"The alternative was the government's plan to shorten holidays and cut Sunday bonuses," she says.

Hagström says this is small comfort. Even with 30 years of experience under her belt, she earns less than 2,000 euros a month, so the missing 400 euros will be a major blow.

"It's a pretty significant amount. Not much room for manoeuvre to do something this summer. You work all year to save for a little trip away from home, unless a home appliance breaks down, because then you have to buy a new one," she says.

50% of holiday pay

Finland's system of holiday bonuses is a unique form of so-called "thirteenth salary". Practices vary and are usually agreed upon in collective agreements. The amount that is awarded depends on salary level and how long a person has worked, but it is normally 50 percent of the total holiday pay that workers have earned that year.

The holiday bonus cuts that are currently on the table will affect 429, 000 municipal workers and 72,000 state employees. The number of public sector employees in Finland has fallen significantly in recent years, due to increased levels of retirement and decisions to incorporate many formerly public services.

Wages for state employees in Finland are better than those of municipal workers. People who have worked for the state for over 15 years earn an average of 3,800 euros a month. The Finance Ministry's state labour market department estimates that workers earning this amount will lose 820 euros' worth of holiday bonus with the cut.

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