Questions related to the application of collective agreements

The employment contracts act is the basis

The employment contracts act is the basic law of working life and it applies to everyone working in an employment relationship. The law regulates the main rights and obligations of the parties to the employment contract. it contains both mandatory regulations and regulations that can be agreed on otherwise. The employment contracts act secures the minimum conditions of an employee’s employment relationship.

What collective agreement?

In addition, collective agreements have been concluded in several sectors, which terms must be followed in the employment relationship of those sectors, in addition to employment contracts act. Collective agreements agree on many conditions, which are central to the employment relationship, and it is essential for the employer to know whether one or more collective agreements are applicable for its operation. Figuring out a suitable collective agreement can sometimes be challenging and require a large-scale assessment. We assist our customers in finding out and choosing an applicable and/or suitable collective agreement.

Typically, collective agreements have agreed in detail, for example, the salary tables of the relevant field. However, a collective agreement cannot agree on worse conditions for employees than the mandatory regulations of the Employment Contracts Act. On the other hand, it is always possible to agree on better terms of employment for employees than the Employment contracts Act through a collective agreement.

Normally binding or generally binding collective agreement?

A collective agreement basically binds the parties that concluded the collective agreement, i.e., as a general rule, the employer’s and employee’s union, as well as their member associations and individual employers and workers. Such binding is called standard binding.

In addition to generally binding, a collective agreement can also be applied on the basis of generally binding. Generally binding nature is a statutory system that secures the minimum employment conditions for employees of employers who are not part of an employer’s association, i.e., unorganized. If the employer is not bound by a normally or generally binding collective agreement, and no applicable collective agreement has been agreed upon, the employer is only obliged to comply the Employment Contracts Act.

The role of central organisations?

A separate issue is the so-called “central organisation agreements” between two or more central organisations of employees and employers. They contain centralised solutions, sometimes involving government, and legislative measures. Their entry into force usually requires a sufficient number of unions to reach a negotiated outcome within the framework of the agreement.

In addition, the central unions conclude general agreements which cover issues other than wage settlements for a period longer than one contract period, such as protection against redundancies, shop stewards or holiday pay. Such agreements are usually applied as part of a collective agreement.


How is the applicable collective agreement determined?

The applicable collective agreement is determined based either on the employer’s industry (the so-called industry principle) or on the basis of the employee’s profession or membership of the employee union (the so-called professional principle). As a general rule, the industry principle is used in industrial companies and the professional sector principle in service industries.

We also consult our customers on questions related to the application of collective agreements. We are widely familiar with collective agreements and central organization agreements in both industry and service sectors. We are also familiar with public sector employment and service agreements. We also help our customers with questions regarding local contracts based on collective agreements.

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