Layoff vs Dismissal — Differences, Rights and What to Do 2026

Guide · Updated 26 April 2026

A clear guide to what layoff and dismissal mean in Finland, how they differ, and what you are entitled to in each situation.

In brief Layoff = employment contract stays valid, work is temporarily suspended — you return when the layoff ends. Dismissal = employment contract ends permanently. You are entitled to unemployment allowance in both cases without a waiting sanction if the employer made the decision. If you resign yourself, you may face a 90-day sanction.

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Contents

1. Comparison table
2. Layoff
3. Dismissal
4. Sanction — when you don't receive allowance
5. Co-determination procedure (YT)
6. Step-by-step action plan
7. Frequently asked questions

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1. Comparison Table

*A sanction may apply if you resigned without a valid reason or caused the dismissal through misconduct.

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2. Layoff

A layoff is the employer's decision to temporarily suspend work and stop paying salary. The employment contract remains valid and you return when the layoff ends — either on a set date or when the employer calls you back.

When can an employer lay off?

• Available work has temporarily decreased (less than 90 days)
• Available work has decreased for economic or production reasons
• Business operations are interrupted, strike or lockout

Layoff notice

• Must be given in writing at least 14 days before the layoff starts (Employment Contracts Act, chapter 5, section 4)
• Must state the reason, start date and duration (if known)
• Layoff may be indefinite or fixed-term

During the layoff

• You receive unemployment allowance from Kela or your unemployment fund
• You may take on other work (Employment Contracts Act allows this with special permission)
• You cannot refuse to participate in TE Office training or job searches without a valid reason
• Annual leave continues to accrue under the collective agreement

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3. Dismissal

Dismissal ends the employment contract permanently. It can happen for two reasons:

1. Economic and production-related grounds — substantial and permanent reduction of available work
2. Personal grounds — material breach of the employment contract, e.g. repeated unauthorised absences

Notice period

Employer dismisses (Employment Contracts Act, chapter 6, section 3):

• Less than 1 year → 14 days
• 1–4 years → 1 month
• 4–8 years → 2 months
• 8–12 years → 4 months
• Over 12 years → 6 months

Employee resigns:

• Less than 5 years → 14 days
• Over 5 years → 1 month

Your collective agreement may change these — check your own CBA.

Contesting a dismissal

If the grounds for dismissal are insufficient, you can file a claim in district court within 2 years. Compensation for unfair dismissal is typically 3–24 months' salary. Consult your trade union or an employment lawyer before filing.

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4. Sanction — When You Don't Receive Allowance

A sanction is a 90-day period during which you do not receive unemployment allowance. A sanction applies if:

• You resign yourself without a valid reason
• Your misconduct was the reason for the dismissal
• You refuse offered work or training without a valid reason

Valid reasons for resigning

• Spouse's job change to another location
• Your own or a close family member's serious illness
• Material deterioration of working conditions (salary cut, change of hours)
• Harassment or occupational safety violation at the workplace
• Repeated breach of the employment contract (e.g. salary not paid)

The sanction is determined by your unemployment fund or Kela when processing your application. You can appeal the decision.

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5. Co-determination Procedure (YT)

The co-determination procedure (YT) is a statutory negotiation between the employer and employees before collective dismissals or large-scale layoffs. Required under the Co-operation Act (1333/2021) when the employer has at least 20 employees.

Minimum negotiation period

• 6 weeks when dismissal or layoff affects at least 10 employees
• 14 days when layoff is short-term (maximum 90 days)

What is negotiated?

• Grounds and targeting of the reductions
• Alternatives to dismissal (redeployment, training)
• Support measures for employees

If the YT procedure is not followed: The employer may be ordered to pay compensation to each dismissed employee (Co-operation Act, section 11). Compensation can be several months' salary.

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6. Step-by-step Action Plan

1. Read the notice carefully. Is it a layoff or a dismissal? What is the start date? Is the reason stated?
2. Take copies of all documents: notice, employment contract, pay slips, collective agreement, any YT minutes.
3. Register as a jobseeker on Työmarkkinatori on the very first day of unemployment or layoff.
4. Apply for allowance: from your unemployment fund if you are a member, otherwise from Kela. Apply within 7 days.
5. Contact your trade union if it is a dismissal and you doubt the grounds. The union's lawyer assesses the situation free of charge.
6. Apply for housing allowance from Kela if your income drops significantly. Housing allowance can be granted retroactively for 2 months.
7. Keep your job-search activities up to date — the TE Office plan and job applications are a condition for the allowance.

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7. Frequently Asked Questions

What is the difference between a layoff and a dismissal? In a layoff, the employment contract remains valid but there is no work for the time being — you return when the layoff ends. In a dismissal, the employment contract ends permanently. You receive unemployment allowance in both cases, but after a layoff you have a stronger right to return to your workplace and can, within limits, take on other work during the layoff.

Do I receive unemployment allowance during a layoff? Yes. During a layoff the allowance is paid on the same logic as after dismissal: a 5-day waiting period, then allowance for the duration of the layoff. No sanction applies. Register as a jobseeker on Työmarkkinatori on the first day of the layoff and apply for allowance from Kela or your unemployment fund within 7 days.

What is the sanction and when does it apply? The sanction is a 90-day period during which you receive no unemployment allowance. It applies if you resign without a valid reason, or if your misconduct was the reason for the dismissal, or if you refuse offered work or training without a valid reason.

What is the co-determination procedure and when is it mandatory? The co-determination procedure (YT) is a statutory negotiation that the employer must conduct with employees before collective dismissals or large-scale layoffs. Mandatory under the Co-operation Act (1333/2021) when the employer has at least 20 employees. The minimum negotiation period is 6 weeks, or 14 days for short-term layoffs of up to 90 days.

How long is the notice period? When the employer dismisses: less than 1 year → 14 days, 1–4 years → 1 month, 4–8 years → 2 months, 8–12 years → 4 months, over 12 years → 6 months. When the employee resigns: less than 5 years → 14 days, over 5 years → 1 month. The collective agreement may change these. The salary for the notice period must always be paid even if no work is done.

What if I don't accept the dismissal? You can contest the dismissal with a claim in district court. You have 2 years from the dismissal. If the claim is accepted without valid grounds, the employer may be ordered to pay compensation equivalent to 3–24 months' salary. Consult your trade union or an employment lawyer.

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This is general information, not legal advice. In personal situations, consult your trade union or an employment lawyer.

Useful links:

• Työmarkkinatori (jobseeker registration): tyomarkkinatori.fi
• Kela unemployment allowance: kela.fi
• Employment Contracts Act (Finlex): finlex.fi