Termination of employment relationship
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A permanent employment relationship usually ends in a notice being given or in a resignation. A fixed-term employment relationship ends when the agreed time period comes to an end.
Pay your employee the final pay and prepare the certificates of employment and wages as necessary. Also take care of other practical matters related to termination of employment, ensure you store the required employee records and pay the possible receivables.
A permanent employment relationship, concluded until further notice, ends when your employee resigns or your company gives notice to the employee. Under the Employment Contracts Act, if your company is the party giving notice, the reason for it must be proper and weighty. Your employee, on the other hand, can give notice without a specific reason. Both of you must comply with the notice period.
A fixed-term employment relationship ends when the time period in the contract comes to an end or the agreed work is completed. It is not normally possible to give notice in a fixed-term employment relationship.
There is often a six-month trial period at the beginning of the employment relationship. During that time, either your company or the employee may cancel the employment relationship without a notice period. A justified reason is not required for the cancellation during the trial period, but the reason must not be inappropriate regarding the purpose of the trial period.
Your company or the employee may cancel the employment contract without a notice period also when the other party has severely breached or neglected its obligations. There must always be a particularly weighty and justified reason for cancelling an employment contract.
Employment relationships may sometimes end because of special circumstances. Such situations include a reorganisation procedure and bankruptcy.
When your employee’s employment relationship ends, pay the employee all employment-derived receivables in the final pay. These include
- the actual wages
- evening supplements and other supplements included in the wages
- overtime pay
- holiday pay
- reduction leave
- daily allowances
- compensation for travel costs
- holiday bonuses
Make the final payment on the date agreed in the employment contract or, if the matter has not been agreed upon, on the last day of employment, even if the day is not normally a payday in your company. If your employee’s employment contract ends on a day that is not a banking day, pay the receivables on the preceding banking day.
Provide the employee with a pay slip showing the amount of the final pay and the grounds for calculating it.
If you do not pay the receivables in time, pay the employee the full wage for the days the employee has to wait; however, for six calendar days at the most. In addition, your employee is entitled to interest on arrears both on the receivables and the wage for the waiting period.
When the employment has ended, your employee may need a certificate of wages to get an unemployment benefit. Under the law, you have an obligation to provide it on request. Note that the certificate of wages is not the same as a pay slip.
Ask the employee which unemployment fund the employee is a member of. Fill in the pay certificate of the Federation of Unemployment Funds in Finland and submit it to your employee’s unemployment fund.
If the employee is not a member of any unemployment fund, fill in Kela’s pay certificate form and submit it to Kela.
Indicate the employee’s regular wage income for a total of 26 calendar weeks. If the working hours vary on a weekly basis, also fill in a weekly working hour report.
Record the time period that the information concerns clearly in the certificate. Also indicate the possible unpaid periods and the reasons for them. Detail holiday pay, holiday bonuses and other compensations such as performance bonuses and service bonuses.
If the unemployment fund or Kela needs additional information for its decision, provide the required information.
Your employee is entitled to a written certificate of employment after the end of the employment relationship. Provide the certificate without delay, preferably within a week from when the employee requested it.
Your employee has the right to request a certificate of employment within ten years from the end of the employment relationship. Therefore, store the records of the duration of your employees’ employment relationships and work duties for at least ten years.
Prepare the certificate of employment in accordance with the Employment Contracts Act. State the duration of the employment relationship and the employee’s work duties in the certificate. If the employee requests it, also state the reason for terminating the employment relationship and an assessment of the employee’s skills and conduct.
Write a new, corrected certificate if you have included incorrect information in the original certificate. Also write a new certificate if you have included matters that the employee did not request.
If you neglect your duty to provide a certificate of employment you may be fined according to the Employment Contracts Act.
If you have given notice to an employee, check that you have a legitimate reason to do so and that you have notified the employee in writing. Also check the period of notice.
Inform payroll administration about the termination of the employment relationship. Ensure that the employee receives the final pay and the certificates of employment and wages.
Make sure that the employee is removed from the access control and working hours monitoring systems. Ask the employee to return the keys to the workplace. Ensure that all confidential information remains with your company. Terminate the employee’s user rights in the information systems and cancel the possible signing rights.
Make sure that the employee returns the items owned by your company, such as a mobile phone or a computer. Also take care of half-completed work and projects and make sure they will continue.
Inform your other employees, customers, partners and anyone else concerned about the end of the employment relationship.
Conduct an exit interview with the employee. Be present on the last working day and thank the employee for the work done.
Your company must store the employee records even after the employment relationship has ended. The minimum time for storing each type of information is provided by the law. Records that have to be stored include
- brief certificates of employment, ten years
- extensive certificates of employment, five years
- payroll records, ten years
- receipts recorded in payroll administration, six years
- material related to recording of working hours, two years
- annual holiday records, two years.
In the case of a foreign employee, store the information on the right to work and the minimum terms and conditions of work observed in the employment relationship for four years.
Records of employees posted abroad must be stored for two years after their work in Finland has ended.
Store the records of your former employees according to the General Data Protection Regulation and other obligations. When the storage period of the records ends, find out if you can destroy them.
Do not store information that the law does not require you to store.
If you have receivables form your employee, you can usually deduct them from the final pay, however, within the restrictions in the Employment Contracts Act. For example, your receivables may be an advance pay that you have paid to the employee, a loan given to the employee or compensation for damages caused by the employee.
Before deducting the amount from the employee’s wages, request the employee to pay it.
You can deduct your receivables only if the employee clearly owes the amount and it is not disputed. For example, if the employee does not admit the damage, you cannot deduct any compensation from the final pay.
If an employee who has resigned does not comply with the notice period, you have the right to deduct from the final pay the amount corresponding to the gross pay for the notice period.
You can usually deduct your receivables to the amount of about one third of the employee’s final pay. An advance pay is an exception: it can be deducted as a whole from the final pay.