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Layoff means an employer’s unilateral decision to temporarily suspend pay and work while the employment relationship continues. It can be realised by reducing daily or weekly working hours or by laying off a person full time. A layoff can last either for a predetermined period or indefinitely.

Frequently asked questions about layoffs

Only employees with a permanent employment contract can be laid off. Temporary employment relationships that involve filling in for another employee are an exception. The temporary employee can be laid off if the regular employee would also be laid off in that situation. The grounds for a layoff can relate either to specific departments, functional units or to all personnel.

The need for layoffs can be caused by sales difficulties of a particular product, with the effects limited to a specific production line. In such cases, the employer must primarily assign other work to those laid-off under the employment contract, such as from another department. Layoffs are not justified if the work is done by agency-hired labour, for example.

Layoffs follow the order of reduction determined in the collective agreement.

Special attention must be paid to the order of reduction if the need for layoffs does not concern all employees. Then, those who have lost part of their working capacity under the employer’s service cannot be among the first to be laid off. Attention is also paid to the length of the employment relationship and the number of underage children the employee has.

Local co-operation negotiations might also have determined matters to be taken into account when deciding on layoffs.

An employee can be laid off if temporary difficulties hinder the company’s ability to operate or pay. According to the Employment Contracts Act, an employer has the right to make layoffs in two cases:

  1. In a situation where an employee could be dismissed on economic or productive grounds as defined in the Employment Contracts Act. In this case, the duration of the layoff is unlimited. Note: possibility of resettlement and training for other tasks as required by the Employment Contracts Act must be determined prior to layoffs.
  2. In a situation where work or the possibility of organising work has been temporarily reduced. In this case, it is estimated that the duration of the layoff will not exceed 90 days. Before making layoffs, it must be determined whether other work can reasonably be arranged for the employee or whether they can be trained to fit the employer’s needs.

The grounds for layoffs must be carefully examined with the personnel or shop steward during co-operation negotiations, seeking other solutions to avoid layoffs. The employer may resort to layoffs if the other options discussed in the co-operation negotiations are not suitable for the company’s situation.


Layoffs must always be in accordance with the actual needs of the employer. Most collective agreements contain provisions for situations where the need for layoffs changes from what was announced.

The Employment Contracts Act does not provide for the cancellation, transfer or suspension of layoffs. However, it is also clear under the Employment Contracts Act that if the need for layoffs ceases, the layoff must be cancelled.

The employer is obliged to inform the employee laid off indefinitely of the end of the layoff at least seven days before the start of work. The employee must be available for their employer after that.

During a layoff, you should accept temporary work as refusal may lead to a temporary loss of the right to unemployment security.

Other work can also be accepted when laid off. The other work can also be at a competing company. However, engaging in business activities in competition with the employer is prohibited. When you are laid off, the period of notice for concluding the new employment relationship is five days. The notice period applies to indefinite and fixed-term employment relationships.

Despite the start of the layoff, the employee is entitled to sick pay if the layoff notice is given during the sick leave and the sick leave continues at the beginning of the layoff. The employee is also entitled to sick pay when the sick leave continues with a new sick leave based on the same diagnosis as the previous one after the layoff notice.

The employee is not entitled to sick pay at the beginning of the layoff if the layoff notice is given before the start of the sick leave.

If you are laid off for an indefinite period, you accrue annual leave only from the first 30 days of your lay off period. However, if you have been made laid off by reducing your weekly working hours, you accrue annual leave from a period of 6 months. After the holiday entitlement year changes, a new six month period begins.

If your daily working hours are reduced due to the lay off, you continue to accrue annual leave as usual. 

According to the Annual Holidays Act, you  are entitled to have your summer holiday during the normal holiday period, i.e. from 2 May until 30 September, even if you are laid off.  

You can continue to use occupational health care also while laid off. 

The use of fringe benefits during layoff must be agreed locally with the employer, with the exception of employee housing. You can continue to use employee housing provided that it has been included to your fringe benefits or if it is based on a rental agreement related your employment relation. 


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The layoff notice must be given before the layoff begins

Before the layoff begins, the employer must notify the laid off employee, stating the reason for the layoff, the exact start time and the duration or estimated duration of the layoff. In accordance with the Act on Co-operation within Undertakings, the notification must be made 14 days before the start of the layoff. However, several collective agreements determine that the notice period depends on the length of the employment relationship. In that case, the notification must be made one month or two months before the start of the layoff. Always check the notice period in your collective agreement. The layoff cannot start until the end of the period of notice.

The layoff notice can be given orally or in writing. However, the employer is obliged to provide a written certificate containing the information corresponding to the layoff notice when requested. The laid off employee needs a written layoff notice for the unemployment fund.

If possible, the layoff notice should be given to the employee in person. The employer may require the employee’s signature to confirm that they have been informed of the layoff at the time of signature. The layoff notice period is deemed to begin on receipt of the notification. The employer must not include any other conditions or matters in the layoff notice that the employee should accept at the time of the notification.

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