Before hiring employees in Finland, there are a few important things you’ll need to know. Firstly, fixed-term employment in Finland can’t be terminated. If an employee is performing poorly, employers must give employees a warning as well as an opportunity to improve before being terminated.
In addition to income tax in Finland, employees are also subject to municipal income tax, which varies between 16.5% and 23.5% depending on the employee’s municipality. Some employees may also pay church tax.
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Get an overview of what you need to know when hiring in Finland below.
Not legally required, but an annual holiday bonus is common in most collective agreements. Usually, the bonus is 50% of an employee’s gross pay for the annual holiday.
In Finland, employees typically work eight hours a day, 40 hours a week—unless otherwise provided by collective agreement. However, the regular working hours for white-collar employees specified in collective agreements are typically seven and a half hours a day and 37.5 hours per week.
Regular business hours are typically 8:00am to 4:00pm or 9:00am to 5:00pm, from Monday to Friday.
The probationary period in Finland is six months.
The notice period in Finland depends on the duration of employment.
Non-compete agreements in Finland must only be used for reasonable grounds. Compensation is not required for a non-compete agreement that lasts up to six months, but is required for agreements lasting longer.
Annual leave is calculated from the period of April 1st through March 31st of the following year. 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 per year is between 24 and 30 days. In Finland, Saturdays are included when taking a full week of vacation.
Employees who have at least 15 years of service receive three vacation days per month.
Vacation is typically taken between May 2nd and September 30th—four weeks in the summer and one week in the winter.
Employees who have been in service for at least a month are entitled to paid sick leave of nine working days.
After these nine days, the employee must provide a medical certificate from a doctor. They are then entitled to sickness allowance from the state (the Kansaneläkelaitos or Kela), the amount of which is based on the employee's earned income and is paid for weekdays and Saturdays for a maximum period of 300 days.
Employees that have been working for less than a month are entitled to 50% of their pay during sick leaves.
Employees are entitled to maternity leave of 105 days (excluding Sundays). They can choose to start the leave a maximum of 50 days before the expected due date.
Employees are also given 54 weekdays (including Saturdays) of paternity leave, with a maximum of 18 days to be used at the same time as the mother. The remaining days are to be taken in more than two periods.
Employers are not required to pay a salary during this period, but the state can grant the employee an earnings-related maternity allowance. However, most collective agreements require that salary is paid during maternity leave and temporary child-care leave.
An employer can expect to contribute about 22% in social contributions which includes health insurance, pension insurance, unemployment insurance, accident insurance premium, and, if agreed in the collective labour agreement, group life insurance.
Employees in Finland are taxed from 0% to 31.25% depending on their income bracket. Social contributions are between 9.58% and 11.08%.
Employees are also subject to municipal income tax, which varies between 16.5% and 23.5% depending on the municipality. Employees may also pay church tax.
Fixed-term employment in Finland cannot be terminated. Employers must give a warning to an employee performing poorly, as well as an opportunity to improve before being terminated.
Vacation days that remain unused at the end of an employment relationship are compensated for the employee.
There is no statutory severance pay unless the employee’s termination is unjustified, or the employer has decided voluntarily to provide it.
Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring. Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast.
We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities.
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