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Finland – Employer of Record

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Country Introduction – Finland

Capital – Helsinki
Currency – Euro (EUR)
GDP – 297.3 billion USD (2021)
People/Nationality – Finnish
Language – Finnish and Swedish
Major Religion – Christianity
Population – 5,548,483 as of (March 6, 2024)

Finland has a mixed economy characterised by a highly industrialised and technologically advanced manufacturing sector, a strong services sector, and a significant emphasis on innovation and research. It is known for its strong industrial base, particularly in sectors such as electronics, telecommunications, machinery, and forest products.

Companies like Nokia, KONE, and UPM-Kymmene are prominent examples of Finnish industrial success stories. Finland places a high emphasis on innovation and research. It has a well-developed education system and invests heavily in research and development (R&D). Institutions like Aalto University and various research centers contribute to the country’s innovation ecosystem.

It relies heavily on international trade. Its key export products include electronics, machinery, forest products, and metals. Trade with other European countries, especially within the European Union, is significant, as is trade with neighbouring countries like Russia and Sweden.

Finland is rich in natural resources, including forests, minerals, and freshwater resources. The forest industry, in particular, plays a crucial role in the economy, with timber and paper products being major exports. The services sector is an important component of the Finnish economy, contributing significantly to GDP and employment. This sector includes industries such as finance, healthcare, education, and tourism.

Finland boasts a highly educated and skilled workforce. The country places a strong emphasis on education and training, and its workforce is known for its technical proficiency and adaptability. Finland has a well-developed welfare state with comprehensive social welfare programs, including healthcare, education, and social security.

The government plays an active role in the economy through policies aimed at promoting innovation, competitiveness, and sustainable growth. Overall, Finland’s economy is characterised by a combination of industrial prowess, technological innovation, and a strong commitment to education and research, making it a key player in the global economy.

Finland values work-life balance, with shorter workweeks, generous vacation allowances, and strong labor rights. Employees often enjoy flexible work arrangements and parental leave benefits. Finland is known for its high level of social equality and safety. The country ranks well in terms of gender equality, LGBT rights, and overall social inclusion.

Contract of Employment

In Finland, employment relationships are governed by law and collective agreements negotiated between employers and labor unions. Employment contracts can be for a fixed term or an indefinite period. Fixed-term contracts specify the duration of employment, whereas indefinite contracts have no predetermined end date.

Probation Period

Probation periods in Finland can vary in length, but they typically range from 1 to 6 months. The duration of the probation period is usually specified in the employment contract or collective agreement.

Termination

The termination notice period in Finland varies based on the length of employment:

– For employment lasting up to one year, the notice period is 14 days.
– If employment has been between one to four years, the notice period is one month.
– Between four to eight years of employment, the notice period is two months.
– For employment lasting between eight to twelve years, the notice period is four months.
– Employment exceeding twelve years requires a notice period of six months.

Working Hours

8 hours per day and 40 hours per week.

Overtime

According to Finnish labor laws, the maximum amount of overtime that an employee can work is 138 hours over a period of four months, or an average of 35 hours per week over a four-month period.

13^th Month Pay

In Finland, there isn’t a traditional concept of a “13th-month pay” as seen in some other countries.

Annual Leave

Finnish labor laws stipulate a minimum annual leave entitlement for employees. The minimum annual leave entitlement is 2.5 working days per month of employment, totaling 30 days for a full year of employment.

Sick leave

Finnish employees are entitled to sick leave if they are unable to work due to illness or injury. Sick leave may also be granted for preventive medical treatment or quarantine purposes. The duration of sick leave can vary depending on the nature and severity of the illness or injury. Employees typically provide a medical certificate from a healthcare professional to support their sick leave claim.

Income Tax

Employer / Employee Contributions

Social Insurance Contributions in Finland:

– Employees: Finnish employees contribute to social insurance, deducted from their gross wages to fund pensions, healthcare, and unemployment benefits.

– Employers: Employers also make social insurance contributions based on employee wages to support social security programs.

Pension Contributions in Finland:

– Employees: Finnish employees contribute a portion of their earnings to the pension system, with the amount based on income and age.

– Employers: Employers also contribute to the pension system on behalf of employees, separate from employee contributions.

Unemployment Insurance Contributions in Finland:

– Employees: Employees contribute to the unemployment insurance fund, which provides income support during unemployment.

– Employers: Employers are required to make contributions to the unemployment insurance fund based on employee wages.

Health Insurance Contributions in Finland:

– Employees: Employees may contribute to the Finnish health insurance system for access to healthcare services.

– Employers: Employers may also contribute to the health insurance system on behalf of employees, with amounts varying based on factors like earnings and coverage type.

Other Contributions:

– Employers and employees may contribute to additional social security programs like occupational accident and maternity insurance.

Maternity and Paternity Leave

In Finland, fathers are entitled to paternity leave, which typically lasts for a duration of approximately 6.4 weeks. This period can be taken consecutively or in separate blocks, depending on the preferences of the father and the needs of the family.

VAT / GST

The standard VAT rate in Finland is 24%. This rate applies to most goods and services unless they qualify for a reduced rate or are exempt from VAT. Finland also applies reduced VAT rates of 14% and 10% to certain goods and services. The reduced rates typically apply to essential items such as food, accommodation, public transportation, books, and pharmaceutical products.

Public Holidays

Here is a list of the main public holidays observed in Finland:

January 1 – New Year’s Day
January 6 – Epiphany
Good Friday – observed on the Friday before Easter Sunday.
Easter Sunday and Easter Monday – usually falling in late March or early April.
May 1 – May Day
Ascension Day – observed 40 days after Easter
Midsummer Day – celebrated on the Saturday between June 20th and 26th
All Saints’ Day – first Saturday of November
December 6 – Independence Day
December 25 – Christmas Day
December 26 – Boxing Day

Severance Pay

In Finland, severance pay, also termed termination compensation, may be granted to employees when their employment ends due to reasons such as redundancy, restructuring, or wrongful termination. Here’s a summary:

– Termination Circumstances: Severance pay is provided in cases of job loss due to various reasons, including redundancy and company restructuring.

– Collective Agreements and Statutory Entitlements: Severance pay terms are outlined in collective agreements or Finnish labor laws. They specify eligibility criteria and payment calculation methods.

– Calculation Basis: Severance pay is typically calculated based on factors like length of service, salary level, and terms in the employment contract.

– Notice Period and Compensation: It’s often provided in addition to notice periods or compensation owed to employees upon termination.

– Taxation: Severance pay is subject to taxation, but exemptions or deductions may apply depending on the circumstances.

– Negotiation and Resolution: Terms of severance pay are usually negotiated between employers and employees. Disputes can be resolved through mediation, arbitration, or legal means.

Work and Residence Permits (Expatriates)

In Finland, expatriates and non-EU/EEA citizens typically require both work and residence permits to legally live and work in the country.

– Work Permit: Required for employment, initiated by the employer, and processed by the Finnish Immigration Service (Migri). Different types exist based on qualifications and labor market conditions.

– Residence Permit: Necessary for legal residence, applied for separately from the work permit. Requires valid reasons such as work, family ties, or studies, and processed by Migri.

– Employer Sponsorship: Employers typically sponsor foreign nationals for permits and must fulfill certain obligations.

– Processing Time and Fees: Varies based on factors like origin and case complexity. Applicants pay processing fees for both permits.

– Renewal and Extensions: Permits are granted for specific periods and may require renewal or extension before expiration.

– Permanent Residency and Citizenship: After a period, individuals may apply for permanent residency or Finnish citizenship, subject to specific requirements.