Finland is gradually moving from the old, rigid salary model to a new and more flexible one that takes better account of local needs and makes possible a salary that is more incentive-based.

In Finland the size of an employee's salary increase has been decided on the basis of national incomes policy agreements and sector-based collective agreements. The model, which was designed decades ago, is no longer able to respond to present-day and future demands.

"In international terms a wage model that ignores companies these days is unusual" says Niilo Hakonen, an advisor at the Confederation of Finnish Industries (EK).

"Other Nordic countries have in recent years successfully developed new and looser salary models that provide room for manoeuvre for companies and workplaces, promote good personnel management and success for companies. We are now aiming for the same in Finland, too."

Company needs to the fore

The old salary model based on general increases of the same size are inadequate for meeting the needs of companies and their employees, because the increases bear no relation to the success factors at workplaces, the demands of the work or the competence and performances of the employees.

"Negotiators of labour market organizations cannot have the information and tools that would make it possible to allocate salary increases with fairness and incentives inside companies," Hakonen explains.

EK's aim is to create through the reform better preconditions for continued success by companies and for developing operations and employee's professional skills, and for improving productivity and employment.

For the employees the new salary model will mean a fairer salary with more incentive, in which they can affect the size of their salary themselves.

Reforms make progress

Reforming the salary model has been the main aim of business life during this year's round of negotiations. Hakonen says that a good start has been made.

The collective agreement in the financial sector in the spring was the first to introduce the salary-discussion model used a great deal in Sweden. In it the size of an individual's salary increase is decided once a year in a discussion between the superior and subordinate, with a safe framework given by the collective agreement.

The agreements in the chemicals and technology industries in June advanced through a big increase in the company-based role.

"The reforms have not been implemented in one go but by advancing one step at a time, which makes it possible to learn from experiences," Hakonen states.

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Finland is moving gradually to a new salary payment model that takes better account of companies' and employees' needs.