Laying off an employee means temporary interruption of working and payment of salary by the employer. The employment contract and employment relationship remain in force during the lay-off. Lay-off may be valid indefinitely or for a fixed term, and it may be partial, in which case it means a shortened working week or working day.
According to the Employment Contracts Act, the employer is entitled to lay off an employee on two grounds:
1) The employer can lay off an employee due to temporary diminishing of work, in which case the lay-off may last for a maximum of 90 days.
2) The employer can lay off an employee for a financial or production-related reason. Then it is required that work has diminished essentially and permanently. In that case the lay-off may be valid indefinitely.
If the lay-off lasts for more than 200 calendar days, you are entitled to terminate your employment contract for immediate effect and receive the pay for the notice period as compensation according to the employer’s period of notice.
- Laying off a fixed-term employee
The employer is entitled to lay off an employee in a fixed-term employment relationship only if the employee is working as a substitute for a permanent employee and if the employer would be entitled to lay off the permanent employee if the permanent employee was working.
- Order of laying off
The order of reducing labour due to lay-off may have been agreed on in the collective agreement applied in the employment. Those to be laid off last include e.g. experts important to the company’s operations or employees that have lost part of their working ability at the service of the same employer. The collective agreement may also take a stand on the duration of the employment or an employee’s care obligation when the order of lay-off is decided on. Usually the persons elected as representatives of the employees are the last ones who can be laid off.
- Lay-off notice
The employer shall notify employees of a lay-off in person a minimum of 14 days before the lay-off begins. The notice shall include the grounds for lay-off, the date of commencement and the duration or estimated duration of the lay-off. The duration of fixed-term lay-off shall be given precisely. The employer is not bound by the estimated duration of lay-off which is valid indefinitely, and a new lay-off notice is not required if the duration turns out to be incorrect. If the notice cannot be given in person, it can be given by letter or electronically with the same minimum notice period.
- Returning to work after lay-off
If an employee has been laid off indefinitely, the employer shall notify the employee of resumption of work at least seven days in advance unless otherwise agreed.
Employees are entitled to take another work for the duration of the lay-off. They are, however, obliged to return to the work from which they have been laid off within seven days from the employer’s notice.
Employees are entitled to terminate an employment contract made with another employer for the lay-off period, regardless of its duration, at five days’ notice.
- Termination of the employment relationship of a laid-off employee
During a lay-off, employees are entitled to terminate their employment contract without a period of notice regardless of its duration. If the date when the lay-off ends is known by the employee, this right shall not apply for seven days preceding the end of the lay-off period. The employer must not interrupt the lay-off artificially so that the employees could not terminate their employment contracts without a period of notice.
If the employer terminates a laid-off employee's employment contract by giving notice so that the contract ends during the lay-off, the employee is entitled to the pay for the period of notice. The employer may deduct a pay sum due for 14 days from the pay for the period of notice, if the employee has been laid off using a law- or contract-based lay-off notification period of more than 14 days.
Employees who terminate their employment contract after the lay-off has lasted continuously for a minimum of 200 (calendar) days are entitled to their pay for the notice period as compensation. The employees are not obliged to work.
An annual holiday taking place between periods of lay-off does not mean that the lay-off is interrupted.
Employees can terminate their employment using the form found on the website of Occupational Safety and Health Administration.
- The effect of lay-off on annual holiday
During a lay-off, 30 working days at a time are included as days that accumulate the annual holiday. In calculating the 30-day period, only those days are taken into account that would have been the employee’s working days if he/she had not been laid off. 30 days are calculated as days equivalent to time at work, even if the lay-off lasted longer than that. If an indefinitely valid lay-off is interrupted, the 30-day period will start again.
There is no annual maximum number of lay-off days in the Annual Holidays Act, but each instance of lay-off shall be examined independently. The 30-day limit shall also be applied at the turn of the holiday credit year.
If the lay-off has been implemented through shortened working weeks or other comparable working hour arrangements, a maximum of six months at a time shall be calculated as equivalent to time at work. The maximum period means a period of six months, not six calendar months.
If such working hour arrangements continue without interruption after the end of the holiday credit year, a new six-month period shall be calculated from the start of the new holiday credit year.
- Rights and obligations during lay-off
Employees must not express business or professional secrets, breach the prohibition of competition or cause damage to their employer. The loyalty obligation to the employer also concerns the lay-off period.
Laid off employees are entitled to take on another work if it does not breach the prohibition of competition. The employees shall, however, return to the work from which they have been laid off after having received the employer’s notice on the end of lay-off.
Employees are then entitled to terminate another employment contract made for the lay-off period at five days’ notice.
Employees are entitled to terminate their employment contract for immediate effect during a lay-off period. It is not, however, permitted during the last week before the end of lay-off, if the date of ending is known to the employees. Then the employees are usually not entitled to the pay for the period of notice.
If the employee terminates the employment after the lay-off has lasted for a minimum of 200 days, they are entitled to receive the pay for the notice period as a compensation.
If the employee has a residence in their use as a salary benefit or on the basis of a contract of lease related to the employment, the right to use the residence remains during the lay-off.
Fringe benefits will not remain in force during the lay-off period, unless separately otherwise agreed.
- Unemployment security during lay-off