Employment changes

If, as an employer, you are no longer able to offer full-time work, on certain conditions you can change the job to a part-time one. The employer and employee can agree on the switch to part-time work, or the employer can unilaterally change the working hours clause in the employee’s contract. The job can also be temporarily made part-time as part of a part-time lay-off.

Under the Employment Contracts Act, if you as an employer have financial or production grounds for terminating employees, you can unilaterally make employment contracts part time. Making people part time is thus an alternative to terminating their employment. If you regularly employ at least 20 people in your company, you must conduct negotiations pursuant to the Act on Co-operation within Undertakings before making staff part time. In addition, you must give proper notice of the change: the employees’ jobs only become part time after the notice period.

Lay-off can also be part time

In a situation where making the work part time permanently is unnecessary, you can also lay people off part-time. You can lay employees off part-time by shortening their daily or weekly working hours. The lay-off can be either in force until further notice or for a fixed term. A fixed-term lay-off may last no longer than 90 days.

An employee who is laid off part-time can receive adjusted unemployment allowance. In these situations, the reduced working hours are partially compensated from the unemployment security system. Adjusted unemployment allowance depends on how many hours the employee works while laid off. The general rule is that part-time laid-off employees can receive adjusted unemployment allowance when their working time is no more than 80% of the applicable working time in the sector.

The Annual Holidays Act permits relative wide discretion for timing annual leave. Generally, employers time annual leave at the quietest part of the holiday season. Under the Annual Holidays Act, the employer and employee can also agree on annual leave in a period that begins at the start of the calendar year in which the holiday period falls, and which ends the following year before the start of the holiday season. That means annual leave can begin before the holiday season if the employer and employee so agree. This may be useful for the business, as the employee’s work can be used during the holiday season if there is a spike in demand.

In a financially difficult situation, remember too that even if an employee’s employment ends before he or she is entitled to take annual leave, the Annual Holidays Act allows the opportunity to agree on using all annual leave days accrued before the employment ends. If both parties agree, the employee can then take all the annual leave days he or she accrued during employment before the employment ends. In such a case, you, the employer, do not have to pay holiday compensation. You should check the collective bargaining agreement in your sector to see if you would nevertheless have to pay holiday bonus in such a situation. The practice varies by collective bargaining agreement.

Read more: Annual leave

The employer and employee can agree at any time to change the terms of employment. However, they cannot go below the minimum statutory terms or the terms in the collective bargaining agreement which binds the employer. In a difficult financial situation, both parties can thus agree on reduced salary, but not one lower than the minimum set out in the collective bargaining agreement. This rule also applies to other minimum terms of employment such as holiday bonus and overtime compensation. You should always agree on changes to terms of employment in writing.

Changing the terms of employment by unilateral decision of the employer

The Employment Contracts Act only refers to unilateral change of terms of employment by an employer once. On the basis of this regulation, you as employer can unilaterally make the job part time with observance of a notice period, if the financial and production grounds for termination laid down by the Employment Contracts Act exist. The Supreme Court has ruled on an employer’s right to reduce employees’ salaries instead of terminating employment.

Supreme Court ruling 1996:89. The company’s financial capacity for offering the employee work on the former terms had reduced to the extent that the company would have had the right to terminate employment. The company then unilaterally decided to reduce employees’ salaries, after a notice period, instead of dismissing the employees, as even the reduced salaries met the minimum level in the sector’s collective bargaining agreement. Additionally, this action, along with other available restructuring actions, was deemed necessary to ensure viable company operations.

The decision practice of the Supreme Court has stressed that salaries may be reduced as an alternative to termination of employment. There has also generally been a requirement for the employer to take other action to secure continued company operations. In practice, salary reduction is possible in situations where, in conjunction with other restructuring actions, it is deemed necessary to ensure viable company operations. The salaries must be reduced using the notice principle and with observance of a notice period. Salaries cannot be reduced beneath the minimum in collective bargaining agreements, and employees must be treated equitably.