Finland EOR Services

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Working in Finland

Ah, the land of the midnight sun. Throughout June and July, Finland enjoys a permanent sunrise — and thanks to around 180,000 islands, over 188,000 lakes and an abundance of emerald green forests, there’s plenty of natural beauty to discover. If you’re a coffee-lover, you’ll also fit right in. The Finnish are renowned caffeine fanatics, with each Finn consuming an average of 12 kilograms of coffee per year!

But there are plenty of other reasons for expanding your business into Finland. The Nordic nation has an industrialised and mostly free-market economy, with a developed infrastructure, skilled workforce, competitive operating costs, and a highly conducive business environment. Finland is also one of the least corrupt countries in the world and has minimal red tape to cut through.

Despite its skilled workforce, Finland is facing a future labour shortage due to its ageing population. The tech industry, in particular, has taken a hard knock. So, if you’re a tech company looking to expand overseas, Finland could provide an excellent opportunity to bring your talent with you and give your employees’ careers a boost in this sought-after field.

And convincing them to make the move won’t be too hard, either! Even with an average 40-hour working week, those working in Finland enjoy a high standard of living with plenty of time to explore the country’s extraordinary landscapes. Most workers get five to six weeks of annual leave, and Finland currently leads the way in terms of flexible working. The 2019 Work-Life Balance Index even ranked Helsinki as the best city for work-life balance!

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Jump to:

Working in Finland

Ah, the land of the midnight sun. Throughout June and July, Finland enjoys a permanent sunrise — and thanks to around 180,000 islands, over 188,000 lakes and an abundance of emerald green forests, there’s plenty of natural beauty to discover. If you’re a coffee-lover, you’ll also fit right in. The Finnish are renowned caffeine fanatics, with each Finn consuming an average of 12 kilograms of coffee per year!

But there are plenty of other reasons for expanding your business into Finland. The Nordic nation has an industrialised and mostly free-market economy, with a developed infrastructure, skilled workforce, competitive operating costs, and a highly conducive business environment. Finland is also one of the least corrupt countries in the world and has minimal red tape to cut through.

Despite its skilled workforce, Finland is facing a future labour shortage due to its ageing population. The tech industry, in particular, has taken a hard knock. So, if you’re a tech company looking to expand overseas, Finland could provide an excellent opportunity to bring your talent with you and give your employees’ careers a boost in this sought-after field.

And convincing them to make the move won’t be too hard, either! Even with an average 40-hour working week, those working in Finland enjoy a high standard of living with plenty of time to explore the country’s extraordinary landscapes. Most workers get five to six weeks of annual leave, and Finland currently leads the way in terms of flexible working. The 2019 Work-Life Balance Index even ranked Helsinki as the best city for work-life balance!

Country Guidelines

An overview of the main provisions

Collective bargaining agreements

Finland applies the principle of generally binding collective bargaining agreements (CBAs). This means that even though an employer may not be a member of an employer union, it’s required to follow the generally applicable CBA of its business sector (or in the case of co-employment, through the client’s main business sector).

There are almost 200 generally applicable CBAs covering almost 90% of business in Finland. For the purpose of providing precise data, we’re basing the information below on the CBA of the IT service sector (the CBA which represents the majority of our clients).

Salary currency

Euros

Salary increases

There’s no legislation regarding statutory annual increases; however, annual (or other) increases are regulated in the respective collective bargaining agreements. The CBA for the IT service sector enacted the following increases:

Salary pay date

Last working day of the month at the latest.

Holiday bonus

Employees subject to the IT sector CBA are entitled, in addition to their normal salary during annual holiday, a holiday bonus (50% of holiday salary).

Social security system

The Social Insurance Institution of Finland, Kela, is responsible for providing social security coverage for both Finnish residents who live in Finland on a permanent basis and, in certain situations, to Finns living abroad.

The social security benefits offered by Kela are family benefits, health insurance, rehabilitation, basic unemployment security, basic social assistance, housing benefits, financial aid for students, disability benefits and basic pensions. These benefits are funded by a combination of taxes and insurance contributions.

Public healthcare

Public healthcare in Finland includes:

Employer costs

Working in Finland

Statutory benefits

Pension

This is a statutory benefit in Finland, and all employers must take out a valid insurance and report employees’ earnings to the Incomes Register. In 2021, the basic TyEL insurance contribution is 24.80% of the employees’ wages and salary. The employees’ share of the contribution is:

The employee’s pension contributions are withheld from the employee’s salary and the entire earnings-related pension contribution is then paid to the pension insurance company.

Sickness

According to the Employment Contracts Act, an employee is entitled to continued salary payment during sickness from the first day of illness and for nine subsequent days.

After this time, the employee is entitled to sickness allowance from the government. If the employer continues to pay salary, they’re entitled to receive the allowance payment instead of the employee.

According to the IT service sector CBA, an employee is entitled to continued salary as follows:

Maternity & paternity

Mothers who have just had a baby are entitled to a maternity grant (äitiysavustus) and maternity leave (äitiysvapaa), and fathers to paternity leave (isyysvapaa). In addition to these, either parent can take parental leave (vanhempainvapaa) providing that certain eligibility criteria are met. Mothers receive a maternity grant when they’re pregnant either in the form of a maternity package or as a tax-free lump sum of EUR 170.

Maternity leave begins at the earliest 50 working days, and at the latest 30 working days, before the estimated due date. When maternity leave begins, Kela (The Social Insurance Institution of Finland) will pay maternity allowance (äitiysraha) for a duration of 105 working days.

Fathers can, after the birth of the child, take paternity leave for a maximum of 54 working days. Of this, the father can be at home at the same time as the mother for a maximum of 18 working days, i.e., approximately three weeks. During paternity leave, Kela pays a paternity allowance (isyysraha).

Parental leave begins after maternity leave. Parental leave can be taken by either the mother or the father. Kela pays parental allowance (vanhempainraha) for 158 working days. If employees receive pay during maternity, paternity or parental leave, Kela will pay a daily allowance for this time to the employer.

Contractual provisions

Probationary period

The maximum allowed is six months. It’s not possible to extend the probationary period for performance related issues. If the employee is away from work during the probationary period due to incapacity for work or family leave, the employer is entitled to extend the probationary period by one month for every 30 calendar days of sickness leave or family leave.

Notice period during probation

If employment is terminated during the probationary period in accordance with the probation period conditions, the employment ends with immediate effect. If employment is terminated due to other reasons, then agreed notice periods have to be observed (please see below).

Notice period after probation

Notice period is applied from the beginning of employment, also during the probationary period.
The maximum notice period is six months. Notice periods to be followed based on the Employment Contracts Act and IT service sector CBA are:

Employer

Employee

Working hours

The maximum regular working hours according to the Working Hours Act is 40 hours per week.
According to the IT service sector CBA, the maximum regular working hours are 7.5 hours per day and 37.5 hours per week.

Overtime

Overtime must always be at the employer’s request and in each case, the employee has to confirm approval to work the overtime offered. An employee cannot work on average more than 48 hours per week (including any possible overtime) during a four-month period.

For some more senior management-type roles, it may be possible to deem that the basic salary includes a provision for overtime. In this case, it’s imperative to include a clear indication in the contract of employment to show the basic salary and the overtime element of the total salary.

Working in Finland

Non-competition

There has recently been an update to Finnish legislation regarding non-competition agreements with employees, which will result in the employer having to pay the employee a monetary compensation during the time of the non-competition restriction. These changes will take effect on 1 January 2022. For non-competition agreements entered into before the new legislation takes effect, the new rules would apply after a one-year transition period i.e. 1 January 2023. During the transition period, the employer is entitled to terminate any unnecessary non-competition agreements that have been made before the new law comes into force, without the notice period set out in the new legislation.

The key changes are:

Termination

The employment contract can be terminated under two scenarios:

  1. Production, financial and reorganisation related grounds
  2. Employee’s person related grounds

To terminate the employment under option one, the available work has to have reduced substantially and permanently, and there must be no other suitable positions vacant. If the employer employs regularly at least 20 employees, the employer has to undergo consultation negotiations before making decisions about termination(s).

To terminate with option two, the employee has to have seriously breached or neglected their substantial obligations arising from the employment relationship. Option two also offers the possibility to terminate employment with immediate effect without notice if there’s a serious breach of obligations on the part of the employee.

Statutory insurances

Worker’s compensation insurance
Workers’ compensation insurance is part of Finnish social security. It provides cover for all employees and compensation is paid, in accordance with the Employment Accidents Insurance Act, for injuries resulting from an accident at work or an occupational disease.

In Finland, the statutory workers’ compensation insurance is administered by private accident insurance companies. TopSource Worldwide has a policy with If P&C Insurance — a private accident insurance company.

Unemployment insurance
The Employment Fund (Työllisyysrahasto) was launched on 1 January 2019 through the merger of the TVR and the Education Fund. It’s an organisation established by law, regulated by the Finnish Financial Supervisory Authority and forms part of the Finnish social security system.

Unemployment insurance contributions are used to finance costs such as earnings-related unemployment benefits, adult education allowances, pension benefits and Kela benefits. The employee and employer are obliged to make unemployment insurance contributions.

Holiday entitlement

The right to annual holiday is established in either the applicable collective bargaining agreement or, if no CBA is applicable, in the Annual Holidays Act. An employee accumulates days of annual holiday during the holiday credit year from 1 April to 31 March inclusive. Two-and-a-half days of holiday are credited for each month during which the employee works ‘a full holiday credit month’. Thus, employees normally have 30 days of holiday each year. Saturdays are calculated into the 30 days, meaning that the employee has five weeks of holiday.

The entitlement is two weekdays of holiday for each full holiday credit month if, by the end of the holiday credit year, the duration of the employment relationship has been an uninterrupted period of less than one year. The annual holiday for these employees is up to 24 days, forming up to four weeks of annual holiday. When the number of days of holiday is calculated, any fraction of a day is rounded up to constitute one full day of holiday.

A full holiday credit month depends on what is agreed in the employment contract as to how much the employee shall work. If the employee is away for a reason other than those listed in section 7 of the Annual Holidays Act, the employee might not earn holiday during that month.

The holiday season, during which the holidays are mainly taken, means the period from 2 May to 30 September inclusive. It’s normal for employees to take four weeks of accumulated holiday during this period and the remaining one week of holiday in the winter.

The employer and employee may also agree on different timing of holidays. Mandatory law, however, stipulates that the employee shall have an uninterrupted period of 12 holiday days (two weeks) during the period from 2 May to 30 September.

Public holidays 2021

New Year’s Day Friday 1 January
Epiphany Wednesday 6 January
Good Friday Friday 2 April
Easter Monday Monday 5 April
May Day Saturday 1 May
Ascension Day Thursday 13 May
Whit Sunday Sunday 23 May
Midsummer Eve Friday 25 June Friday between 19–25 June. Non-official – non-business day in the Annual Holidays Act (162/2005) – holiday in some CBAs
Midsummer Day Saturday 26 June Saturday between 20–26 June
Independence Day Monday 6 December
Christmas Eve Friday 24 December Non-official – non-business day in the Annual Holidays Act (162/2005) – holiday in some CBAs
Christmas Day Saturday 25 December
St Stephen’s Day Sunday 26 December

Note: if a bank holiday falls at the weekend in Finland, there’s no rolling forward of that holiday to a working day.

Looking for a EOR in Finland? At TopSource Worldwide, we work with local experts to help you stay on the right side of Finland law.

Get in touch today to see how we can help your business with our employment solutions.

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Published date: 3rd Aug 2021
Review date: 3rd Aug 2022