Payroll & Employment Guide Finland

In Finland, employment contracts are the cornerstone of the employer-employee relationship, defining the terms and conditions under which an employee works. The Finnish Employment Contracts Act recognises several types of employment contracts, each suited to different employment situations and needs. In Finland, employment contracts can be established in oral, written, or electronic form. While all three forms are legally valid, written contracts are strongly recommended to avoid misunderstandings and disputes. These contracts must specify key employment terms, such as compensation, job responsibilities, working hours, and notice periods.

Part-Time Employment Contracts (Osa-aikainen työsopimus) are designed for employees who work fewer hours than the standard full-time schedule. Part-time work is common in various industries, including IT, where flexible working arrangements are often necessary to accommodate both the employer's and employee's needs. Part-time employees in Finland are entitled to the same benefits and protections as full-time employees, on a pro-rata basis.

Temporary Agency Work Contracts (Vuokratyösopimus) involve employment through a temporary work agency, which then assigns the employee to work at a client company. The agency is the legal employer, responsible for paying wages and ensuring compliance with employment laws, while the client company oversees the day-to-day work. In Finland, the use of temporary agency work is regulated to prevent abuse and ensure that agency workers receive fair treatment and appropriate benefits.

Apprenticeship Contracts (Oppisopimus) are another form of employment contract that combines work with vocational training. These contracts are often used in industries where practical experience is essential, and they provide a pathway for young people and career changers to enter the workforce. Apprenticeships are less common in the IT sector, where formal education and continuous professional development play a more significant role.

In conclusion, the various types of employment contracts in Finland provide flexibility to meet the diverse needs of the labour market while ensuring that employees are protected under the law. Whether it's a permanent, fixed-term, part-time, or temporary agency contract, each type has specific legal requirements that must be met to ensure fairness and compliance. Employers in the IT sector, like in all industries, must carefully consider the type of contract they offer to ensure that it aligns with the nature of the work and complies with Finnish employment laws.

Notice periods: 14 days - 6 months, depending on tenure and the collective agreement.

Termination of employment: Must comply with Finland’s Employment Contracts Act and may involve employer justification, mutual agreement, or expiry of fixed-term contracts.

Employers in Finland are legally required to provide a wide range of employee benefits and often supplement these with additional perks to stay competitive in the job market.

Finland boasts a robust system of family leave policies designed to support parents in balancing work and family life. The Collective Agreement for the IT Service Sector reflects these policies, providing for both maternity and paternity leave.

Also, employees are entitled to paid sick leave if they are unable to work due to illness or injury. The duration of paid sick leave depends on the employee's length of service, ranging from four weeks for those employed for less than three years to eight weeks for those employed for at least ten years.

An employee has the right to a leave of absence from work due to pregnancy, childbirth, or childcare and receive the following Health Insurance Act benefits: pregnancy allowance days (pregnancy leave), special pregnancy allowance days (special pregnancy leave), and parental allowance days (parental leave).

Maternity benefits

• Pregnancy leave (raskausvapaa): Typically commences 30 working days before the baby's due date.
• Pregnancy allowance (raskausraha): Paid by Kela for 40 working days during pregnancy leave.
• Special pregnancy allowance (erityisraskausraha): Granted if the workplace poses health risks and reassignment is not possible.

Parental benefits

• Parental leave (vanhempainvapaa): Commences after childbirth, providing 320 working days of paid leave shared between parents.
• Parental allowance: Paid by Kela for the duration of parental leave. The days can be divided, transferred, or used for part-time work with partial parental allowance.
• Special care allowance (erityishoitoraha): Available for parents of seriously ill or disabled children requiring care.

Adoption benefits

Adoption grant (adoptiotuki): A lump sum payment to offset adoption costs for children under 18 adopted from abroad.

Parental allowances

• Calculation: Based on annual income from the 12 calendar months preceding the entitlement period.
• Daily allowance: Varies based on the benefit period and may consider previous income sources (e.g., rehabilitation, studies, illness, unemployment).
• Minimum levels: Apply if the claimant lacks working income.
  

Mandatory benefits: Social security (covering health insurance, unemployment, and pension schemes).
Common perks: Flexible working hours, remote work options, professional development, health and wellness programs, meal and commuting benefits, and extended parental leave.

Leave policies: Annual leave, sick leave, parental leave, care leave, and study leave.

Finland has a progressive personal income tax system and requires employers to withhold all relevant taxes and contributions at source.

• Income tax: In Finland, personal income tax is progressive, with national rates ranging from 12.64% to 44.25%. Municipal tax rates vary by region (4.70%–10.90%), and church members may also pay an optional 1.0%–2.25% church tax. Exact income brackets depend on annual earnings - consult the Finnish Tax Administration for detailed rates.
• Capital income tax: 30% on income up to €30,000, and 34% on the excess.
• Value Added Tax (VAT): 24%
• Social security contributions: Include health insurance and pension contributions.

Employers must pay salaries at least once per month, unless otherwise agreed in the employment contract. Finnish payroll is detailed and governed by both national law and sectoral collective agreements.

Salary payment deadline: At least monthly

Taxes and contributions payment deadline: Typically remitted monthly

Payroll declarations deadline: Payslips must accompany each payment; annual reports due by end of January

Payroll currency: EUR

Finland’s Employment Contracts Act and sector-specific collective agreements govern key employment terms, including wages, benefits, leave entitlements, and working conditions.

Total employment cost:

• Employer’s social security contributions: 19.78%
• Employer’s health insurance costs: 1.87%
• Employees’ social security contributions: 7.94%
• Employee’s health insurance costs: 1.52% (Employee Sickness Insurance contribution, which is withheld from salary).

Minimum wage: €2,600

Probation period: Max. 6 months

Using EOR services in Finland allows you to legally employ individuals in the country without opening legal entities there. The EOR takes over all the legal responsibilities as an official employer, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

Using PEO services in Finland provides HR and administrative support, while you remain the legal employer. PEO services are ideal for employers who already have legal entities in Finland but need support to manage their workforce operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams provides a payroll calculator adjusted per Finland’s labour laws. Estimate gross-to-net salaries, tax withholdings, and employer costs in Finland with our localised calculator. Designed to meet all payroll and compliance requirements.