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Production-related and financial grounds

Production- and financial-related – what every employee should know

The termination of an employment relationship is always a significant change. When the reason for dismissal is not related to the employee’s own actions but to factors related to the employer’s operations, it is referred to as a production- and financial-related dismissal.

What does production- and financial-related redundancy mean?

Production- and financial-related dismissal is applicable when the employer is forced to reduce staff for reasons unrelated to the employee. Such reasons include, for example:

  • financial difficulties of the company,
  • downsizing of operations,
  • restructuring of production or services,
  • changes in technology or processes that reduce the need for work.

The prerequisite is that the employee’s work has decreased significantly and permanently. If the situation is only temporary, there are no legal grounds for dismissal.

Employer’s obligations prior to termination

According to the law, dismissal is always the last resort. Before making a decision, the employer must determine:

  • Can the employee be transferred to other duties? If there are vacant positions in the company, they must be offered instead of dismissal.
  • Is retraining possible? The employer must offer training if it would enable the employee to take on new tasks.
  • If an employer who does not have other work to offer an employee can also exercise control in another organization. In such a situation, the employer must determine whether they can offer the employee work in other companies or organizations under their control.

These obligations aim to reduce the number of redundancies and safeguard the position of employees in times of change.

The employer has dismissed me for financial and production-related reasons, even though they have hired a new employee. Has my termination been legal?

According to the Employment Contracts Act, there are, as a rule, no financial or production-related grounds for dismissal if the employer has hired a new employee for the same or similar tasks before or after the dismissal, unless there has been a significant change in the employer’s operating circumstances between your dismissal and hiring the new employee.

Employee protection in the event of dismissal

A dismissed employee has rights that are intended to make it easier to find new work and secure a livelihood. These include, for example:

  • Unemployment benefits, if the employment condition and other requirements are met.
  • Employment leave during the notice period, during which you can look for work, attend interviews, or participate in training.
  • Employment support services through the employment authority, such as training, coaching, and job placement
  • Change security, which may include financial support and services if the employee meets the conditions set by law.
Watch the Lakiruutu-video on Order of dismissal
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