Setting Up Payroll in Finland – A Practical Guide for International Employers

Understanding Employer Obligations in Finland

Being an employer in Finland involves a number of responsibilities and obligations that at first glance may seem complex and complicated. For example, the employer has to deal with notifications to the authorities, insure employees and take care of employer contributions. However, the right accountancy partner can take care of all of these for you.

Key Labour Laws You Should Know

In Finland, employment relationships and wages are regulated by several laws, the most important of which are:

• the Working Time Act
• the Annual Holidays Act and
• the Employment Contracts Act.

If you are planning to expand your business to Finland and pay wages in Finland, it is a good idea to familiarise yourself with the employer's obligations beforehand.

Taxation of Employees in Finland

In Finland, the taxation of employees can simply be divided into two types: general and limited tax liability. As a rule, these can be divided into two types: those who live and work in Finland are subject to general taxation, while others are subject to limited taxation.

These two types have different tax cards, so you can check there. Withholding tax is withheld when the salary is paid, and the employer remits it to the tax administration.

Mandatory Insurances for Employers in Finland

The employer must provide occupational pension insurance for employees (TyEL), which must be taken out for employees aged 17-68 whose monthly earnings exceed the insurance requirement, the lower limit of the compulsory insurance threshold. TyEl is deducted from the employee's salary and paid by the employer in addition to its own contribution to the occupational pension insurance company.

An unemployment insurance contribution is payable if, during the calendar year, the employer pays a total of more than €1 500 in wages to workers aged 18-64. The employee also makes an unemployment insurance contribution, which the employer must collect when the salary is paid and pay the full amount to the Employment Fund.

Both the employer and the employee pay health insurance contributions if the employee is 16-67 years of age and insured in Finland under the Sickness Insurance Act. However, the employee's share of the health insurance contribution is included in the withholding percentage, so the employer does not collect it separately when the salary is paid. Health insurance contribution rate varies from year to year.

Insurance against accidents at work and occupational diseases must be taken out if the wages paid in a calendar year exceed € 1 500 and must be valid when the employee starts work.

The Role of Collective Agreements

In addition to various laws, employment relationships and wages in Finland are governed by collective agreements, which can be either universally binding or normally binding. If a collective agreement is generally binding, all employers in the sector must comply with it. If the collective agreement is standard binding; the employer must comply with it if he belongs to the employers' association that concluded the agreement.

Need a Reliable Payroll Partner?

If You are planning to expand to Finland and need a reliable accounting partner, we at Gallant are ready to have your back!