Employment Newsletter 1/2014
Welcome to the first issue of Hannes Snellman's Employment Newsletter! To find out more about our Employment practice, please click here.
Extension of working careers
As the economic crisis has added to the financial pressure on national budgets, the European Commission has taken the role of working with member state governments to continue providing decent pensions in the future. A main theme of discussion has been ensuring the possibilities of men and women staying longer in employment.
In Finland, the recent statutory amendments within the area are diverse and include for example increasing employers’ responsibilities in relation to the needs of aging employees and occupational health care. Moreover, the liability of large employers for additional unemployment costs accrued in connection with terminations of employment of aging employees has been increased since the beginning of 2014. The obligation to compensate relates to situations when a former employee born in 1950 or thereafter becomes entitled to continued unemployment allowance. The compensation fee applies to employers, whose total yearly salary costs exceed EUR 1,990,500. The compensation fee increases in a linear fashion from zero up to the maximum compensation fee which in 2014 is reached with a total yearly salary amount of EUR 31,848,000. The fee is determined on the basis of the amount of benefit costs payable to the dismissed employee up to the end of the calendar month in which the employee reaches the age of 63. For employees born between 1950 and 1956 the compensation fee is at a maximum 80 per cent of the continued unemployment allowance or the total of the paid unemployment allowance. However, since the beginning of 2014, the maximum compensation fee percentage for employees born after 1957 has been increased to 90 per cent.
Another ongoing discussion relates to raising the retirement age. Changes to the earnings-related pension scheme are planned to enter into force in the beginning of 2017. The reform is currently being negotiated by the trade union confederations and a proposal on the long term reform of the pension scheme can be expected in autumn 2014. Already existing amendments to the earnings-related pension scheme, in force since 2013, include raising the part-time retirement age from 60 to 61 for employees born in 1954 and thereafter and discontinuing the possibility of early old-age pension at the age of 62 for employees born in 1953 and thereafter.
Amendment of the Annual Holidays Act
The Finnish Annual Holidays Act was amended following the judgment of the ECJ in the case C-78/11 where the Court found that Article 7(1) of Directive 2003/88/EC on the subject of organisation of working time must be interpreted as precluding national provisions under which a worker who becomes unfit for work during paid annual leave is not entitled subsequently to the paid annual leave which coincided with the period of unfitness for work. Prior to the amendment, if an employee became unfit for work during paid annual leave which continued for an uninterrupted period of more than seven calendar days, the portion of the unfitness period exceeding seven days was not considered as part of the annual leave. Since October 2013, the entire period when the employee was not able to work shall not be considered as part of the annual leave, if the employee so requests.
Preliminary ruling of the Court of Justice on the interpretation of the “parental leave directive”
In Finland an employee may be entitled, on the basis of a collective agreement, to pay during maternity leave. Most collective agreements state that an employee must return to work in between pregnancies in order to be entitled to pay during the latter maternity leave. However, a change in the current practice is anticipated following the recent preliminary ruling of the ECJ in joint cases C 512/11 and C 513/11 stating that Council Directive 96/34/EC on the subject of parental leave must be interpreted as precluding a provision of national law pursuant to which a pregnant worker who interrupts a period of unpaid parental leave to begin, with immediate effect, a new maternity leave, shall not be entitled to receive remuneration which she would have been entitled to had that period of maternity leave been preceded by a minimum period of resumption of work.
Reduced social security contributions within science and development
As from 1 January 2014 it is possible for an employer to make deductions from the social security contributions for employees working within systematic and qualified science and development during at least 75 per cent of the working hours and 15 hours per month.
The maximum possible deduction is ten per cent of the employee’s salary. However, the deduction shall not exceed an amount which would imply that the final social security contributions, to be paid by the employer, do not cover the mandatory pension contribution (i.e. 10.21 per cent of the salary). Further, the deduction may in no event exceed SEK 230,000 in total per month, for all the employer’s employees.
Example: A scientist’s salary is SEK 50,000 per month for which the social security contributions will amount to SEK 15,710 (during 2014). The employer may deduct ten per cent of the salary, i.e. SEK 5,000, from the social security contributions. Consequently, the final social security contributions to be paid by the employer will amount to SEK 10,710, which corresponds to 21.42 per cent of the salary and is consequently sufficient in order to pay the mandatory pension contributions of 10.21 per cent.
Caroline Wassdahl, Senior Associate, Stockholm