Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Finland might not all be familiar to you yet. By using our PEO and EOR service, we can provide compliant labour contracts for employees in Finland including local benefits. When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Finland, benefits can be guaranteed by labour law and national legislation, as well as collective agreements with trade unions or workers’ councils.
Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into Finland.
What Finland Compensation Laws Exist?
In Finland, compensation laws are largely governed by the Employment Contracts Act, the Working Time Act and supplementary legislation covering such holidays, sick leave, maternity benefits and allowances, privacy in the workplace and more. Additionally, trade unions and collective agreements also set minimums within specific sectors of the economy and for particular benefits, to ensure that employees are treated the same as others in that sector. For example, there is no national minimum wage in Finland, and this is set by collective agreements per sector.
Collective agreements cannot undercut minimum compensation laid down by national laws where they apply. These include:
Social Insurance: Finnish employees are entitled to social security benefits. Both employees and employers must contribute to social insurance funds to cover entitlements such as unemployment, maternity leave, sick leave, and health insurance. Withheld health insurance deductions are paid to the Central Tax Administration and other contributions to the Employment Fund and insurance providers.
Redundancy, Termination and Severance: Termination notice depends on the length of the employee’s service and can be contractually agreed upon if not already governed by collective agreements. If the employee’s contract is terminated without fault on their part, notice periods are: Up to one year’s employment – 14 days; up to four years – one month; up to eight years – two months; up to 12 years – four months; over 12 years – six months.
Employees terminating employment must give 14 days’ notice if they have been working up to five years and one month for over five years. There is no legal requirement for severance payments unless covered by collective agreements in the case of mass redundancies, or the employer chooses to pay them.
Working Hours and Breaks: The Working Time Act restricts working hours to eight per day or 40 each week, or they can average 40 a week over 52 weeks. Where collective agreements allow flexible ‘period working time’ hours should not exceed 80 over two weeks or 120 over three weeks. ‘Flexi-work’ arrangements cannot exceed an average of 40 hours per week over four months.
The Act also covers breaks. Employees are entitled to one hour after six hours of work, 11 hours of rest between working days and 35 hours of continuous break every seven days.
Sick Leave: The Employment Contracts Act stipulates employees receive sick pay from their employer for nine days after the first day of illness. Those employed for less than a month receive 50% of their salary. After 10 days the Social Insurance Institution (Kela) pays sickness benefits for up to 300 days and compensates the employer if they paid the salary.
Holiday / Vacation Leave: This is governed by the Annual Holidays Act and is based on a holiday credit year running from April 1 to March 31. Those employed under 12 months receive two days for each month worked during their first credit year; those having worked more than one year receive two-and-a-half days per month.
The total of paid days is 30 per year. Individuals who have to work on paid public holidays receive twice their normal pay, although collective agreements may provide more salary or entitlements in lieu.
Maternity / Paternity Leave: The Social Insurance Institution (Kela) pays benefits for 105 working days (Monday to Saturday) from the start of the leave. Mothers are also entitled to a tax-free lump sum of €170 (US$200).
Maternity leave begins at the earliest 50 days before the due date or 30 days at the latest. Paternity leave of up to 54 days can include between one and 18 days taken simultaneously with the mother while she receives maternity or parental allowance. The balance of parental leave can be in two separate periods. The Social Insurance Institution (Kela) also pays paternity allowance.
Parental Leave: Can be taken by either parent for the full term or be shared. The Social Insurance Institution (Kela) pays an allowance for 158 days, during which parents can work part-time and receive a partial allowance accordingly.
Social Security in Finland
Employees’ social security in Finland covers benefits and entitlements for being unable to work through illness or injury, unemployment, and maternity leave. The system, which is administered by the Social Insurance Institution (Kela) compensates employers who fund such as sick leave, maternity benefits, and occupational health care. Local municipalities, unemployment funds, pension companies and insurance providers are part of the social security framework, which is also funded by state taxes in addition to employer and employee contributions. Withheld health insurance deductions are paid to the Central Tax Administration and other contributions to the Employment Fund and insurance providers.
Finnish social security laws stipulate foreign employers must make social insurance contributions on behalf of their employees. To be covered by the social insurance system, foreigners planning to live in Finland for more than one year must register with the Population Information System. After receiving their personal identity code, they can apply for a Kela card online. Once registered they are eligible for benefits including family, maternity and sickness allowances, childcare support, reimbursed medical costs and unemployment benefits.
- Health Insurance: 1.53%, (no cap)
- Pension Insurance: 16.95%, (average, no cap)
- Unemployment Insurance: 0.50% up to €2.17million (US$2.55m) of gross salaries; 1.9% above
- Group Life Insurance: 0.07%, (average, no cap)
- Accident Insurance: 0.8%, (average, no cap)
- Pension Insurance: 7.15% (for under 53 years old); 8.65% (between 53 and 63 years); 7.15% (over 63 years)
- Unemployment Insurance: 1.40% (between ages 17 and 67)
- Statutory Costs in Finland
Minimum wages: There is no national minimum wage in Finland. Employers’ statutory costs in this regard depend on trade unions and collective agreements as they apply to their sector.
Social security: Statutory social security costs made by the employer cover deductions for health, pensions, unemployment, accident and life insurance and average around 20%.
What Benefits are guaranteed in Finland?
Overtime: Rates are 50% above basic salary for the first two hours and 100% for each subsequent hour.
Health Insurance: All employees paying social security contributions are entitled to health insurance.
Public Holidays: There are 11 paid public holidays. Employees who have to work those days receive twice their normal pay, although collective agreements may provide for extra benefits in lieu.
Vacation Leave: Paid vacation is a statutory benefit, calculated at two days per month for having worked under 12 months, and two-and-a-half days per month after working more than 12 months.
Sick Leave: The Employment Contracts Act stipulates employees receive sick pay from their employer for nine days after the first day of incapacity, then for a maximum of 300 days from the Social Insurance Institution (Kela).
Maternity and Paternity Leave: Expectant mothers receive the benefit for a total of 105 days, which begins at the earliest 50 days before the due date or 30 days at the latest. Paternity leave is for a maximum of 54, with up to 18 days taken simultaneously with the mother.