Reasons for termination of employment

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.

An employee's employment relationship also ends in their resignation when they retire. Read more about how an employee can plan their retirement.

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.

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.

According to the Employment Contracts Act, your company may dismiss an employee only for proper and weighted reasons.

The reasons for dismissal may be financial or production-related if the work provided by your company has permanently diminished and you cannot provide the employee with other duties or training for them.

Temporary reduction in the amount of work does not entitle you to terminate employment. You also cannot terminate employment if you employ a new person to carry out similar work. The employee’s illness, participation in industrial action, opinions, social activities or resorting to means of legal protection are not considered to be valid grounds for dismissal.

Employment may also be terminated due to person-related reasons. The employee may neglect their obligations at work, for example, by constantly being late for work or not carrying out their work duties. The reason may also be that your employee is no longer able to cope with the work.

Take into account that your employee is under special protection against dismissal if the employee is a shop steward or elected representative, pregnant or on parental or child care leave.

There is often a trial period of up to six months 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.

Otherwise, cancellation of an employment contract is a more severe measure than giving notice. When you cancel your employee’s employment contract, the employment relationship ends immediately and the notice period is not observed.

Particularly weighty reasons are required to cancel an employment contract, such as serious breach or neglect of obligations that have a significant impact on the employment relationship. In practice, such reasons include substance abuse at the workplace, violence, disclosure of a business secret or an unauthorised absence of several days.

Cancel the employment contract within 14 days of establishing the reason. Talk to the employee before you give notice of the cancellation. Give the notice to the employee in person.

You can also cancel the contract of a fixed-term employee on the same grounds.

Remember that you cannot cancel an employment contract on financial or production-related grounds.

The grounds for dismissal must be based on overall consideration. Take into account the nature of the work, the quality of the possible breach and the number of employees in your company.

If dismissal is based on financial and production-related reasons, arrange cooperation negotiations before deciding on the termination of employment and also inform the TE Services of the negotiations, if your company employs at least 20 people. Explain the reasons for dismissal to the employee. Try to place the dismissed employee in a new work task or provide training for it, for example with the help of Restructuring coaching.

If the reason for the termination of employment is related to the person, arrange to hear the employee before giving notice. If the employee has neglected his or her obligations, you cannot usually terminate the employment before giving a warning. Give the warning in writing so that there is proof of the warning and its date. If the employee’s conduct does not improve, you can start the process of terminating employment.

Always issue the notice of termination in writing and give it to the employee in person. Comply with the periods of notice. Note that fixed-term employees cannot usually be dismissed.