Hire and pay employees in Finland quickly and compliantly

Complying with labor and employment laws in Finland

Finland’s labor environment is influenced by a tradition of robust collective bargaining, social equity, and well-being. Several key laws shape this dynamic, including the Employment Contracts Act, the Working Hours Act, and the Annual Holidays Act. Employers are responsible for maintaining fair working conditions, respecting employees’ rights, and closely following applicable collective agreements if their sector is bound by one. Failure to do so can lead to fines, reputational damage, and legal disputes, especially in a market that values transparency and employees’ well-being.

By embracing Finnish labor norms—such as open dialogue (yhteistoiminta) and a strong welfare ethos—you’ll foster trust and longevity within your new Finnish workforce.

You can make hiring and compliance in Finland—and around the world—simpler and more streamlined by partnering with Rippling EOR. Having a reliable EOR partner like Rippling on your team means being able to tap into expert HR guidance tailored to the employment laws in jurisdictions where you hire—in Finland and beyond.

Employment contracts in Finland

All employees in Finland must have a written employment contract when the employment relationship is of a long duration, but it’s a best practice to have a written agreement regardless of whether it’s required, even for short engagements, to avoid disputes. This contract typically clarifies pay, working hours, job responsibilities, and any applicable collective agreements. Employers should make sure to include:

• Both parties’ identities
• The location of the workplace
• The employee’s job title and a description of the work
• The start date
• The employment duration
• Details of the probation period, if there is one
• The employee’s right to holiday pay
• Procedures for terminating the employment relationship and notice periods for both the employer and the employee
• Salary and any other supplementary payments (including benefits)
• Working hours and breaks
• Details of any collective agreements that apply to the working relationship

Note that employment contracts are typically permanent and valid indefinitely. Fixed-term contracts are allowed, but both the employer and the employee must agree, and there must be a valid reason for having a fixed-term employment arrangement in place (for example, if the work is project-based or seasonal). Employers should generally draft contracts in Finnish or English, but may use Swedish in bilingual regions like Vaasa or Turku.

Labor unions in Finland

Unionization rates in Finland are high due to a strong tradition of collective bargaining and worker representation. There are a few key confederations employers should know:

• SAK (Central Organisation of Finnish Trade Unions): Represents a broad range of employees in industrial, service, and transport sectors
• STTK (Finnish Confederation of Salaried Employees): Focused primarily on white-collar professionals
• Akava: Represents employees with university degrees or other higher education

Unions negotiate sectoral collective agreements that often dictate minimum wages, overtime pay, and other employment conditions. These agreements may be generally binding for an entire industry, including workers who are not union members.

Mitigating permanent establishment risk in Finland

When expanding your business into any foreign country, one important tax consideration is permanent establishment (PE). In Finland, PE risk is a strategic business issue that requires careful planning.

A permanent establishment (PE) in Finland arises if a foreign company carries on business within the country in a “fixed place” or through a dependent agent who habitually concludes contracts on the company’s behalf.

If a company has a place of business in Finland that falls into any of these categories, the Finnish tax authority warns that it risks triggering permanent establishment:

• a place of management
• a branch
• a factory
• a workshop
• a mine
• an oil or gas well
• a quarry or any other site for the extraction of natural resources
• a construction or installation project lasting longer than six, 12, or 18 months (depending on the tax treaty)
• a dependent agent

Accidentally triggering PE status can raise compliance costs significantly, as you’ll face Finnish corporate tax obligations. By keeping a close eye on your employees’ activities and where you make decisions, you can maintain a light footprint until you’re ready to establish a more permanent legal presence.

Here are some general best practices for mitigating PE risk for global companies:

• Limiting their local presence: Avoid leasing permanent offices or granting employees contractual signing authority.
• Establishing a local entity: If you plan to stay in Finland long term, establishing a local legal entity can help separate your operations in different countries and avoid complex tax entanglements.
• Seeking legal support: Local tax advice from an expert can clarify Finland’s PE framework, tax treaties, and other relevant information.
• Documenting all activities: Carefully record work locations, durations, and authority granted to local staff.

Probationary periods in Finland

In Finland, probationary periods can last up to six months, during which time either the employee or employer can end the agreement without notice. However, terminations must still be for cause and cannot be for discriminatory reasons; legitimate reasons might involve poor performance or a mismatch in role requirements.

Employers should offer regular feedback, clear performance metrics, and support to employees during their probation periods. Even if you decide not to continue with an employee, open communication during probation can maintain goodwill and a positive relationship.

Local laws in Finland

In addition to the major labor and employment laws we’ve touched on so far, Finland enforces other statutes that help shape employment in the country. Respecting the local laws fosters a positive reputation as an employer, signaling to Finnish employees that you value legal compliance, work-life balance, and their well-being. By proactively addressing employment issues like safety, discrimination, and employer-employee cooperation, you’ll better integrate into Finland’s socially conscious culture as a foreign employer.

With that in mind, here are a few important laws employers should know:

• Act on Co-operation within Undertakings (334/2007): Requires dialogue with employees on organizational changes, redundancies, or restructurings
• Occupational Safety and Health Act (738/2002): Obligates employers to ensure a safe workspace, covering everything from ergonomic setups to chemical hazards
• Anti-Discrimination Act (1325/2014): Prohibits discrimination based on age, religion, ethnicity, disability, and other protected characteristics

Worker classification and misclassification in Finland: Contractors vs. employees

Determining whether a worker is an employee (työsuhde) or an independent contractor (toiminimi/freelancer) is pivotal. Employees typically follow set schedules, use employer tools, and receive social benefits, whereas contractors handle taxes, scheduling, and insurance independently.

Finnish tax legislation doesn’t specifically define “contracts signed with an independent entrepreneur” vs. “employment contracts.” In case of a dispute, tax authorities examine the characteristics of the contract and the working relationship itself to determine whether the worker is, in fact, an employee or an independent contractor. Below are some of the key characteristics they use to differentiate between the two.

Worker classification in Finland: Key differences between contractors and employees

Consequences of misclassification in Finland

When in doubt about how to classify workers in Finland, consult local HR or legal experts to avoid costly errors. If authorities (such as the Finnish Tax Administration or Tyosuojelu) find an employee-like arrangement behind a “contractor” label, you could face back contributions, holiday pay arrears, and potential fines. A misclassified contractor may also claim benefits and statutory protections in court.

Wages and payroll in Finland

Finnish wages tend to be competitive, reflecting the country’s high cost of living and skilled labor market. Although there is no government-mandated minimum wage, collective agreements across different sectors often establish minimum salaries and benefit levels for their workers.

Minimum wage in Finland

Finland doesn’t have a universal statutory minimum wage. Instead, many employees are covered by an industry-specific CBA (yleissitova työehtosopimus). If considered universally binding, these CBAs apply to all employers in that field, regardless of whether employees are members of the employers’ association. If a sector doesn’t have a collective agreement, employers must still pay a salary considered reasonable and comparable to other sectors.

Before offering salaries to new hires in Finland, check if your industry has a universally binding agreement. Failing to meet mandated wage or bonus levels could lead to legal disputes and other penalties.

Payroll frequency in Finland

Employers in Finland typically observe monthly pay cycles, with wages disbursed on the last day of the month. Employers are required to withhold and remit income taxes from employees’ pay based on each worker’s tax card (verokortti). They must forward taxes on each employee’s behalf to the Finnish Tax Administration.

The typical payroll process is:

1. Calculate gross salary: Include base pay, any overtime or bonuses, and holiday pay if due.

2. Withhold taxes: Deduct at the rate on the verokortti.

3. Submit required payroll data: Report wages to the Incomes Register (Tulorekisteri) in real time.

4. Pay social contributions: Cover mandatory pension (TyEL), unemployment, and health insurance fees.

13th month pay in Finland

13th month salary payments are common in many countries around the world. Unlike some European countries, Finland does not legally require a 13th month payment. However, a holiday bonus (lomaraha) is standard in many CBAs or individual employment contracts, especially around the summer holiday season. This bonus typically amounts to 50% or more of the employee’s typical monthly pay.

If you do offer a holiday bonus, clarify its calculation method and payout schedule in your employment contracts.

Run payroll compliantly in Finland

Given the potentially complex interplay of taxes, social contributions, and possible CBA requirements, many foreign companies expanding or hiring in Finland opt to:

• Engage a local accountant or accounting firm. They have direct knowledge of Finnish regulations and are fluent in local bureaucratic processes.
• Use global payroll software. Many software solutions can help you manage cross-border compliance if you hire in multiple countries.

But navigating international payroll and compliance doesn’t need to be a hassle. You can simplify the process significantly by partnering with an EOR that can handle essential tasks like managing deductions, adhering to wage regulations, and making timely salary payments when you hire employees in Finland. With Rippling EOR, you can hire and compensate global talent more efficiently than ever before.

Employer and employee taxes in Finland

Progressive income taxes and employer contributions fund Finland’s renowned social welfare system. As an employer, you must register with the Finnish Tax Administration, withhold the right amount from wages, and remit both employer and employee contributions on time.

Employment costs include TyEL pension, unemployment insurance, accident insurance, and health insurance. These taxes finance health care, education, and safety nets—a cornerstone of Finnish society. The Finnish Tax Administration updates rates yearly, so be sure to confirm tax rates regularly. Below, find some of the most important things employers need to know about taxes in Finland.

Employer taxes in Finland

Here is an example of employer payroll contributions in Finland as of 2025. Note that while the taxes shown in this table are mandatory for employers to pay, the rates can vary:

Employee taxes in Finland

Employers in Finland deduct social contributions and income taxes from employees’ paychecks and remit them on the employees’ behalf. Employees contribute to social insurance, paying premiums for Finnish health insurance, unemployment insurance, and pension insurance at different rates depending on their age.

For individuals in Finland, capital income and earned income are taxed differently—capital income is taxed at a flat rate, while earned income is taxed progressively, meaning individuals who earn more pay more in income taxes. Exact tax rates can also vary depending on the individual’s location, religious affiliation, and deductions. Employers should refer to each employee’s tax card (verokortti) for their individual tax rates.

Penalties for not paying taxes in Finland

Tax noncompliance in Finland can trigger serious penalties, making it important for employers to ensure they pay accurately and on time. The Finnish Tax Administration performs audits to verify compliance, and for foreign businesses, being unfamiliar with local laws is not an excuse for missing tax payments or making incorrect filings.

Penalties for noncompliance can include:

• Late filing penalties: The penalty for filing a business tax return after the filing deadline but before your tax assessment is complete is typically €100. You may also have to pay this penalty if you file your tax return on time but then make additions or corrections after the due date.
• Punitive tax increases: Businesses that fail to file a tax return before the end of their tax assessment may be subject to punitive tax increases. The Tax Administration uses a formula to calculate the tax increase, with a minimum amount of €150.

If you have a valid reason for missing a payment or filing deadline (such as a sudden or severe illness), penalties and punitive tax increases may be waived. You also won’t incur penalties if you make changes to your tax filing after the deadline that decrease your taxable income, if you’re only slightly late, or if your changes have a negligible impact on your tax assessment.

Partnering with an EOR can help ease your tax compliance worries by handling global compliance obligations for you—from deducting and withholding payroll taxes from employees’ wages to making accurate and timely tax payments across different jurisdictions.

Employee benefits in Finland

Finland’s social model places great importance on well-being, so mandatory benefits are relatively extensive even compared to other Nordic countries known for comprehensive statutory benefit schemes. Employers must provide a competitive employee benefits package in order to meet their obligations under Finland’s employment laws, but doing so also signals a commitment to Finnish norms like work-life balance and equity.

Some Finnish employee benefits, like health insurance contributions, sick leave, and pensions, are mandated by law. But others, like supplemental insurance, stock options, and meal vouchers, are optional. Employers can (and often do) offer non-statutory benefits to help them stand out in a crowded employment landscape and recruit and retain the top talent in Finland.

Below, find an overview of both mandatory and some common optional employee benefits in Finland.

Mandatory benefits in Finland

Many of Finland’s mandatory benefits fall under the Independent Social Security Institute, or Kela (Kansaneläkelaitos), and the Finnish Centre for Pensions. These two agencies combine to create a robust social safety net for employees in Finland and offer:

• Health insurance: Employers and employees both pay a healthcare contribution, while employees access the publicly funded healthcare system (via Kela).
• Pension contributions (TyEL): Employers and employees share responsibility for an earnings-related pension. Employees must be at least 17 and typically under 68 to contribute.
• Unemployment insurance: Both parties pay toward unemployment benefits managed by the Finnish Employment Fund.
• Mandatory accident insurance: Employers are required to provide occupational accident insurance to cover employees in case they’re injured or become ill during work activities.

Optional benefits in Finland

In addition to statutory benefits, many Finnish employers provide extra, optional fringe benefits to help them attract top-tier talent in fields like tech, gaming, and engineering. By exceeding minimum legal requirements, employers can show their commitment to the Finnish principle of well-being (hyvinvointi)—a value that resonates with local talent seeking stable and supportive employers.

Some common supplemental benefits include:

• Supplemental health insurance: Faster specialist appointments or extra mental health coverage accessible via private insurance plans can appeal to high-level professionals.
• Stock options and other equity compensation: As many as 40% of Finnish employers provide stock purchase plans for their employees, giving them a way to invest in their company’s success.
• Meal vouchers: Substantial midday meals are common in Finland, so subsidizing lunches can help boost employee morale.
• Sports and culture subsidies: Encourage employees to explore sauna sessions, attend ice hockey games, or enjoy cultural events.

Working hours, overtime, and leave in Finland

With its dark winters and bright summers, Finland’s approach to work-life balance is deeply ingrained. Many Finns cherish summer holidays at mökki (lakeside cottages), and it’s standard for employees to take leave during this time, making it vital to accommodate these seasonal traditions in your workforce planning.

Standard working hours in Finland

The Working Hours Act caps normal working hours at 40 per week, typically spread over five days. Many employees have collective bargaining agreements that reduce their workweeks to 37.5 hours or implement flexible scheduling policies, allowing employees to start earlier or later to give them more freedom to manage personal obligations.

Overtime laws in Finland

In Finland, overtime is allowed only if an employee specifically agrees to it—though, in some cases, if there’s a compelling reason for a public sector worker to work overtime (for example, during an emergency), it can be required. Daily overtime is any hours worked over eight in a day, and weekly overtime is any hours worked over 40 in a week. Overtime rates apply:

• 1.5 times the employee’s regular rate of pay for the first two hours of daily overtime
• Twice the employee’s regular rate of pay for any subsequent hours of daily overtime
• 1.5 times the employee’s regular rate of pay for weekly overtime

An employee’s working time, including overtime, cannot exceed an average of 48 hours per week over four months. Employers must document all overtime meticulously to make sure they comply with limits and rest requirements.

Rest period and break laws in Finland

The Working Hours Act mandates the rest periods and breaks that Finnish employees are entitled to, including:

• At least 11 consecutive hours of daily rest per 24-hour period
• 35 consecutive hours of weekly rest, often including Sunday
• Typically, 30-minute meal breaks if working over six hours, though specifics can vary depending on company policy or any applicable collective agreements

It’s an important part of Finnish work culture to ensure employees get ample breaks; providing a relaxed environment for coffee breaks (kahvitauko) or lunch fosters camaraderie and productivity.

Leave laws in Finland

Finnish employees are entitled to the following types of leave and time off:

• Holiday leave: In addition to 12 paid national holidays, employees are entitled to annual holiday leave. The calendar holiday year runs from April 1 to March 31. Employees who begin employment by April 1 and who have worked more than one year earn 2.5 days of paid annual leave each month, for a total of 30 days of holiday leave per year. Employees who have worked less than one year earn two days of paid holiday leave per month.
• Sick leave: Employers are responsible for paying sick employees 100% of their salary for up to nine days of illness. After that, they can apply to Kela for sickness benefits for up to 300 days.
• Parental leave: Finland offers both maternity leave and paternity leave benefits from Kela, equivalent to 160 working days for both parents, as well as an untaxed, lump sum payment of €170. Expecting mothers can take maternity leave beginning 14 days before the due date. Parents can transfer up to 63 days of leave to the other parent, and parental leave can be taken as part-time leave or in up to four separate periods.
• Adoption leave: A parent of an adopted child is entitled to child care leave for at least two years following the date of adoption, but not beyond the time when the child starts school.
• Education leave: Employees can take up to two years of unpaid leave to further their studies. They can take study leave in installments over as long as five years.
• Other leaves: Employees can also take leave for bereavement and to care for sick children and family members.

Work permits in Finland

Before your new team member can start working in Finland, it’s up to you to confirm that they have the legal right to work in the country. Non-EU/EEA nationals need work permits to work legally in Finland. Finland is part of the EU, which means anyone who has the legal right to live and work in any other EU/EEA nation-state can live and work in Finland.

Who needs a work visa in Finland?

Any employee from outside the EU/EEA or Switzerland will typically need a work visa or permit in order to work in Finland and a residence permit to live there.

The most common types of visas for foreign workers in Finland are D visas, which are issued to specialists, startup entrepreneurs, top or middle managers, and workers from other EU/EEA countries. Some workers may also qualify for seasonal work visas, depending on the nature of the work they’re planning to do. Visa requirements vary, and most workers applying for employment visas need sponsorship from a local employer. The employer must often start the visa application process on the employee’s behalf.

How long does it take to get a work visa in Finland?

Visa processing times vary depending on the type of visa and how many applications the Finnish Immigration Service is processing at the time. Processing can be delayed if the applicant submits an incomplete application or is missing required documents, so be sure to complete every step of the application process diligently.

Types of work visas in Finland

Some of the most common types of work visas employees are likely to pursue in Finland include: 

• D visas: Work visas for employees coming to Finland to work for a certified employer
• Seasonal work visas: Visas for employees coming to Finland to do short-term work on a seasonal basis

Termination and redundancy in Finland

Finland’s labor legislation is famously employee-friendly, so employers are held to strict standards when ending contracts with their workers. One of the most important tenets of Finnish employment law is that employees can’t be fired without cause. Valid reasons may include significant financial or production-based changes, proven misconduct, or chronic underperformance. However, “at-will” firing is not recognized—all dismissals need legal grounds.

Maintaining thorough performance records or financial evidence can protect your company if an employee challenges their dismissal. Clear, written communication doesn’t just foster transparency in the workplace; it also helps protect your company and comply with Finnish labor standards.

Does at-will employment exist in Finland?

At-will employment is a type of employment relationship that allows either the employee or the employer to terminate the employment relationship at any time for any reason (or even without a reason) as long as it is lawful (the termination cannot be discriminatory, for example). At-will employment is common in the United States.

Finland does not recognize at-will employment. Employers must justify terminations with solid reasoning (for example, economic necessity or a breach of contract). Wrongful terminations can lead to legal claims, union involvement, and potential compensation payouts.

Notice periods in Finland

Required notice periods depend on whether the employee or the employer is the one ending the employment agreement and are based on the employee’s length of service:

Severance pay in Finland

Unlike many European countries, Finland does not enforce a universal severance requirement. However, if the employee’s CBA or individual contract stipulates that they’re entitled to severance pay, the employer is required to pay it. And employers often provide severance as a gesture of goodwill during layoffs or reorganizations, which can reduce conflict. While not mandatory, offering severance can help preserve your reputation and soften the blow for departing staff, potentially limiting the chance of legal disputes.

How to terminate employees compliantly in Finland

When you oversee a global team, there’s a lot to consider, and navigating all the different termination rules and regulations in jurisdictions around the world is just the tip of the iceberg. It’s up to employers to know and adhere to varying just-cause standards, notice requirements, severance rules, and probation period regulations in different countries and regions—which is no small feat, even for veterans of global employment.

That’s why partnering with an employer of record (EOR) can be valuable in Finland and other foreign jurisdictions as you navigate terminations and similarly complex compliance tasks. An EOR can take time-consuming administrative work off your plate, from onboarding to offboarding, so you can focus on growing your business globally.

FAQs about hiring in Finland

What do employers need to hire employees in Finland?

To hire employees in Finland, a company must either establish a registered legal entity in the country or work with an employer of record (EOR). Employers are required to register with the Finnish Tax Administration and the Employer Register to manage tax withholdings, social security contributions, and statutory insurances such as pension and accident insurance. Compliance with Finnish labor laws is essential, including requirements for written employment contracts, minimum working conditions, and collective agreements where applicable.

A well-structured onboarding process is also important to ensure new employees understand company culture, policies, and expectations. Employers may choose to carry out background checks to verify a candidate’s qualifications and work history, especially for roles in education, finance, or security. Partnering with an EOR can simplify these steps, enabling companies to hire in Finland quickly while staying compliant with local regulations.

Can I hire employees in Finland without my own entity?

Yes. By working with an EOR, you can recruit local talent without going through the time- and resource-intensive process of setting up your own legal business entity. The EOR handles payroll, taxes, and compliance while you manage the employee’s daily tasks.

What is the difference between an independent contractor and an employee in Finland?

Employees operate under an employer’s supervision and direction, receive statutory benefits, and have taxes and social contributions deducted by the employer. Contractors set their own schedules, provide their own equipment, and handle taxes independently. Misclassification can trigger back payments, tax liabilities, and possible legal action.

How much does it cost to hire an employee in Finland?

Beyond recruitment costs and gross salary, employers typically pay over 25% for social security (pension, unemployment, health insurance). Additionally, many CBAs require holiday bonuses (lomaraha).

What is the annual leave entitlement in Finland?

Employees who begin employment by April 1 and who have worked more than one year earn 2.5 days of paid annual leave each month, for a total of 30 days of holiday leave per year. Employees who have worked less than one year earn two days of paid holiday leave per month.

What benefits are required for employees hired in Finland?

Employers must pay healthcare contributions, fund unemployment insurance, pay for pension contributions, provide statutory leave, and more. 

What is always required when an employer terminates an employee in Finland?

You need a legally valid reason (for example, economic hardship or severe misconduct) and must observe statutory notice periods. In wrongful or unjust termination cases, employees can pursue legal remedies or dispute the termination through their union.

How does a US company pay a foreign employee in Finland?

There are generally three ways a US company can hire and pay workers in Finland:

1. Establishing a Finnish entity: Manage payroll locally and pay all employer taxes—comes with direct control but high overhead
2. Partnering with an EOR: Delegate payroll, compliance, and HR tasks to a local partner
3. Using a global payroll provider: Centralize payments and reporting while ensuring local compliance—a good solution for multi-country payments

No matter which method you choose, you must comply with Finnish tax withholding, reporting requirements, and social security contributions.

Disclaimer: Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.