Commercial Agreements Lawyers Finland 2026: Fixed‑term Rules, Termination Thresholds and Drafting Risks

Last updated: 7 May 2026

Two significant amendments to Finnish employment legislation took effect in the first quarter of 2026, and commercial agreements lawyers Finland‑wide are now fielding urgent questions from procurement teams, general counsel and HR directors about what needs to change in their contracts. On 1 January 2026, the threshold for dismissing an employee on personal grounds was lowered under an amendment to the Employment Contracts Act. On 1 April 2026, a separate reform relaxed the rules governing fixed‑term employment contracts, reducing the justification previously required for entering into successive fixed‑term engagements. Together, these employment law changes Finland has enacted reshape the risk profile of every services agreement, subcontractor arrangement and outsourcing contract that depends on a supplier’s workforce to deliver results.

This guide translates both reforms into concrete drafting steps, sample clauses and a contract compliance checklist designed for in‑house teams managing renewals, restructures and new supplier onboarding.

TL;DR, three actions to take now:

• Update termination clauses. Tighten “for cause” definitions to reflect the higher evidentiary standard that the lowered dismissal threshold now demands in practice.
• Review subcontractor indemnities. Ensure suppliers warrant compliance with the Employment Contracts Act and indemnify buyers against wrongful‑dismissal exposure.
• Run a clause audit before each renewal. Prioritise service agreements with embedded staff, secondments, temp‑workforce provisions and large supplier contracts.

2026 Legislative Summary and Timeline for Commercial Agreements Lawyers Finland

From 1 January 2026, the Finnish Employment Contracts Act was amended to lower the threshold for terminating an employment relationship on personal grounds. According to the Ministry of Economic Affairs and Employment, the change means that an employee’s conduct or capacity no longer needs to meet the previously established “weighty reason” standard in every case; the employer’s circumstances, including the size of the business and the overall situation, may now be weighed more flexibly. From 1 April 2026, a separate amendment increased flexibility for fixed‑term contracts by allowing employers to enter into a fixed‑term contract of up to one year without a specific justification, and by relaxing the restrictions on successive fixed‑term engagements.

Key Provisions

• Lowered dismissal threshold (1 Jan 2026). The amendment permits a broader assessment of dismissal grounds on personal bases. Employers must still demonstrate a proper and weighty reason, but the overall assessment now accounts for the employer’s circumstances more explicitly, reducing the evidentiary burden in certain situations.
• Relaxed fixed‑term rules (1 Apr 2026). Employers may conclude a fixed‑term contract of up to one year without stating a specific reason. The government proposal confirmed that the goal is to lower the hiring barrier and give employers more operational flexibility.
• Procedural adjustments (2026, ongoing). Related changes to negotiation obligations, lay‑off notice periods and re‑employment duties interact with both reforms and affect notice and termination windows embedded in commercial contracts.

Which Agreements Are in Scope

The reforms directly amend employment contracts, but the practical effects reach far further. Any commercial agreement that references employee‑related termination events, allocates workforce risk between parties, or depends on a supplier maintaining specific personnel is in scope. The most exposed categories include managed‑service and outsourcing agreements, secondment and staff‑augmentation contracts, subcontractor workforce clauses within construction or IT delivery, and procurement framework agreements with key‑person provisions.

What This Means for Commercial Agreements: High‑Level Risks

The 2026 reforms create a dual pressure on commercial contracts. On one side, the lowered dismissal threshold makes it easier, in statutory terms, for an employer to terminate an individual employee. On the other, the practical result is that termination decisions are likelier to be challenged by employees and unions who view the lower bar as an invitation to test its limits. For buyers of services, the risk materialises when a supplier’s workforce disruption, caused by a contested dismissal or an improperly managed fixed‑term conversion, triggers a performance failure under the commercial agreement.

Industry observers expect several categories of contractual risk to intensify through the remainder of 2026: termination‑for‑cause disputes where a supplier’s definition of “cause” no longer aligns with the amended statutory standard; intellectual property and know‑how retention gaps when key personnel leave or are dismissed; business continuity failures tied to workforce instability; and increased redundancy and re‑engagement costs that must be allocated between contracting parties. The likely practical effect will be that service agreements without updated risk‑allocation provisions expose buyers to supply disruption and indirect liability.

Risk Matrix

Fixed‑Term Contracts Finland 2026: Practical Drafting Responses

From 1 April 2026, an employer may conclude a fixed‑term employment contract of up to one year without providing a specific reason, a change that the Finnish Government described as a measure to increase flexibility and lower the hiring barrier. The reform also extends the permissible use of successive fixed‑term contracts. For commercial agreements lawyers Finland counsel rooms are now seeing the downstream effects: suppliers are deploying more fixed‑term staff on project deliveries, increasing both operational flexibility and the risk that fixed‑term workers will later claim they should have been treated as permanent employees.

The drafting implications fall into two categories. First, when a buyer’s own delivery model relies on fixed‑term hires, for example, in project‑based statements of work, the agreement should set explicit caps on term length, renewal frequency and conversion triggers to prevent disguised‑employment claims. Second, when a buyer relies on suppliers who use fixed‑term staff, the commercial agreement should require the supplier to warrant employment‑law compliance and to notify the buyer of successive fixed‑term usage that approaches statutory limits.

Drafting Checklist for Fixed‑Term Usage

• Maximum term and renewals cap. State the maximum permitted fixed‑term duration and the number of successive renewals before automatic conversion to open‑ended status.
• Justification record. Require the employing party (or supplier) to maintain a written record of the grounds for each fixed‑term engagement, even where a specific reason is no longer required for contracts of up to one year.
• Conversion trigger. Define what happens if a fixed‑term worker is deemed to have acquired open‑ended employee status: who bears the cost, and how does the service agreement adjust?
• Notice alignment. Ensure that termination notice periods in the commercial agreement match or exceed the statutory notice periods applicable to the underlying fixed‑term employment contracts.
• Supplier notification obligation. Require the supplier to notify the buyer within a defined period (e.g., five business days) if any fixed‑term engagement assigned to the buyer’s project is renewed for a successive term.
• Insurance and indemnity. Confirm that the supplier carries adequate employment‑liability insurance covering claims arising from fixed‑term misclassification.

Sample Clause: Fixed‑Term Engagement Warranty

The following is original illustrative language provided for guidance. It should be adapted to each transaction and reviewed by Finnish counsel before use.

“The Supplier warrants that all fixed‑term personnel assigned to the Services comply with the Employment Contracts Act (55/2001, as amended). The Supplier shall not renew a fixed‑term engagement beyond three successive terms, or beyond an aggregate duration of 24 months, without the Buyer’s prior written consent. If any fixed‑term engagement is reclassified as open‑ended by a court or authority, the Supplier shall bear all resulting costs and indemnify the Buyer against any claim, loss or expense arising from such reclassification.”

Termination and Dismissal Threshold 2026: Contract Drafting and Negotiation Playbook

The dismissal law 2026 Finland enacted has a direct bearing on how “termination for cause” provisions function in commercial agreements. Before the amendment, the “weighty reason” standard under the Employment Contracts Act meant that dismissing an employee on personal grounds required a high evidentiary threshold. The lowered threshold gives employers greater flexibility, but early indications suggest that trade unions and employee representatives intend to test the boundaries vigorously, meaning that contested dismissals may increase in frequency even as the statutory bar drops.

For in‑house teams reviewing termination clause drafting, the priority is to ensure that commercial‑contract definitions of “cause” are insulated from the uncertainty surrounding individual dismissal disputes. A supplier’s failure to deliver services because a key employee was dismissed, and that dismissal is later challenged, should not automatically entitle the buyer to terminate the commercial agreement without a cure process. Equally, a supplier should not be able to invoke workforce disruption caused by its own non‑compliant dismissal as an excuse for non‑performance.

Practical Steps for Updating Termination Provisions

• Tighten objective performance metrics. Replace subjective “for cause” language with measurable KPIs (uptime, SLA attainment, delivery milestones) so that termination decisions rest on contract performance, not on the fate of individual employment relationships.
• Add a mutual cure period. Require the non‑performing party to receive written notice and a minimum 30‑day cure period before the other party may terminate for cause. This mirrors the procedural fairness emphasis that the amended Employment Contracts Act reinforces.
• Include an escalation and HR consultation step. For agreements where embedded staff are integral, require a joint review meeting, involving both parties’ HR functions, before any termination notice is issued under the commercial agreement.
• Allocate redundancy and termination compensation. Specify which party bears the cost if termination of the commercial agreement triggers redundancy obligations for assigned employees. Define cost‑sharing mechanics, caps and reimbursement timelines.
• Require contemporaneous evidence. Mandate that any party invoking “for cause” termination must provide documented evidence of the breach, including performance data and written warnings, at the time notice is given.

Sample Clause Suite

Enhanced “for cause” definition with objective KPIs:

“‘Cause’ means a material and documented failure by the Supplier to meet two or more Key Performance Indicators set out in Schedule [X] for a continuous period of 60 days, provided the Buyer has delivered written notice specifying the failure and the Supplier has not remedied it within 30 days of receipt.”

Extended cure period with verification step:

“Before exercising any right of termination for cause, the terminating party shall (a) deliver a written cure notice specifying the breach in reasonable detail; (b) allow a minimum cure period of 30 days; and (c) participate in a joint review meeting with the other party’s project lead and HR representative to verify whether the breach has been remedied.”

Termination liability cap:

“The aggregate liability of either party for claims arising from or in connection with termination of this Agreement shall not exceed an amount equal to the fees payable during the 12‑month period immediately preceding the date of termination, or EUR [amount], whichever is lower.”

Supplier and Subcontractor Allocation of Dismissal Risk and Indemnities

Subcontractor liability Finland buyers must now manage has grown more complex under the 2026 reforms. When a supplier dismisses an employee assigned to a buyer’s project, and that dismissal is subsequently challenged, the commercial question is which party absorbs the cost. Three allocation models are common in current market practice:

Sample Indemnity Language

“The Supplier shall indemnify, defend and hold harmless the Buyer from and against any loss, liability, cost or expense (including reasonable legal fees) arising from or in connection with any claim by a current or former employee of the Supplier that relates to the Services, including but not limited to wrongful‑dismissal claims, fixed‑term reclassification claims and collective‑agreement disputes. This indemnity shall survive termination or expiry of this Agreement for a period of 24 months.”

Procurement Negotiation Notes

• High supplier market power. Where the supplier holds significant leverage (sole‑source, critical technology), buyers may need to accept a shared‑risk model but should insist on minimum insurance coverage and an audit right over the supplier’s employment practices.
• Competitive supplier market. In commodity services, buyers should insist on the risk‑light model with a full indemnity and require evidence of insurance at each contract anniversary.
• Multi‑tier subcontracting. Require flow‑down of the indemnity and compliance warranty to all sub‑tier suppliers, with the prime contractor remaining jointly liable.

Contract Compliance Checklist and Sample Clauses for Commercial Agreements Lawyers Finland

The following ordered checklist is designed for in‑house legal teams running pre‑renewal audits. Prioritise high‑risk agreements first: services with embedded staff, secondments, temporary‑workforce provisions and large supplier contracts with key‑person dependencies.

1. Clause audit. Review every termination, cure and notice provision against the amended Employment Contracts Act requirements. Flag any subjective “for cause” language.
2. Employee‑linked warranties. Confirm that the supplier warrants compliance with all applicable employment legislation, including the 2026 amendments.
3. Indemnities. Verify that a clear indemnity covers wrongful‑dismissal, fixed‑term reclassification and collective‑agreement claims, with a defined survival period.
4. Termination notice alignment. Ensure commercial notice periods are at least as long as the statutory notice periods applicable to underlying employment contracts.
5. Re‑engagement obligations. Check whether the agreement addresses the employer’s re‑employment duty under Finnish law and allocates the cost of compliance.
6. Insurance checks. Require evidence of employment‑liability insurance at signing and each renewal; specify minimum coverage levels.
7. Sub‑contracting visibility. Include a right to audit the supplier’s sub‑tier workforce arrangements and a requirement to disclose all fixed‑term and agency staff assigned to the project.
8. Change‑control process. Add a mechanism for updating the agreement if further employment‑law changes take effect during the term, including a duty‑to‑notify and a renegotiation trigger.

Clause Bank

Sample A, Termination for Cause (Objective Standards + 30‑Day Cure)

“Either party may terminate this Agreement for cause upon 30 days’ written notice if the other party commits a material breach that remains unremedied at the expiry of such 30‑day period. ‘Material breach’ means a failure to achieve two or more of the KPIs listed in Schedule [X] for any consecutive 60‑day period, supported by contemporaneous written evidence delivered with the cure notice.”

Negotiation note: Buyers should resist reducing the cure period below 30 days; suppliers may seek 45 days for complex service environments. Both positions are defensible.

Sample B, Supplier Warranty: Employment Law Compliance

“The Supplier represents and warrants that it complies, and shall continue to comply throughout the term, with all applicable provisions of the Employment Contracts Act (55/2001, as amended), including without limitation the rules governing fixed‑term employment contracts and dismissal on personal grounds. The Supplier shall promptly notify the Buyer of any material employment claim, regulatory investigation or collective dispute that may affect the delivery of the Services.”

Negotiation note: Suppliers may request that “material” be defined by reference to a monetary threshold or a specific SLA impact. This is reasonable, provided the threshold is low enough to give the buyer meaningful early warning.

Sample C, Indemnity and Liability Cap

“The Supplier shall indemnify the Buyer against all losses arising from a breach of the warranty in clause [Sample B reference], subject to an aggregate cap equal to the total fees paid or payable in the 12 months preceding the claim. This indemnity shall survive termination for 24 months. The Buyer’s sole remedy for losses exceeding the cap shall be a right to terminate the Agreement on 60 days’ notice without further liability.”

Negotiation note: Suppliers often seek to reduce the survival period to 12 months. Buyers with long project cycles should resist unless the underlying employment claim limitation period has also expired.

Recommended Next Steps

The 2026 reforms will continue to generate new case law and regulatory guidance throughout the year. In‑house teams should act now rather than wait for interpretive certainty. First, run a clause audit across all active agreements using the checklist above, prioritising contracts up for renewal in the next six months. Second, identify high‑exposure suppliers, those with embedded staff, sole‑source dependencies or large fixed‑term workforces, and initiate renegotiation of termination, indemnity and insurance provisions. Third, engage experienced commercial agreements lawyers Finland practices can provide to draft bespoke clause language and to advise on negotiation strategy. A directory of qualified practitioners is available through the Finland lawyer directory.

Sources

1. Finnish Government, Government proposes more flexibility for fixed‑term employment contracts
2. Ministry of Economic Affairs and Employment, Increasing flexibility of fixed‑term employment contracts
3. Ministry of Economic Affairs and Employment, Lower threshold for terminating employment
4. Castrén & Snellman, The threshold for dismissal is lowered: what should be taken into account in practice
5. PAM Trade Union, New dismissal law 2026: employees
6. Työsuojelu, Special cases for termination
7. Finlex, Employment Contracts Act (55/2001, as amended)
8. Waselius & Wist, Corporate and commercial expertise