When are employer representative negotiations mandatory?

Negotiations concerning personnel reductions are mandatory when a company is considering staff reductions for economic or production-related reasons. This obligation applies to companies that regularly employ at least 50 employees. Negotiations must be initiated before making final decisions regarding dismissals, temporary layoffs, or other significant organizational changes.

Which situations require an employer to initiate co-determination negotiations?

The Co-operation Act obliges the employer to initiate YT negotiations in various situations. The duty to negotiate arises when a company considers reducing the use of labor for economic or production reasons. This includes the dismissal, temporary layoff, reduction in hours, or unilateral modification of an essential term of employment for one or more employees.

Many situations triggering a duty to negotiate include significant organizational changes, such as restructuring of company operations, technology adoptions that affect job duties, and the relocation of production. Situations involving business transfers, mergers, and demergers also require negotiations.

The duty to negotiate does not depend on the number or scope of the planned changes. Even if it's just about terminating one employee for economic reasons, negotiations must be held if the company falls within the scope of the law. The employer must ensure that all required matters are addressed within the negotiation period.

Statutory negotiations require expert handling. Services can support the legality of co-determination procedures and ensure the right support for both personnel and the employer.

In Finland, an employer must initiate negotiations on changes in the operation of the company (yt-neuvottelut) if they employ at least 20 people.

Starting from July 2025 YT negotiations are mandatory for companies that regularly employ at least 50 employees. Previously, the applicability threshold was 20 employees. The change particularly reduces the administrative burden of SMEs and strengthens their operational conditions.

The number of employees is calculated based on regularly working individuals. This includes both full-time and part-time employees. Fixed-term employment relationships are included if they last longer than six months or are recurring regularly.

Companies employing 20–49 workers are not fully exempt from obligations. These companies must conduct change negotiations in limited cases, such as when layoffs of at least 20 employees are planned. Regulations concerning business transfers, mergers, and demergers also continue to apply to companies of this size.

The co-determination act does not apply at all to companies employing all 20 employees. These companies can implement personnel changes in accordance with the provisions of the Employment Contracts Act without a separate duty to negotiate.

What happens if co-determination negotiations are not conducted in a statutory situation?

Failure to negotiate can lead to serious legal and financial consequences. Dismissals can be invalid, when mandatory negotiations have not been conducted properly. In such cases, the employer must pay the employee wages for the entire period during which the wrongful termination was in effect.

Employees have the right to claim compensation if the duty to negotiate has been violated. The amount of compensation can be significant, especially if the omission concerns several employees. In addition, the employer may have to pay legal costs and other procedural expenses.

Occupational safety authorities may impose administrative sanctions on employers for negligence. These can include warnings, orders, or even fines. Violations can also affect a company's reputation and reliability in the labor market.

To avoid risks, it is advisable to ensure the legality of procedures in advance. Contact us Engage an HR expert in a timely manner when change negotiations become relevant. Expert support helps avoid costly mistakes and ensures smooth implementation of personnel processes.

The proper implementation of YT negotiations requires precise legal expertise and practical experience. The shortening of negotiation periods starting from July 2025 further emphasizes the importance of careful preparation. When changes are implemented expertly, they support the interests of both the company and the personnel in the long term.