An Employer of Record (EOR) or Professional Employer Organization (PEO) is a company or organization that is legally responsible for paying employees, including dealing with employee taxes, benefits & insurances. As the EOR/PEO of your European or Finnish employees, we provide you with tailored payroll, HR and compliance services. Through this construction, we decrease all the complications such as compliance issues, setting up a foreign establishment and setting up employment contracts in a different language.
Benefits of using a Finnish PEO & Employer of Record in Finland
Expand without an entity
Flexible and cost-effective solution to outsource payroll and HR functions for international expansion
In compliance with foreign local laws & regulations
Minimizes employment liabilities and risks
Reduced risk, as the risks of being an employer fall almost completely on the employer of record
Let's you focus on your core business
You manage your employees
EoR takes care of registration and contact with local authorities
Employment Contracts Finland
In Finland, there are two common employment contracts: Indefinite (permanent) contracts and Fixed-term (limited) contracts. Both contracts can either be part-time or full-time. Contracts could be made orally, in written form or digitally. The most common one is the indefinite contract, which can be terminated only when either one of the two parties serve notice.
A temporary contract, also called fixed-term contract, can be terminated only if previously agreed on by both the employee and the employer. Additionally, if the employer cannot determine any fixed-term purposes, the employment contract is then considered to be an open-ended contract.
Additionally, in Finland, there is the option of a trial period. This period start at the beginning of the employment relationship and the length of it has to be previously decided by both parties and stated in the contract. The trial period cannot exceed four months and it cannot be extended. For fixed-term contracts of a length of less than eight months, the trial period must not exceed half of the duration of the employment relationship.
PEO and EOR service providers in Finland will support you with the set-up of a local employment contract.
Employment Termination Finland - Notice Period Finland
As aforementioned above, In Finland, a temporary employment contract can only be terminated if previously agreed on or for misconduct from the employee side. Permanent contracts can be dismissed for gross misconduct (dishonesty, gross negligence, malicious damage, theft, serious breach of an organization’s policies, fraud, and physical violence). In this case, the work and the wages will be immediately stopped.
Another reason for dismissal is for neglect of duty (if he or she intentionally, knowingly, or deliberately fails to perform, or performs work in a grossly negligent manner). In this case, the employer must inform the employee before terminating the employment contract as well as giving a warning and an opportunity to improve.
Additionally, an employee can resign and he or she must inform the employer. The employee can also decide to not give a reason for the resignation of the contract and he or she must continue to work during the period of notice and will be paid as usual. The notice period varies if it comes from the employer or the employee and it works as follow:
When an employee resigns:
- 14 days if the employment has continued for no longer than five years;
- 1 month if the employment has continued for longer than 5 years.
When an employer dismisses the employee:
- 14 days if the employment has continued for no longer than one year;
- 1 month if the employment has continued for between 1 and 4 years;
- 2 months if the employment has continued for between 4 and 8 years;
- 4 months if the employment has continued for between 8 and 12 years;
- 6 months if the employment has continued for longer than 12 years.
Social Security Tax Finland
What are the primary social security contributions in Finland? And more importantly, what is the amount of the social security contribution that is accounted to the employer? The total primary contribution in Finland for the employer is from 19.85% to 21.25% and 10.89% for the employee.
Social contribution in Finland includes:
- Employer’s health insurance contribution: 1.53% (no cap).
- Employer’s pension insurance contribution: 16.95% (on average, no cap).
- Employer’s unemployment insurance contribution: 0.50% for the first EUR 2,169,000 of gross salaries and 1.9% for the portion of the gross salaries exceeding EUR 2,169,000 (no cap), only for employees between 17 and 64 years old.
- Group life insurance premium: 0.07% (on average, no cap).
- Accident insurance premium: 0.8% (on average, no cap).
Average Salary Finland & Average Employer Costs Finland
In 2019, the average annual wage in Finland was $45.697,56. This is lower than the average annual wage in the United States: $65.835,58. As an employer, the actual employer costs are 21.25% higher than the gross annual salary as we have seen in the social contribution in Finland. Based on $45.697,56 annual salary, the employment costs would be $55.408,29.
To learn more about the average salaries in Europe and the actual employment costs in Europe, we invite you to read this article on Costs of hiring European employees.
Working Hours Finland
In Finland, the working hours per week are usually 37.5, which amounts to 7.5 hours per day. The working hours cannot exceed 40 hours per week and 8 hours per day. The usual working day start at 8am and finishes at 5pm with one hour of lunch break.
Finland sets its standards pretty high when it comes to work-life balance and family time is very important for Finnish people. Additionally, working overtime is quite common, any working hours after 40 hours per week has to be paid at a minimum of 150% of the normal hourly salary.
Paid Vacation Leave Finland
In Finland, the annual leave is calculated from April 1 to March 31. Employees earn 2 vacation days per month in a fixed-term contract and 2.5 days per month in a permanent contract. If the employee works at the company longer than a year the holiday entitlement in Finland is 4 weeks (20 days). Upon completing 15 years’ service, the annual leave entitlement increases to 3 days per month.
To learn more about the average paid vacation days in Europe and how Finland compares to the rest of Europe, we invite you to read our blog on paid vacation days Europe.
Public Holidays Finland
In Finland there are 11 paid public holidays. Those holidays are:
- New Year's Day (1st of January)
- Epiphany (6th of January)
- Good Friday (15th of April)
- Easter Monday (18th of April)
- May Day (1st of May)
- Ascension Day (26th of May)
- Midsummer's Eve (24th of June)
- Independence Day (6th of December)
- Christmas Eve (24th of December)
- Christmas Day (25th of December)
- Boxing Day (26th of December)
Maternity and Paternity Leave Finland
In Finland maternity leave lasts 105 working days. It usually starts 30 working days before the expected birth of the child and it continues after the birth. It is possible to go on maternity leave more than 30 days before the expected birth but no more than 50 days in advance.
On the other hand, fathers have 54 working days of paternity leave. They can take up to 18 days of paternity leave while the mother is on maternity leave and the remaining days after the mother is back to work. The remaining days have to be used before the child turns two years old.
To read more about Paternity Leave in Europe, we invite you read this blog on Paternity Leave in Europe - A New Directive.
Learn more about PEO and EOR in Europe:
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Monique Ramondt Sanders
Executive Vice President | HR Outsourcing