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Non-compete agreements in Finland: what employers should know

A non-compete now costs 40–60% of salary for the restriction period. When an employer can require one, what it costs, and how to get out of it in time.

by Mikko Kivelä·August 10, 2026·

Non-compete agreements in Finland: what employers should know

Many Finnish employers have non-compete clauses in their employment contracts. Since the compensation obligation was introduced, each of those clauses is a standing financial liability rather than free insurance: 40 or 60 percent of salary for the whole period it restricts someone.

That changes what a non-compete is for. It is no longer a clause added to a template because it seems prudent. It is a purchase, and one worth making only where the employer would genuinely pay for the protection.

Two separate things get confused here, so start by telling them apart. The prohibition on competing activity during employment applies automatically, with nothing to sign. A non-compete agreement restricts what someone does after they leave, and it needs an agreement, a particularly weighty reason, and money.

Compensation is 40% of pay for a restriction period of six months or less, and 60% for a period longer than that.
The restriction period can run for at most one year from the end of employment.
A contractual penalty agreed in place of damages is capped at the employee’s pay for the six months before employment ended.
The employer can cancel a non-compete by giving notice of at least one third of the restriction period, and never less than two months, but only until the employee resigns.
A non-compete needs a particularly weighty reason tied to the employer’s operations, and it does not bind someone made redundant.

What is already prohibited without any agreement?

Competing activity during employment, automatically. An employee may not do work for another, or run a business, that obviously harms their employer and constitutes an act of competition contrary to good practice. That prohibition comes from the Employment Contracts Act itself and requires no separate clause.

It covers both employment with someone else and the employee’s own business activity, and its purpose is to stop an employee exploiting the employer’s trade or professional secrets while still on its payroll.

So if the worry is someone moonlighting for a competitor now, the employer already has the protection and does not need to buy it.

Next: check that your employee handbook or code of conduct already states this prohibition, so there is no temptation to pay for a non-compete that only covers what the law already covers.

When can an employer require a non-compete?

Only with a particularly weighty reason connected to the employer’s operations or to the employment relationship, and the reason has to survive.

This is the part that catches employers. The reason must be valid not only when the agreement is signed but also when the employer actually invokes the non-compete. If it applied at the start of employment and has since fallen away, the employer should no longer rely on the clause.

The authority sets out what goes into the assessment:

the employee’s duties and sector, and what is distinctive about them
their position in the organization, and their real access to information
the nature of the employer’s operations
the employer’s need for protection arising from trade secrets
trade secrets, product development, customer relationships: whether the employer holds knowledge and know-how a competitor does not
any special training the employer provided

Read that list as a filter rather than a checklist. A junior employee with no meaningful access to protected information does not become restrictable because the template says so.

There is no prescribed form. A non-compete can be a separate agreement or a clause in the employment contract, and it can be made at the start or later, when duties change, for instance. It works in both indefinite and fixed-term employment. One boundary: if it is made only after the employment contract has ended, the Employment Contracts Act’s non-compete rules no longer apply to it.

Write which duties are prohibited during the restriction period, and the geographic scope, into the agreement itself. Their absence causes most of the arguments.

Next: take your contract template and ask, for the role it is used for, which of the six factors above could actually be evidenced. If the answer is none, remove the clause rather than pay for it.

What does it cost?

The period during which the agreement restricts the employee after employment ends is the restriction period, and the employer pays for it.

Agreed restriction period	Compensation	Maximum
Up to 6 months	40% of the employee’s pay for the period	—
Over 6 months	60% of the employee’s pay for the period	1 year from the end of employment

The authority’s own worked example: a EUR 3,000 monthly salary and a restriction period under six months means EUR 1,200 a month in compensation, at the 40% rate above.

Compensation is paid during the restriction period, on the pay cycle that applied during employment (the 15th of the month, say) unless the parties agree otherwise after the employment contract has been terminated. They can also agree to pay it as a single lump sum.

A contractual penalty may be agreed in place of damages. It is capped at the pay the employee received in the six months preceding the end of employment.

Next: multiply your standard restriction period by 40 or 60 percent of a typical salary in the role, and see whether the number still looks like a sensible default across every contract issued.

Who is exempt from the time limit?

The maximum duration does not apply to an employee who, on the basis of their duties and position, is regarded as carrying out management work in a company, association or foundation, or an independent part of one, or as holding an independent position directly comparable to such a role.

Note what the test is and is not. It turns on the actual duties and position, not the job title. “Head of” in a title does not by itself put someone in this category, and a genuinely autonomous business-unit lead may fall into it without the word “director” appearing anywhere.

Next: list everyone whose non-compete relies on this exemption, and for each one check their actual duties and position against the test, not their title.

When does the non-compete not bind?

When the employment ended for a reason attributable to the employer. Redundancy on financial or production-related grounds is the clearest case: when employment ends because the work ran out, the agreed restriction does not apply to the employee.

It does bind where employment ended because of the employee’s own neglect, or another comparable reason relating to their person.

Set those two side by side and a useful conclusion follows. The non-compete protects the employer least in exactly the scenario where a competitor is most likely to hire its people: a restructuring. Grounds for termination are covered in Terminating employment in Finland.

Next: before you serve a redundancy notice, check whether the departing employee has a non-compete on file, and cross them off the enforcement list. The restriction will not bind them.

How does an employer get out of one?

The employer may terminate a non-compete by giving notice, and the notice period must be at least one third of the restriction period, and never less than two months.

The timing rule is the one to remember: that right ends once the employee has terminated their own employment contract. After the employee has resigned, the employer no longer has a unilateral right to cancel. The parties can still agree that the non-compete does not apply and that no compensation is paid, but that now needs the employee’s agreement, not just the employer’s decision.

The practical consequence is that “we will decide about the non-compete if they ever resign” is not a strategy. By then the decision is no longer the employer’s alone. A clause that is not worth paying for is best terminated while that is still possible.

Next: run a list of everyone currently under a non-compete, and for each one decide now whether enforcing it is worth 40 or 60 percent of pay. Serve notice on the rest.

How does Taito.ai help with this?

Taito.ai is a people operations system. It sets up and keeps maintained the record of who is under a non-compete, on what terms, and since when, so the compensation, the penalty cap, and the cancellation window are always a query away.

Sources

Finlex (2001) Employment Contracts Act, 55/2001, Chapter 3, section 3 (competing activity).
Finlex (2001) Employment Contracts Act, 55/2001, Chapter 3, section 5 (non-compete agreement).
Työsuojeluhallinto (n.d.) Competing activity and non-compete agreements.

Finlex publishes this act in Finnish and Swedish only. There is no citable official English translation, so every rule here is paraphrased rather than quoted. Where the exact wording matters, follow the link and read the Finnish or Swedish text.

Disclaimer

Taito.ai does not provide legal, tax or accounting advice. This article is general information about the law as it stood on the date above, not advice on your situation, and it is not a substitute for it. Rates and thresholds change. Check with a qualified adviser before acting on anything here.

Frequently asked questions

Does an employer have to pay compensation for a non-compete in Finland?

Yes, in every case. Where the restriction period is six months or less, the employer must pay compensation equal to 40 percent of the employee's pay for that period. Where it is longer than six months, the figure is 60 percent. The restriction period may be agreed for at most one year from the end of employment. Compensation is paid during the restriction period on the pay cycle that applied during employment, for example on the 15th of each month, unless the parties agree otherwise after the employment contract has been terminated. It can also be agreed as a single lump sum. The practical consequence is that a non-compete is no longer a free clause to add to a template: on a salary of EUR 3,000 a month, a six-month restriction costs EUR 1,200 a month for those six months.

When can an employer require a non-compete in Finland?

Only where there is a particularly weighty reason connected to the employer's operations or to the employment relationship. That reason must exist when the agreement is made and it must still exist when the employer actually invokes the non-compete. If it has fallen away in the meantime, the employer should not rely on the clause. The assessment weighs the employee's duties and sector, their position in the organization and their real access to information, the nature of the employer's operations, its need to protect trade secrets, whether it holds knowledge or know-how a competitor lacks, and any special training it provided. A non-compete has no prescribed form: it can be a separate agreement or part of the employment contract, and it can be made at the start of employment or later, for example when duties change.

How long can a non-compete last in Finland?

A non-compete requires a particularly weighty reason and may bind for at most six months after employment ends, extending to as much as one year in certain cases. The restriction period may not be agreed for longer than one year from the end of employment. The time limit does not apply to an employee who, on the basis of their duties and position, is regarded as carrying out management work in a company, association or foundation or an independent part of one, or as holding an independent position directly comparable to such a management role. That exemption turns on the actual duties and position rather than the job title, so a senior-sounding title does not by itself trigger it. The agreement may also include a contractual penalty in place of damages, and that penalty may not exceed the pay the employee received in the six months preceding the end of employment.

Is a non-compete binding if the employer made the employee redundant?

No. A non-compete does not bind the employee where the employment ended for a reason attributable to the employer. Redundancy on financial or production-related grounds is the clearest example: an employee dismissed because the work ran out is simply not bound by the agreed restriction. It does bind where the employment ended because of the employee's own neglect or another comparable reason relating to their person. The employer also has a separate right to terminate the non-compete by giving notice, provided the notice period is at least one third of the restriction period and never less than two months. That right disappears the moment the employee gives notice on their own contract. The parties can still agree afterwards that the non-compete does not apply and no compensation is paid, but that needs the employee's agreement rather than the employer's decision alone, so waiting until someone resigns to decide is waiting too long.