EMPLOY IN FINLAND WITH EASE
- Access and hire global talent & deploy them anywhere in the world
- Remove restriction from only hiring from local markets
- Enter any international market without the requirement of opening a local entity
Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.
Expanding to countries such as Finland – which is characterized by a well-educated and experienced workforce, complex employment and tax laws, a well-developed infrastructure network, and leading sectors in electronics, chemicals, energy, manufacturing, agriculture, and services – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.
Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.
Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.
Finland – The Economy
The economy of Finland is a highly industrialized, mixed economy with a per capita output similar to that of western European economies such as France, Germany, and the United Kingdom. The largest sector of Finland’s economy is services at 72.7 percent, followed by manufacturing and refining at 31.4 percent. Primary production is 2.9 percent.
With respect to foreign trade, the key economic sector is manufacturing. The largest industries are electronics (21.6 percent), machinery, vehicles, and other engineered metal products (21.1 percent), forest industry (13.1 percent), and chemicals (10.9 percent).
Finland has timber and several mineral and freshwater resources. Forestry, paper factories, and the agricultural sector (on which taxpayers spend around 2 billion euro annually) are politically sensitive to rural residents. The Greater Helsinki area generates around a third of GDP.
Finland has the 4th largest knowledge economy in Europe, behind Sweden, Denmark, and the UK. The economy of Finland tops the ranking of the Global Information Technology 2014 report by the World Economic Forum for concerted output between the business sector, the scholarly production and the governmental assistance on information and communications technology.
Finland is highly integrated in the global economy, and international trade represents a third of the GDP. Trade with the European Union represents 60 percent of the country’s total trade.
The largest trade flows are with Germany, Russia, Sweden, the United Kingdom, the United States, the Netherlands, and China. Their trade policy is managed by the European Union, where Finland has traditionally been among the free trade supporters, except for agriculture.
Finland is the only Nordic country to have joined the Eurozone; Denmark and Sweden have retained their traditional currencies, whereas Iceland and Norway are not members of the EU at all.
Small and Medium-Sized Companies
SMEs are companies with fewer than 250 employees and a turnover of no more than EUR 50 million or a balance sheet total of no more than EUR 43 million. Companies larger than this are classed as large corporations.
SMEs play an important role in Finland’s ‘non-financial business economy’. They account for 59.6% of value added and 65.2% of employment, close to the respective EU averages of 56.4% and 66.6%.
The productivity of Finnish SMEs, defined as value added per person employed, is approximately €66,000, well above average EU productivity of €44,600. Finnish SMEs employ an average of 4.2 people, against an EU average of 3.9. As is the case throughout the EU, manufacturing and wholesale and retail trade are the two largest SME sectors in Finland, together contributing 35.1% of overall SME value added and 37.4% of employment.
|Country||Finland (Republic of Finland)|
|No. of States/Provinces||6 state provinces|
|Principal Cities||Helsinki, Espoo, Tampere, Vantaa, Turku, Oulu, Lahti, Kuopio, Jyväskylä, & Pori|
|Language(s)||Finnish and Swedish|
|Local Currency||Euro (EUR)|
|Major Religion||Christianity (the Evangelical Lutheran Church of Finland)|
|Time Zone||Eastern European Time (GMT+3)|
|Country Dial Code||+358|
|Border Countries||Norway (north), Russia (East), the Gulf of Finland (south), the Gulf of Bothnia (southwest), and Sweden (northwest)|
|Tax Year||1st January – 31st December|
|Taxpayer Identification Numbers||Tax Identification Number (TIN)|
Social Security Number (HETU)
Business Identity Code
|Leading Sectors||metals and metal products, electronics, machinery and scientific instruments, shipbuilding, pulp and paper, foodstuffs, chemicals, textiles, and clothing|
|Main imports||Crude Petroleum, Cars, Refined Petroleum, Packaged Medicaments, and Vehicle Parts|
|Main exports||Refined Petroleum, Kaolin Coated Paper, Cars, Large Flat-Rolled Stainless Steel, and Sulfate Chemical Wood pulp|
|Main trading partners||Germany, Sweden, Russia, China, the Netherlands, and the United States|
|Government Type||Unitary parliamentary republic|
|Current Prime Minister||Sauli Niinistö (President), and Sanna Marin (Prime Minister)|
The Main Sectors of the Finnish Economy
Finland focuses on the following key sectors, which all have a significant impact on the country’s economy:
- Technology – The technology industry in Finland is one of the country’s most important economic drivers. The technology industry has seen dramatic changes over the years. It is one of the world’s most volatile areas of business, and it is this volatility that has attributed to Finland’s aggressiveness in the design and production of various electronics.
Finland’s technology industry also includes five sub-sectors, which are the electronics, metals, mechanical engineering, information technology, and consult engineering industries.
The technology industry contributes to around 50% of total exports, around 317,000 direct employment (around 670,000 including indirect employment), 65% of private sector R&D investment, and 28% of total GDP.
- Motor & Shipping – Finland differs from other automobile manufacturing countries such as Germany and Japan in that the focus is on industrial machinery. The motor industry is predominantly composed of manufacturers of forest machines, tractors, trucks, military vehicles, and buses.
Finland is also renowned for having a robust shipbuilding industry. Some of the world’s largest and highly reputed cruise ships have been built in Finland. There are at least eight shipyards across the country, and they employ close to 20,000 people. Altogether, the manufacturing industry employs about 400,000.
Similar to the growth of the electronics industry, Finland’s motor industry (and particularly shipbuilding) has seen significant growth thanks to heavy investment in R&D. Government support also accounts for much of the growth. Valmet and Wartsila are some of the most notable companies in this industry. Wartsila alone holds a stunning 47% market share and is the producer of the largest diesel engines in the world. 90% of the produce from the shipping industry is exported.
- Forestry – Forestry in Finland, at the moment, is responsible for about a fifth of Finland’s exports. Forest products for years have been significant export items in Finland. The growth and diversification of the Finnish economy have seen a decline in these exports.
Despite the reduction in forest product exports, pulp and paper remain a critical industry with more than 50 sites countrywide. Additionally, some of the largest international corporations in the business of pulp and paper are headquartered in Finland. UPM and Stora Enso are examples of such corporations.
Their global output has been estimated to be more than 10 million tons. The forest industry is responsible for about 15% of jobs in Finland.
- Energy – Hydroelectric power produces about 16% energy supply in Finland generated by nuclear power and 26%. The consumption of energy is distributed among industries, heating, and transportation. Traditionally, Finland has been a massive importer of energy due to its lack of indigenous fossil fuels. However, this changing as the country turns to nuclear energy.
- Mining – The mining industry in Finland has experienced significant transformation in recent years. The discovery of copper and nickel ores in the infant years of the 20th century set the country on a venture to develop the mining industry. The government invested heavily in the prospecting, and multiple domestic players participated in extensive exploration activities.
However, exploration has practically ceased, and over time the mining operations and various roles in the mining industry have been taken over by foreign organizations.
Finland is however still a major exporter of copper, nickel, zinc, chromium, and steel. There is also the export of finished products including steel pipes, roofing materials, and cladding.
- Finnish Tax Administration – The Tax Administration collects taxes to safeguard the functioning of the Finnish society. Every year, tax recipients receive over €50 billion in tax revenue. The Tax Administration safeguards the revenue stream through credible tax control and by providing proactive guidance and good service.
The goal is to help all taxpayers conduct their tax matters independently and correctly, from private individuals to businesses, corporations, and non-profit organizations.
- Finland Labor Council – The Labor Council is an independent special authority coming under the Ministry of Economic Affairs and Employment. It has a minimum of nine part-time members three of whom are independent. The other members represent employer and employee organizations. The Government appoints the members for a term of three years.
The Labor Council issues opinions on the application and interpretation of legislation on working hours, annual holidays and occupational safety and health and a number of other acts on the protection of employees. The Labor Council also considers the requests for correction concerning the decisions on occupational safety and health derogation permits issued by Regional State Administrative Agencies.
- The Occupational Safety and Health Administration – The purpose is to ensure that working in Finland is as healthy and safe as possible and in compliance with working life legislation. Our job is to improve the working environment and working conditions in order to safeguard and maintain the work ability of employees.
Their duties further include preventing occupational accidents and occupational diseases and reducing the adverse physical and mental health impacts of work on employees. They also issue advice and guidelines concerning occupational safety and health and concerning the terms and conditions of employment relationships.
Labor Contracts Law
Contracts in Finland are usually open-ended and can be presented in a more informal way than in some other territories. For example, they can be oral, written, or electronic and need not be in writing unless requested by either party. Contracts are typically exchanged by email with scanned documents and electronic signatures. There is no legal requirement to exchange hard copies of documentation or regarding the language used.
However, they must detail essential points covering business location, employee’s place of work, termination date of any fixed-term contract, any trial period, employee’s duties, any collective agreement, salary and payment schedule, annual holiday, notice periods and sick pay.
Payroll – Tax Contributions and Benefits
Finland residents are taxed on their worldwide income at various rates, plus flat rates for church taxes (where applicable) and municipal taxes. Individuals are considered tax residents if they have a home in Finland or have stayed there for more than six months.
Non-residents are taxed only on their Finnish income at 35% unless tax treaties apply.
Taxable income includes all the employees’ remuneration or compensation, including sums directly or indirectly arising from their employment. Taxable earned income categories include:
- Basic salary, bonuses, fringe benefits
- Cost of living and housing allowances
- Reimbursed expenses for travel, accommodation, meals
- Entertainment expenses
- Profit-sharing schemes
Taxable investment income includes:
- Income from property
- Capital gains
- Any income earned from assets
Health and Social Insurance: Finnish social security laws stipulate local and foreign employers must make various social insurance contributions on behalf of their employees. Health insurance deductions are paid to the Central Tax Administration and other contributions to the Employment Fund and insurance providers. The contributions are divided like so:
Sick Leave: The Employment Contracts Act requires employees unable to work through illness or injury to receive sick pay from their employer from the first day of incapacity and the following nine days. Those having worked for less than one month receive 50% of their salary. After this period the Social Insurance Institution (Kela) pays sickness benefit for a maximum 300 days and compensates the employer if they have paid the employee’s salary. Benefits are calculated according to salary. Paid Annual Leave: Under the Annual Holidays Act, leave is calculated between April 1 and March 31 as the credit year. Leave is two days per month for employees working 14 days or 35 hours each calendar month for employment of less than 12 months and two-and-a-half days per month after working more than 12 months.
Employees can claim additional days if they are unable to take their full entitlement due to illness, injury, or medical rehabilitation, up to a maximum of 75 days.
Maternity and Paternity Leave: Under the Employment Contracts Act, maternity leave begins at the earliest 50 days and the latest 30 days before the birth due date. The Social Insurance Institution (Kela) pays benefit from when leave begins for 105 working days (Monday to Saturday), or about four months. Mothers are also eligible for a tax-free lump sum of €170 (US$200).
Paternity leave of up to 54 days can include between one and 18 days taken at the same time as the mother’s leave while she receives maternity or parental allowance. The balance of parental leave is taken in a maximum of two separate periods. Kela also pays paternity allowance.
Parental Leave: Either parent can take parental leave in its entirety, or it can be shared. Kela pays an allowance for 158 days, during which period parents can work part time and receive a partial allowance.
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