Taxes and payrolls: the labour market in Finland
Each labour market has some peculiarities. It may be tricky for foreigners to understand fully the payment methods, the taxes and other benefits related. In TalentUp we are starting a series of different blog articles, one for each country. This article analyses the labour market in Finland.
General data about the Finnish labour market
| Minimum wage | Not established |
| Payment basis | Monthly |
| Payment | Must be paid by the last day of the month |
| Maximum working hours a week | Between 37.5-40 per week depending on the position and CBA. |
| Maximum overtime hours a year | 250h |
| Working hours compensation | 1505 rate for the first two hours. 200% from there or on weekends. |
Payroll taxes in Finland
Social security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.
| Contingencies | Employer % | Employee % |
| Pension Insurance | 25.55 | 7.15 (8.65 if the employee is between 53-62 years old) |
| Health Insurance | 1.53 | 1.96 |
| Unemployment Insurance | 0.52 | 1.5 |
| Total | 27.60 | 10.61 |
Once contributions are paid, employees need to pay an income tax that varies depending on their gross salaries.
| Gross salary | Income tax % |
| Up to 19,900€ | 0 |
| Between 19,900 to 29,700€ | 6 |
| Between 29,700 to 49,000€ | 17.25 |
| Between 49,000€ to 85,800€ | 21.25 |
| Over 85,800€ | 31.25 |
Contingencies from self-employees
If you are self-employed, you pay a personal income tax. The amount of taxes you pay will be based on your business income.
Example of net salary in Finland
As a reference, we use the average salary of a software engineer. In Finland, on average, software engineers earn annually 65,300€.
| Employer | Employee | |||
| % | € | % | € | |
| Gross salary (annually) | 65,300 | |||
| Pension Insurance | 25.55 | 16,684.15 | 7.15 | 4,668.95 |
| Health Insurance | 1.53 | 999.09 | 1.96 | 1,279.88 |
| Unemployment Insurance | 0.52 | 339.56 | 1.5 | 979.50 |
| Total | 27.60 | 18,022.80 | 10.61 | 6,928.33 |
| Income tax | 5,908.73 | |||
| Net salary (annually) | 52,462.94 |
The employer contributes 18,022.80€ to social security and the employee 6,928.33€.
After paying the income tax, the employee has a net salary of 52,462.94€ coming from a gross salary of 65,300€.
Unemployment regulation in Finland
If the employer terminates the contract, the notice period is as follows:
| Time worked | Notice period |
| Less than 1 year | 14 days |
| 1 to 4 years | 1 month |
| 4 to 8 years | 2 months |
| 8 to 12 years | 4 months |
| More than 4 years | 6 months |
If the employee terminates the contract, it is 14 days’ notice if they have been employed for less than 5 years and 1 month after that.
There is no statutory severance pay in Finland and the probationary period cannot exceed 6 months.
Different kinds of leaves in Finland
Annual leave is calculated from April 1 to March 31 and vacation is typically taken between May 2 -September 30.
Employees have 30 working days of vacation annually. Upon completing 15 years of service, the annual leave entitlement increases to 36 days.
During vacation, Saturday is considered a working day even if the employee does not usually work on Saturdays.
At least two weeks of the annual holiday must be taken as an uninterrupted period, however, the employer and the employee may agree on taking the holiday outside the holiday seasons and they may also convert part of the holiday into shorter working hours.
If the holiday is longer than 6 days, it should be paid before the start of the holiday.
There are 10 public holidays.
Usually, the sick leave is paid by the employer for 4 weeks. However, after the first 10 days, the salary is reduced to half of it.
Paid parental leave
Generally, family leave (maternity, paternity or parental) is unpaid, but this is stipulated within the employment contract/collective agreement.
A pregnant employee is entitled to 105 days of maternity leave. Working is allowed during maternity leave if it can occur without endangering the safety of the mother, fetus, or child. However, the mother cannot work while on maternity leave two weeks before the due date and two weeks after giving birth.
Paternity leave lasts for 54 days, but only 18 can be taken at the same time as the mother. And it should be taken only if the kid is under 2 years.
Parental leave may be taken part-time, reducing the working hours and the pay accordingly.
Other common Finnish benefits
| Benefit | % of companies with this benefit |
| Diversity | 15.6 |
| Health Insurance | 15.4 |
| Work-Life balance | 15.2 |
| Cutting Edge Technology | 15.0 |
| Work From Home | 14.9 |
How to employ a Finnish worker
Iy you want to employ an individual lingin in Finland, you should stablish your own new legal entity, banking, accounting and payroll service in Finland.
Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.
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