Finland PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Finland to companies willing to come on the Finland market or employ local/expat workers in the country.

Traditional approach requires establishing a subsidiary in Finland.  However our solution allows you to start the operations in Finland within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. .

Finland fast facts

Population, million: 5.5
Land area: 338,455 km²
Capital: Helsinki
Local currency: EUR

Hiring, Negotiating and Doing Business in Finland

Necessity of written employment contract

A written employment contract is not required in Finland. However, the employer must provide the employee with a written statement of the key employment terms by the end of the employee’s first salary period detailing, among other things:

• The employee’s main duties.
• The duration of a fixed-term employment contract and a justified reason for it (if applicable).
• Probationary period (if applicable).
• Applicable collective agreement.
• Salary and related pay terms.
• Regular working hours and annual holiday.
• Notice period.

Although employment contracts need not take any specific form, it is customary to have written employment contracts in Finland.

Finland Employment Contract

Types of employment agreements

There is no statutory limit to the duration of a fixed-term employment contract. However, a contract may only be concluded for a fixed term for a justified reason. The justified reason must also be the basis for renewing or prolonging the contract for a fixed term. Contracts made for a fixed term on the employer’s initiative without a justified reason, or consecutive fixed-term contracts concluded without a justified reason, are considered valid until further notice.

The probationary period in a fixed-term employment contract must not be for more than either:

• Four months.
• Half the length of the employment relationship.

A fixed-term employment contract generally cannot be terminated, but expires either:

• Automatically at the end of the fixed period.
• On completion of the agreed work.

Finland working hours

Regular working hours must generally not exceed eight hours a day and 40 hours a week. However, the regular working hours for white-collar employees specified in collective agreements are typically 7.5 hours a day and 37.5 hours per week.

Overtime

Overtime work can only be performed on the employer’s initiative and with the employee’s consent which, as a general rule, must be obtained separately each time overtime work is performed. The maximum amount of overtime work is 138 hours during a four-month period and 250 hours in a calendar year. The employer and the employee representatives or personnel can also agree on additional overtime work up to 80 hours in a calendar year, provided that the maximum of 138 hours of overtime work in a four-month period is not exceeded. The employee’s salary must generally be raised by 50% for the first two hours of daily overtime work and by 100% thereafter. Hours exceeding 40 weekly working hours (and not considered as daily overtime) must be compensated by a 50% salary increase.

Vacation leave in Finland

The Annual Holidays Act establishes the employees’ right to paid annual holiday. The holiday credit year runs from 1 April to 31 March. During the first holiday credit year, employees accrue two days of paid holiday per month, and two and a half days thereafter. The total number of paid holidays is 30 days per year corresponding to five weeks of annual holiday.

Sick leave: 

Entitlement to paid time off

Employees who are prevented from performing their work by an illness or accident are entitled to pay during illness. However, an employee is not entitled to pay during illness if they have caused their disability wilfully or by gross negligence.

If the employment relationship has lasted for at least one month, an employee is entitled to:

• Full pay from the employer for the period of disability for up to nine days following the date of falling ill.
• Sickness allowance from the state under the Sickness Insurance Act 1963 after ten days. The amount of the sickness allowance is based on the employee’s earned income and is paid for weekdays and Saturdays for a maximum period of 300 days.

In employment relationships that have lasted for less than one month, employees are entitled to 50% of their pay.

Entitlement to unpaid time off

Employees prevented from performing their work due to illness or accident are entitled to their full salary during the first day of illness and the following nine weekdays, unless a wider pay obligation has been set out in the applicable collective agreement. An employer can grant additional unpaid time off at an employee’s request.

Finland Maternity Leave

A mother is entitled to:

• Maternity leave of 105 days (excluding Sundays), which typically begins 50 to 30 days before the expected date of birth.
• Parental leave of a maximum of 158 days after the birth, which can be divided between the parents.

The employer is not generally obliged to pay a salary during maternity leave. However, this obligation is often imposed in the applicable collective agreement. Kela grants the employee an earnings-related maternity allowance during the maternity and parental leave. Following this family leave, employees are entitled to return to work with the same employer and primarily to their former duties. Parents also accrue annual holiday during family leave.

Finland Severance Laws

Notice periods

Unless otherwise provided in the applicable collective agreement, the parties to an employment relationship can agree on the notice period in the employment contract. The maximum length of the notice period is six months. In addition, the notice period applicable for the employer must not be shorter than the one applicable for the employee. If the period of notice is not agreed or set out by a collective agreement, the employer must apply the following statutory notice periods based on the employee’s length of service:

• Up to one year’s employment: 14 days.
• One to four years’ employment: one month.
• Four to eight years’ employment: two months.
• Eight to 12 years’ employment: four months.
• Over 12 years’ employment: six months.

If the employee terminates the employment relationship, the following notice periods are applicable provided that no provisions concerning notice periods are included in the employee’s employment contract or in the applicable collective agreement (if any):

• Up to five years’ employment: 14 days.
• Over five years’ employment: one month.

It is recommended that a written notice of termination is given personally to the employee to be dismissed regardless of the reason(s) for the termination of the employment relationship. However, a notice can also be given by mail or e-mail if it is not possible to deliver the notice personally. Employees are generally entitled to their regular salary and benefits during the notice period even if they are on garden leave during the period, or are paid in lieu of the notice period.

Finland Tax

National tax rates for 2020 applicable to earned income are as follows:

* euros

Social security contributions

The sickness insurance premium payable to the tax authorities is divided in two classes, a daily allowance premium of 1.36% and a medicare premium of 0.68% (in total 2.04%). Only the daily allowance premium is deductible for individual taxation. The daily allowance premium is not collected if the total amount of salary is less than EUR 14,766. 

The medicare premium on pension income and social benefits is collected at a rate of 1.65%. The employer collects the aforementioned premiums from the employee’s salary and remits them together with income tax withholdings to the tax authorities. If the employee’s salary is taxed under the foreign expert tax regime, the sickness insurance premium is included in the flat 32% tax rate. 

In addition, the employer shall withhold from the employee’s salary the employee pension insurance contribution (7.15% for employees of age 17 to 52 years or 63 to 67 years and 8.65% for employees of age 53 to 62 years) and unemployment insurance contribution (1.40% for employees of age 17 to 64 years). These contributions are remitted to the appropriate insurance companies together with employer social insurance contributions. However, if a certificate of coverage (A1, E101, or similar) is obtained for an assignee sent to Finland, basically no Finnish social security contributions are payable (depending on the applicable social security treaty, some contributions may still remain payable in Finland). 

For employees taxed under the foreign expert tax regime, the tax rate remains the same flat 32% regardless of the A1 or certificate of coverage even though the sickness insurance premium is embedded in the rate.

Additional Benefits in Finland

Employee bonus plans are common in Finland.

Finland Holidays

• New Year’s Day
• Epiphany
• Good Friday
• Easter Monday
• Labor Monday
• Ascension Day
• Pentecost
• Midsummer Day
• All Saints’ Day
• Independence Day (non-Christian holiday)
• Christmas
• Stephen’s Day

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.