OUTLINE
Minimum wage in Finland
Payroll in Finland
Statutory benefits in Finland
Other employee benefits in Finland
Compliant, seamless payroll and benefits in Finland and beyond
Payroll and benefits in Finland
As in all countries, payroll in Finland is subject to certain rules and requirements. These are largely defined by Finnish labour law. However, collective bargaining agreements also often contain provisions concerning payroll, which employers need to be aware of. Since almost 90% of Finnish workers are covered by a collective agreement, it’s quite likely that one will impact your operations in Finland.
Employers that want to run payroll in Finland need to know which collective agreement applies to their workers. They also need to understand the intricacies of taxes and social security contributions, including how much to withhold from employees’ salaries and where to remit payment. Lastly, employees need to know about the mandatory benefits they’re required to provide for their employees so they can ensure compliance with the law. We’ll cover everything you need to know about payroll and benefits in Finland in this guide.
Minimum wage in Finland
There is no national minimum wage in Finland. While this is unusual for a European country, the situation is similar for some of Finland’s closest neighbours, Sweden and Denmark.
Instead of a national minimum, minimum hourly wages in Finland are set through collective bargaining agreements between employers’ associations and trade unions. These minimum wages are often extended to all workers in a sector, whether or not they’re covered by the collective agreement.
Almost 90% of employees in Finland are covered by a collective agreement, including all public sector employees. Employees who are not covered by a collective agreement are entitled to a salary that’s usual and reasonable within their sector.
What counts towards the minimum wage in Finland
When calculating the minimum wage in Finland, only base salary is included. That means that employers must pay employees at least the minimum wage for their sector, not including any additional payments or benefits. For example, employees may receive compensation for working overtime, as well as an additional rate for work completed at night, in the evening, or on weekends. They may also receive bonuses or benefits in kind. None of these counts towards the minimum wage in Finland.
Minimum wage in Finland for international students
There is no specific minimum wage in Finland for international students. If a student chooses to work alongside their studies in Finland, they must be paid at least the minimum wage for their sector, as defined in the relevant collective agreement. If no collective agreement applies, they can expect a salary that is considered reasonable within their sector.
Payroll in Finland
There are certain things that employers need to know before running payroll in Finland. Read on for our guide to the basics.
Basics of payroll in Finland
The payroll cycle in Finland is typically monthly, with employees receiving their wages on the last day of the month. However, employers and employees can agree on a shorter pay cycle. The tax year in Finland is the same as the calendar year, running from 1 January to 31 December. The local currency is the euro (€).
Employers in Finland must provide employees with an electronic or paper payslip each pay cycle. This must include the following key information:
- The employer’s information.
- The employee’s information.
- The pay period.
- The pay date.
- Details of the employee’s basic salary, bonuses, and allowances.
- Any overtime pay.
- Details of fringe benefits.
- Taxes, social security payments, and other deductions.
Finland payroll tax
There are two forms of income tax in Finland: national tax and local (municipal) tax. Members of certain religious institutions also have to pay church tax. National tax is charged on a progressive scale depending on the employee’s income, with rates varying from 6% to 31.25%. Local tax is paid at a flat rate that varies by municipality.
Withholding taxes from employees’ wages is an important part of running payroll in Finland. Normally, each employee has a tax card stating how much tax should be withheld. If an employee doesn’t have a tax card, employers should withhold a flat rate of 60%.
Tax in Finland is payable on wages, salaries, bonuses, stock options, and other forms of compensation. It must be paid to the Finnish Tax Administration no later than the 12th of the month following the payroll run. Employers also must file an ‘earnings payment report’ stating the total salaries paid within five days of each payday.
Social security contributions in Finland
Both employers and employees in Finland pay contributions to the social security institute of Finland, Kela. This applies to both resident employees and non-residents who are not covered by social security in another country. Kela pays for things like pensions, health insurance, and unemployment insurance. Contribution rates for both employers and employees are adjusted annually. In addition, employers have to pay for occupational accident insurance and group life insurance.
Employers are responsible for withholding employee contributions from their wages and remitting them along with their own contributions. Health insurance payments must be paid to the local tax authority by the 12th of the following month, and unemployment insurance contributions are paid quarterly. All other payments are due to the relevant insurance provider.
13th salary in Finland
Unlike in some other European countries, the 13th salary is not mandated by law in Finland. However, it’s common for employees to receive bonuses, which are usually paid in conjunction with their holidays.
Other requirements for payroll in Finland
Payroll in Finland must be run at least once a month. Unless otherwise agreed, employees should receive their pay on the last day of the agreed pay period. Employers must make payments directly to the employee’s bank account. Although there is no formal requirement for payments to be made in euros, this is generally easier since reporting has to be completed in euros.
Statutory benefits in Finland
In Finland, employees benefit from a robust social security system, which is paid for through contributions from both employers and employees. The Finnish social security institute is called Kela, and it handles things like pensions, health insurance, and unemployment insurance. There are also other benefits that employees are expected to provide directly.
Social security benefits in Finland
All employers and employees in Finland make contributions to the social security system, covering pensions, health insurance, and unemployment insurance. Employers are also required to provide:
- Group life insurance: This is mandatory for many employers based on the collective bargaining agreement that applies. It provides protection for employees’ families in the case of death.
- Occupational injury insurance: Similarly, employers must provide employees with occupational injury coverage, which offers protection in case of accidents at work.
Other mandatory employee benefits in Finland
In addition to the benefits provided through Kela, employers in Finland must provide at least the following statutory benefits:
- Redundancy, termination, and severance: There are specific rules that apply to the termination of employment contracts in Finland, which employers must abide by.
- Working hours: Employees in Finland should work a maximum of 40 hours per week or eight hours per day. They also have the right to breaks and rest periods between shifts.
- Overtime: Employees in Finland are entitled to additional pay when they work overtime. Rates are set by collective bargaining agreements or individual employment contracts.
- Leave: Employees are entitled to leave in various situations, such as when they are sick or when they have a baby. All employees are also entitled to a minimum of five weeks of paid holiday each year.
Collective bargaining agreements and employee benefits in Finland
Collective bargaining agreements play a significant role in shaping the labour market in Finland, providing coverage for almost 90% of employees. Collective agreements might include provisions for additional benefits or strengthen statutory benefit entitlements, for example by providing for more paid leave. Employers in Finland need to understand the requirements of the specific agreement that applies to their employees.
Other employee benefits in Finland
Employers in Finland can choose to provide additional benefits to their employees. Though these are not mandatory, they can help to improve employee engagement and attract and retain talent. Below are some of the most common additional employee benefits in Finland.
Extra paid holidays
While all employees in Finland are entitled to a minimum of five weeks of paid holiday per year, some employers choose to provide more. This can be a valuable employee benefit that helps employees to improve their work-life balance.
Bonuses
Many employers in Finland offer their employees annual bonuses. While these aren’t required by law (as they are in some countries), they can help to motivate employees and improve their performance. Some companies also implement profit-sharing schemes to give employees a stake in the business.
Additional pension contributions
Employees in Finland are entitled to the state pension when they retire. Some employers choose to offer private pensions as an additional benefit, helping employees to better save for the future.
Stock options
Employers in Finland may choose to grant their employees stock options or set up other employee share schemes. This can help to tie employees’ motivations to the company’s goals, ultimately improving performance. Since these increase in value over time, they can also be a valuable employee benefit in Finland.
Other benefits
Like in all countries, there are almost limitless ideas for benefits you could offer to your employees in Finland. For example, you could consider providing things like:
- Company cars.
- Meal vouchers.
- Personal development opportunities.
- Wellness benefits.
- Flexible/remote work.
Compliant, seamless payroll and benefits in Finland and beyond
Getting payroll and benefits right is not just a legal issue. Every country also has its own customs, norms and expectations about employee compensation. And if your operations aren’t in line with your workers’ expectations, they may not stick around for long.
Thankfully, we know what we’re doing. When you work with CXC to engage workers in Finland, we’ll handle everything from tax withholding to employee bonuses on your behalf.
Want to find out more?
Compliantly hire workers anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
DISCLAIMER: The information contained on this website is provided for general informational purposes only and should not be construed as legal, tax, or other professional advice on any subject matter. While we endeavor to ensure that the content is accurate and up to date, we make no warranties or representations of any kind regarding the completeness, accuracy, reliability, suitability, or availability of the information contained herein. The content on this site is not intended to be a substitute for professional advice. Users should not act or refrain from acting based on any information on this website without seeking the appropriate legal, tax, or other professional advice tailored to their specific circumstances from qualified professionals. We expressly disclaim all liability in respect to actions taken or not taken based on any or all of the contents of this website. Use of the information on this site does not create an attorney-client, tax advisor-client, or any other professional-client relationship between the user and the website or its authors.
Australia/New Zealand Head Office
Asia Head Office
EMEA Head Office
North America Head Office
Latin America Head Office
Level 3, 99 Walker Street
North Sydney, NSW 2060 Australia
