Tax Laws and Regulations
At Bradford Jacobs our Employer of Record (EOR) platforms provide complete solutions for companies moving into Finland, a leading member of the European Union. We know successful international expansion depends on making the right moves from day one. This is vital for foreign companies establishing their presence and operating payroll in Finland. Compliance with Finnish payroll laws is essential to your business’s smooth and stress-free transition into the market. Our teams step in from the start, locating talent through our Professional Employer Organization (PEO) networks, then dealing with Finland’s Central Tax Administration and the Social Insurance Institution (Kela). We do the work, so you do not have to. When expanding into a new country, you may encounter some challenges regarding payroll, but allow us to take the reins and answer any of your questions and concerns with our trusty guide on payroll for Finland.
What Finland Payroll Options are available for Companies?
Remote payroll – This option allows businesses to operate under a single payroll system, by adding employees in Finland to your parent company’s payroll. However, these employees must operate under different regulations, which can cause some problems. Internal payroll – You may operate payroll from your subsidiary, especially if you are committed to growing your company’s presence in Finland. However, this does require hiring dedicated HR staff that understand the Finnish employment and compliance laws.
Finland payroll processing company – If you are considering outsourcing, working with a Finnish payroll company will help in processing your payroll but not when it comes to compliance. Finland payroll outsourcing. However, there is another option available which solves both concerns by working with a company such as Bradford Jacobs. We can handle both your payroll and compliance for all your employees in Finland. We take the stress of administration off your shoulders so you can focus on what you do best.
Finland Payroll Services
Finland’s payroll regulations are complicated and change frequently. Businesses must keep up to speed or risk fines and sanctions if they fail to comply. Bradford Jacobs’ payroll services ensure employers stay up to date with the rules – we administer filings and associated payments for wage tax and social security contributions directly from our payroll system to the relevant authorities. Our role includes:
- Registering with Central Tax Administration to obtain employees’ 12-digit tax number
- Registering for a Finnish identity number for foreign workers, if required, before applying for the tax number
- Obtaining a Business Identity Code (YTJ)
- Registering with the Social Insurance Institution (Kela)
- Registering company with the Employer Register of the Central Tax Administration
- Creating contracts for employees that comply with the Finnish Employment Contracts Act in Finnish, and English if required
- Applying for employees’ special expatriation status (if applicable)
- Calculating employees’ monthly salary and sending them their pay slips
- Researching for any available tax incentives
- Submitting employees’ or employer’s wage tax returns and national insurance forms
- Corresponding with the applicable national authorities regarding payroll changes and payments
- Creating and submitting your company’s annual accounts and year-end statements
- Creating payment schedules for wage tax, national insurance, and net wages
- Ensuring proficient personal income tax returns for you and your employees
This ‘to do’ list emphasizes why the popular choice for the majority of foreign companies expanding into Finland is to hand payroll administration to Employer of Record (EOR) providers such as Bradford Jacobs. Outsourcing company payroll guarantees employees are paid, tax returns are filed, and social security obligations are all met in full and on time. Bradford Jacobs provides the complete service to remove all the stress and anxiety from your company.
What is required to set up Finland Payroll?
Requirements for setting up payroll in Finland depend on how foreign companies establish their presence in the country. Setting up a subsidiary is one option as the first step. However, this takes time and can be a complex process depending on where you incorporate your company as well as the type of entity you choose to operate.
To begin processing payroll in Finland, you will need:
- A 12-digit tax number for employees, tax card and employment contract
- Registration with the Central Tax Administration
- Registration with Trade Register, VAT Register and Employer Register through the Finnish Patent and Registration Office, which works with the Central Tax Administration
- Report employees’ salaries to the Incomes Register of the Tax Administration within five days of payment, via the ‘real time’ e-Register
- Registration with the Social Insurance Institution (Kela)
A local company bank account is not mandatory, but employees should have a local account to receive payments.
What Entitlement / Termination Terms apply to Finland Payroll?
Employees in Finland are protected by benefits covering employment contracts, working hours, annual holidays, and privacy. Additionally, national and sector collective agreements also lay down minimum employment requirements.
National Minimum Wage: Finland does not have a national minimum wage, with minimum levels of salary applied by collective and union agreements and by sectors. These are legally binding and apply to Finnish and foreign workers.
Working Hours: The Working Time Act covers regular working, plus additional work and overtime which require the employee’s consent. General working time is eight hours per day or 40 per week or can average 40 hours weekly over 52 weeks. Period working time is restricted to 80 hours over two weeks or 120 hours over three weeks and is allowed only in certain sectors by law or collective agreements. ‘Flexiwork’ can be agreed between employer and employee but must not average more than 40 hours a week over four months. Employees are entitled to a one-hour break after six hours work and are allowed to leave the workplace. Shorter breaks are allowed if employer and employee agree. Employees must have at least 11 hours’ rest between working days and a continuous 35-hour break every seven days.
Overtime: The Working Time Act stipulates employees receive 50% above their regular wage for two hours’ overtime and 100% extra for subsequent hours.
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.
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.