Non-compete agreements in Finland: a guide for employers

A non-compete agreement in Finland can restrict an employee from joining a competitor or starting competing activities after employment ends. It is not a routine retention tool: the employer must show the statutory justification.

The main rules are in Chapter 3, section 5 of the Finnish Employment Contracts Act. Coordinate the clause with the rest of the employment contract and the planned exit process.

When is a non-compete justified?

A non-compete may be agreed only for a particularly weighty reason connected with the employer’s activities or the employment relationship. The assessment is case-specific. The Act directs attention in particular to the nature of the employer’s activities and the need to protect trade secrets, any special training provided by the employer, and the employee’s position and duties.

A job title or seniority label is not enough. Identify the interest at risk, how the employee’s duties expose it and why narrower protection would not suffice. A standard clause copied into every contract is therefore difficult to defend.

Record the reasons and terms in writing, although the Act does not make a particular written form a general condition of validity. A restriction without the required reason does not bind the employee.

Compensation and maximum duration

The employer must pay compensation for the entire post-employment restriction period. The percentage depends on the total agreed duration:

The higher percentage is not limited to the months exceeding six. At a usual salary of €5,000 per month, a six-month restriction costs €12,000 and a 12-month restriction €36,000. Usual salary may require separate assessment where remuneration varies.

Compensation is paid during the restriction period on the usual salary payment dates unless the parties agree a different schedule after notice to terminate the employment relationship has been given. The employer should not try to set a different payment schedule prospectively in the original employment contract.

For an ordinary employee, the restriction may last no more than 12 months. A contractual penalty agreed instead of damages may not exceed the employee’s salary for the six months preceding the end of employment. These two caps do not apply to an employee deemed, from their duties and position, to manage the undertaking or an independent part of it, or to hold a comparable independent position. The justification and compensation rules still apply.

Ending the clause before it becomes costly

An employer may terminate the non-compete if the protection is no longer needed. The notice period must be at least one third of the agreed restriction period and in every case at least two months. A nine-month restriction therefore requires at least three months’ notice.

The employer loses this statutory termination right once the employee has given notice to terminate employment. Review non-competes regularly rather than waiting for a resignation. This rule does not create the same automatic bar following every employer-initiated dismissal.

The non-compete does not bind the employee if employment ends for a reason attributable to the employer. That test is broader than unlawful dismissal alone and depends on why the employment ended. It should be assessed separately from the employer’s right to terminate the non-compete clause.

Plan these dates alongside the applicable notice period. A clause may generate costs after the protected business interest has disappeared.

Confidentiality and non-dealing are not automatic workarounds

A properly limited confidentiality clause protects confidential information without preventing the employee from working for a competitor. That can be a more proportionate solution. Uhmu’s NDA guide explains confidentiality agreements in a general business context; an employee clause should be adapted to employment law, the employee’s duties and the information concerned.

The name of a clause does not decide its legal character. A client non-dealing or non-solicitation clause may amount to a non-compete if its practical effect restricts the employee’s ability to work in the same field. The Supreme Court treated a client restriction as a non-compete in KKO 2003:19. KKO 2022:16 likewise underlines that the substance and practical effect of contractual obligations matter. A genuine confidentiality obligation is not automatically a non-compete, but drafting it broadly does not guarantee that it falls outside the statutory rules.

Choose the narrowest measure that addresses the risk: access controls, trade-secret procedures, a tailored confidentiality term or, where justified, a compensated non-compete. Do not reproduce a non-compete under another label.

Special situations

• Probation. Ending employment during probation does not produce one automatic answer. The reason for ending employment and the continuing existence of a particularly weighty reason both matter.
• Managing directors. A statutory managing director of a Finnish limited liability company is not normally an employee under the Employment Contracts Act. Their service agreement requires a separate contractual assessment. This does not mean that every manager is outside the Act.
• Owners and sellers. Restrictions connected with ownership or the sale of a business may fall outside the employment-law rule or raise overlapping questions. An employment clause and an owner restraint are not interchangeable.
• Older agreements. The compensation regime generally extended to existing non-competes from 1 January 2023. The transition rules included a limited exception where compensation required under the earlier law had been paid, or payment had begun, before 1 January 2022.

An employer’s practical checklist

1. Identify the concrete interest at risk and document the particularly weighty reason.
2. Test whether confidentiality or another narrower measure would be sufficient.
3. Define the restricted activity and duration no more broadly than necessary.
4. Budget compensation using the employee’s usual salary and the percentage for the full period.
5. Review the clause when duties change and before either party gives notice.
6. Check the termination reason before seeking to enforce the restriction or a penalty.

For help assessing justification, drafting a proportionate clause or reviewing an existing restriction, see Uhmu’s employment-law services.

English adaptation prepared on 7 October 2026. Based on the Finnish article published on 13 September 2026. This guide provides general information and is not a substitute for advice on a specific situation.