Working in Finland

Before an employee starts a new job, they sign an employment contract with the employer. This states the central work tasks and other terms of work. The work can be fixed term (määräaikainen) or permanent (vakituinen) and the work can be part time or full time. On-demand work (keikkatyö) and zero-hour contracts (nollatuntisopimus) are also possible forms of work.

Salaries are paid to a bank account and taxes need to be paid from salaries. The employer pays withholding tax (ennakonpidätys) from the employee’s salary to the tax authority based on the tax card (verokortti). The higher a person’s income, the higher the tax percentage is. The tax return (veroilmoitus) is done once a year. This shows the previous year’s income and the paid withholding tax.

Income can also be generated by becoming an entrepreneur. If you think of a good business idea, you can receive guidance, counselling and loan financing for establishing a business.

 Because there are particular rights and obligations connected to the status of an employee, it is important to know whether you are working as an employee or an entrepreneur. An employer must also be aware of their obligations.

Employment contacts define the terms of the employment and work

Before an employee starts, they sign an employment contract with the employer. This should be done in writing. There are always two identical copies of an employment contract: one for the employee and one for the employer. Both parties sign the contract.

Signing an employment contract means that the employee agrees to what is written in the contact, for example, work during nights or weekends. The employment contract also states where the work is to be done.

The contract should be read carefully before signing and you should make sure you understand what you are agreeing to. You can take the contract home and read it through with someone before you sign it. The employment contact contains the following information::

• When employment begins
• the place of work
• whether the work is permanent or fixed term
• the duration of the employment relationship
• working hours
• duties
• possible probationary or trial period (koeaika) and its duration
• the pay and pay period
• the applicable collective agreement
• the annual holiday
• the annual holiday.

Work is done in different types of employment relationships

Work and its nature have changed drastically in Finland in the last decades. Earlier, most people worked full time in the same workplace for many years and even their whole career. Nowadays, work is not as stable. Some people work many different jobs for different employers at the same time. Part-time work and short employment relationships (pätkätyöt) have become more common.

An employment contract can be either valid indefinitely (toistaiseksi voimassa oleva) meaning permanent or fixed term. All employees must be treated equally. Fixed term or part-time employees cannot have worse employment terms than permanent or full-time employees.

More information about working in Finland: As a foreign employee in Finland (infofinland.fi) (Arabic, Bosnian, English, Hindi, Chinese, Kurdish, Nepali, Persian, Romanian, Swedish, Finnish, Tagalog, Thai, Ukrainian, Uzbek, Russian, Vietnamese, Estonian)

An employment relationship can be permanent or fixed term

A contact which is valid indefinitely means that the employment relationship is permanent. The employer or employee can terminate the contract, but a notice period must be observed.

If an employer lays off an employee, they must have a suitable and substantial reason for this. A valid reason can be, for instance, the company’s poor financial situation or the employee’s severe negligence of tasks. If it is a case of negligence, there must be a hearing with the employee and a warning must be given before termination. If an employee is absent from the workplace for seven days without giving an acceptable reason, the employment relationship is considered undone.

An employee can terminate the contract without stating a reason. If an employee resigns and becomes unemployed, usually unemployment benefit is not paid immediately, but only after a certain period.

A fixed-term contract ends on a set date which is stated in the employment contract. If the contract is fixed term, there must be a good reason for this, for example, substitution, seasonal work or project work. The reason must be stated in the contract. A fixed-term contract cannot usually be terminated mid-contract.

Work can be full time or part time

If the work relationship is full time, work is typically done five days a week with 37.5–40 hours a week. A monthly salary is usually paid for full-time work and the number of working hours or salary does not vary. Depending on the profession, the work may be daytime work (päivätyö), evening work (iltatyö), night work (yötyö) or shift work (vuorotyö).

If the work is part time, the number of working hours a week is less than in full-time work. The number of working hours may also vary. Salaries are usually paid by the hour. In this case, the monthly salary depends on how many working hours the employee has done that month.

With a zero-hour contract, an employee is called to work on demand

A zero-hour contact is an employment contract where the working hours are for instance 0–40 hours or 0–15 hours a week. In such a case, the employer is not obligated to offer work. The employee is free to accept the amount of work they want.

The employer can suggest a zero-hour contract only if there truly is no work on offer during some weeks. If, in reality, there is continuously more work, the employer must offer a contract where the working hours correlate with the true situation. The employer must annually check that the working hours in the contract correlate with the actual situation.

If the employee wishes for a zero-hour contract, no reason for this is necessary. If the employee suggests it, a zero-hour contract can be written whenever the arrangement suits the employer.

Agency workers work at client companies

Agency work (vuokratyö) means that a worker is hired by a personnel services firm (vuokratyöyritys) which pays their salary. The worker works shifts in one or more workplaces which are client companies of the personnel services firm. The work can be a short shift or a longer project or substitution. Requesting the worker to pay for being offered a job or being hired to do a job is not allowed.

The personnel services firm provides workers for fields where temporary additional workers are often needed. These fields include construction, restaurants, and health and social services. Agency work can be a way to find a permanent employment relationship. If the work is done well, sometimes the agency worker is hired as a permanent employee in the client company.

The client company is responsible for the worker’s induction into the work and for work safety. Statistically, agency workers get into more occupational accidents than permanent workers. That is why it is important for the agency worker to make sure that they are told about safe work practices and have sufficient protective equipment.

Wages are paid to the employee’s bank account and taxes are withheld

In Finland, there is no general minimum wage which would apply to all professions. The minimum wage of each field is determined in the collective agreement (työehtosopimus) of the field. The wage may be either monthly pay (kuukausipalkka) or hourly pay (tuntipalkka). Wages may also be a performance-related contract rate (urakkapalkka). In this case, a person receives wages when a certain project or task is completed.

If an employee works in the evenings, weekends or holidays, they are paid bonuses in addition to the normal wages. The amount of the bonus depends on the profession and the collective agreement in the field. All fields must pay double pay on Sundays. If an employee works overtime in addition to their normal working hours, overtime pay must be paid. Collective agreements dictate which bonuses are paid to employees.

Salaries are typically paid once a month

The payday is stated in the employment contract. Salaries are typically paid once a month, but multiple paydays are also possible. Salary may not be paid late. Salaries are always paid to the employee's bank account. Taxes, pension contributions (eläkemaksu) and unemployment insurance contributions (työttömyysvakuutusmaksu) are automatically deducted from the salary.

The employer must give the employee a salary slip (palkkalaskelma). This shows all the taxes and other contributions deducted from the salary. The salary slip can also be used to check that the salary and bonuses have been paid correctly. If there is a mistake in the salary and too little salary has been paid, you must ask for this to be fixed. If too much salary is paid by accident, the employee is obligated to return the excess salary.

The higher the income, the higher the tax

Everyone in Finland has to pay taxes. The state uses tax revenue to organise extensive public services which support citizens’ wellbeing. Tax is paid on earned income. Earned income includes, for example, salary, unemployment allowance, pension, and financial aid for students. The employer or the payer of the benefits, such as Kela, will deduct taxes automatically from the salary or the benefit and remit them to the Tax Administration. 

People also pay many other taxes in Finland. Value added tax (VAT, arvonlisävero) is paid on products and services, car owners pay car tax (autovero), inheritance tax (perintövero) is paid on inheritance, and owners of real estate pay real estate tax (kiinteistövero).

In Finland, the taxation of earned income is progressive. This means that the more you earn, the higher your tax rate (veroprosentti). If you have a high salary, your tax rate will also be high, and if you have a low salary, your tax rate will be low.

Employers need the employee’s tax card for the calculation of salary

Each year in November or December, the Tax Administration sends tax cards to everyone over the age of 15. The tax card shows how much tax must be withheld from the employee’s salary. The Tax Administration calculates the tax percentage based on the income of the previous year.

Usually, employers receive employees’ tax cards electronically directly from the Tax Administration. This is needed for the calculation of salaries. If the employer does not receive the tax card electronically, the employee must deliver the tax card to the employer. If the employer does not give their tax card to the employer, 60% of the salary will be withheld as tax. The tax percentage on the tax card is usually much smaller than this.

If your income has changed and the percentage on the tax card is wrong, you can ask for a new tax card from the tax office online or by phone. You need an estimate of your total income in the ongoing year to receive a new tax card.

More information about the tax card: Tax card (vero.fi) (Finnish, Swedish, English, in parts also: Sámi, Ukrainian, Estonian, Polish, Russian, Belarusian, Chinese, Thai)

Your previous year’s income and deductions are reported in the tax return

A pre-completed tax return (veroilmoitus) is sent to your home address in March or April every year. It shows all your income in the previous year. The tax return needs to be checked and any mistakes need to be corrected. Deductions (verovähennys) can also be reported. If you correct your tax return, the Tax Administration will send you a new tax decision (verotuspäätös) by the end of October.

If too much tax has been withheld from your income in the previous year, the Tax Administration will pay you a tax refund (veronpalautus). Refunds are paid between July and December. Correspondingly, if your tax rate has been too low in the previous year, you need to pay an additional rate (lisävero). This is why you should check that your tax rate is at the right level.

More information on taxation Vero.fi (Finnish, Swedish, English)

An entrepreneur needs a good business idea

One option for employment is to start your own company or work as a self-employed individual (itsenäinen ammatinharjoittaja). For example, interpreters, journalists, musicians, accountants or graphic designers may be self-employed.

If you want to become an entrepreneur, you need to have a good business idea. You also need enough money to get started. There is always financial risk in entrepreneurship. If the business has no clients, there is no income. If a person is a full-time entrepreneur or self-employed, they do not have the right to unemployment benefit.

You can get help for starting a business

Starting a company requires skills and knowledge, for example, in taxation and bookkeeping. If you are considering starting a business, you must first create a preliminary business plan (liiketoimintasuunnitelma), which is a calculation of the business’s profitability.

Enterprise Agencies (uusyrityskeskus) in different cities offer help with the business plan and all matters relating to founding a company. They also offer trainings for people who want to become entrepreneurs. Municipal employment services also offer services to entrepreneurs.

When you start a company, you must always report this to the trade register (kaupparekisteri) and Tax Administration. This will grant you a Business ID (Y-tunnus), which is a code with which the company can be found in different registers.

In Finland, everyone has the opportunity to receive free business counselling. Counselling is offered by:

• Enterprise Agencies
• Municipal employment services
• Suomi.fi/yritykselle

You can get a loan for starting a business

Starting a company requires money – especially if the company needs commercial premises or supplies. Banks can give out loans for business activities. The state-owned specialized financing company Finnvera can also grant a loan or guarantee a loan granted by a bank.

A new entrepreneur can also apply for a start-up grant (starttiraha) from municipal employment services for the first stages of setting up a business. The start-up grant is meant for the entrepreneur’s personal costs of living, not for business activities. A start-up grant can be granted for a maximum of 12 months.

One of the obligations of an entrepreneur is to organize bookkeeping. Bookkeeping lists the income and expenses of the business. The entrepreneur can take care of bookkeeping themself or hire an accounting firm to do it. Bookkeeping must be done in accordance with the law.

More information about starting a business: 

• Starting a business in Finland (infofinland.fi)
• Guide to Entrepreneurship (uusyrityskeskus.fi) (Finnish, Swedish, English, Russian, Arabic, Chinese, French)

In some fields, a permit is required for business operations

Business activities in certain fields require a permit from the authorities. Permits are required for restaurants, kiosks, travel agencies, health and social services, the transport of passengers and goods, and housing agencies.

According to law, entrepreneurs must insure themselves under the self-employed persons’ pension insurance (yrittäjän eläkevakuutus, YEL or MYEL). If the business hires employees, it also needs to take out employees’ pension insurance (työntekijöiden eläkevakuutus, TyEL) and accident insurance.

Different company forms in Finland

When a person wants to become an entrepreneur, they must choose the most suitable company form (yritysmuoto). When choosing the company form, the number of founders is crucial. Different forms include private entrepreneurship or self-employment (yksityinen elinkeinonharjoittaja; proprietorship, toiminimi) and limited companies (osakeyhtiö).

Proprietorships are usually small companies with one person – for example, translators or hairdressers. Limited companies are made up of shares, and shareholders own the company together. The company’s decision-making power, obligations and profits are shared based on how many shares each shareholder owns.

A light entrepreneur invoices their work and manages their own insurances and taxes

A light entrepreneur (kevytyrittäjä) is an entrepreneur who uses an invoicing service. The invoicing service company sends the invoices for the work to the client. Often the invoicing service takes care of legal taxes and costs on behalf of the light entrepreneur. The light entrepreneur, however, has to ensure that their pension insurance, liability insurance and accident insurance are in order. The light entrepreneur is also responsible for taxes being paid correctly.

More information about light entrepreneurship: Light entrepreneurship – getting started (vero.fi) (Finnish, Swedish, English, French, Ukrainian, Russian)

It is important to know if you are working as an entrepreneur or as an employee

It is not always easy to know whether you are working as an entrepreneur or as an employee. Sometimes the employment contract can state that the person is an entrepreneur, but in practice they work like an employee. In such a case, they should have the rights of an employee.

An entrepreneur has the freedom to decide how, when, at what price and for whom they work. If a company dictates working hours, the worker may be an employee. Then they should have employee rights, such as paid annual leave, paid sick leave, overtime bonuses, occupational health care and accident insurance.

You should ensure your employee rights from the start. The terms of the employment contract should be read carefully. Demanding rights afterwards is slow and laborious. If you are not sure if you are an entrepreneur or an employee, you can ask for advice from the Occupational Safety and Health Administration.

More information about the status of an employee: Administration Are you self-employed or an employee? (tyosuojelu.fi) (Finnish, Swedish, English, Arabic, Farsi, Kurdish, Polish, Ukrainian, Russian, Estonian)