Finland cuts public sector holidays by 8 days

[HELSINKI] Finland's pro-austerity government on Tuesday announced harsh cutbacks to workers' benefits in a bid to revive the country's slumping economy.

"Long holidays, especially in the public sector, will be shortened from 38 to 30 working days," the government said in a statement.

The centre-right government announced a slew of measures aimed at reducing the eurozone country's unit labour costs by five percent.

Unit labour cost is an economic indicator used by the Organisation for Economic Cooperation and Development (OECD), and it measures the average cost of labour per unit of output.

Some of the other measures include halving overtime compensation and reducing Sunday work compensation from 100 to 75 per cent for all employees.

Some paid bank holidays will also be eliminated, and employees will not be paid for their first sick leave day.

"The measures ... will take effect when the current collective agreement periods come to their end," Prime Minister Juha Sipila told reporters.

Finland's economy has been in a recession for three consecutive years, with its gross domestic product contracting by 1.4 per cent in 2012, 1.1 per cent in 2013 and 0.4 per cent in 2014.

The crackdown on employee benefits comes after the country's labour unions rejected an earlier government proposal for a deal which it had dubbed a "Social Contract".

Finland has a long tradition of forging tripartite compromises, in which employers' organisations, labour unions and the government sit down to agree on taxes, wages and other conditions such as working hours.

On Tuesday the unions were quick to condemn the new measures.

"These measures will wreck the tripartite negotiations, labour agreements and the culture of compromises," Niko Simola, head of the civil servants' union Pardia, said in a statement.

But Sipila said the measures were "indispensable" to fight a 10-billion-euro (S$15.7 billion) "public finance sustainability challenge", referring to the public deficit caused by the growing expenses of an ageing population.

The government said its goal was to increase the country's employment rate from the current 70.7 per cent to 72 per cent and to put an end to the swelling debt by the end of the government's four-year term ending in 2019.

Finland was long a top performer in the eurozone, but its economy is now suffering the effects of its rapidly ageing population and hits to key sectors of its economy such as forestry and the technology industry.

At the same time two of Finland's biggest trading partners, Russia and the eurozone, are slogging through their own economic woes.

AFP