Employee benefits in Finland: All you need to know

For so long this far-flung Northern European nation has developed highly skilled professional workers, but this talent had only been accessible to local employers and nearby Scandinavian neighbors.

Now, it’s never been easier for employers all around the world to tap into the Finnish labour market. If you have a superstar Finnish candidate in your pipeline, the most important first step is to develop an understanding of statutory benefit legislation and compensation expectations to help you develop a compliant and competitive offer.

Finland has an advanced welfare system compared to its Nordic counterparts. The Finnish government facilitates an exceptionally high standard of living for its citizens through strong mandated welfare schemes.

This guide walks you through the statutory employee benefits you need to provide in Finland. We’ll also help you learn how to set up a competitive and compliant compensation package that will attract both Finnish and international employees.

We’ll explain:

• Who is entitled to employee benefits in Finland?

• Statutory and common employee benefits

• Leave entitlements

• Supplemental benefits to consider for Finnish employees

• Soft benefits to entice remote workers

• How to set up and manage benefits for international employees

Who is entitled to benefits in Finland?

The Independent Social Security Institute, or Kela (Kansaneläkelaitos), handles the residence-based social security system. The Finnish Centre for Pensions governs the earning-related social security system.

The social protection system aims to give everyone an equal opportunity to work and participate in society. This is possible through benefits and financial support available to various groups, including:

Health Insurance

The health insurance scope in Finland covers every person living there, and people with disabilities or long-term illnesses also receive disability allowance.

The Finnish government also offers rehabilitation allowances through the Social Insurance Institution or a chosen pension insurance institution.

This is an important consideration for global companies considering making an offer to a Finnish candidate.

Rather than offering basic health insurance coverage to Finnish employees, employers could re-invest the cost of this benefit into other alternatives that will have a much higher perceived value to a resident who already enjoys solid public medical insurance.

If an employee is involved in an accident or contracts a disease at work, they can receive benefits in the form of a survivors' or disability pension, a daily allowance, a handicap benefit, or a funeral grant in the case of fatalities.

Certain special professional groups also afforded social security, including grant recipients, farmers, and sportspeople. They receive benefits such as accident insurance and pension security from the government.

Statutory employee benefits in Finland

The Employment Contracts Act and the Working Time Act govern the compensation laws in Finland. Supplementary legislation covers other aspects like maternity benefits, sick leave, and holidays.

Trade unions and collective bargaining agreements (CBAs) have a strong presence in Finland. They set the industry minimums and specific benefits within various sectors. The presence of unions and CBAs ensure a high standard of employee treatment across all industries.

Employers must provide the following statutory benefits.

Social insurance

All employers and employees in Finland must make contributions to social insurance funds. These funds cover maternity and sick leave, health insurance, and unemployment benefits.

Some deductions go to the Central Tax Administration, insurance providers, and the Employment Fund.

Redundancy, termination, and severance

In Finland, the termination notice varies depending on how long the employee's service is, and it's either specified in the employment contract or determined by the relevant collective agreement.

If contract termination is not deemed to be the employee's fault, the notice periods are as follows:

• 1 year and below: 14 days

• 1 - 4 years: one month

• 4 - 8 years: two months

• 8 - 12 years: four months

• Above 12 years: six months

Employers have no legal obligation to make severance payments for mass redundancies. In some cases, the collective agreements specify the same, or employers decide to pay the employees of their own volition.

Working hours and breaks

Under the Working Time Act, working hours should be eight hours daily or 40 hours weekly across 52 weeks.

For flexible working hours, the total should be a maximum of 80 hours in two weeks or 120 hours in three weeks. Employees should not work more than 40 hours a week for four months for such arrangements.

Employees should have a one-hour break after working for six hours. They should also rest for 11 hours in between working days and a 35-hour consecutive break after seven working days.

Overtime

The maximum number of hours each person should work, including overtime, needs to be an average of 48 hours weekly for four months. If there are technical or internal issues, employees can work overtime for six or twelve months.

For the first two hours of overtime, there should be a 50% increase in the wages depending on the daily rate. For two or more hours, it should be 100%.

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Mandatory leave entitlements in Finland

Sick leave

Under the Employment Contracts Act, employers should pay employees a 100% salary for nine days over a month of service.

After ten days, they can apply to Kela for sickness benefits up to 300 days. If the employment period is less than a month, the employee should get 50% of their daily wages for the sick days.

Holiday leave

Employees should have 24- 30 paid leave days annually, and they can have 11 paid public holidays off.

If employees are required to work on a public holiday, they should receive double their usual daily rate (or another equitable benefit) as compensation.

If the employment period is less than 12 months, employees should get two days of mandated leave per month for the first year. For more than one year, employees should be afforded two-and-a-half days leave every month.

Maternity/Paternity leave

Mothers receive benefits from Kela, equivalent to 105 working days from the day the leave starts, including Saturdays. They should also get a lump sum amount of €170 (US$200) that is not subject to taxes.

The maternity leave can start any time, not earlier than 50 days and not later than 30 days to the due date. Partners have up to 54 days of unpaid paternity leave before the child turns two.

Parental leave

Kela offers a parental allowance for 158 days. During this time, parents can stay home and are entitled to a partial allowance or work part-time.

Education leave

Employees with up to one year of service to their employer can take two years of unpaid leave to further their studies. The two years can be in the form of installments over five years.

For service of more than three months but less than one year, the employee can take a five-day leave.

Other leave

Hospitalization leave of up to four days is available to parents whose children fall sick.

Pension plans/retirement contributions

All employees in Finland should receive either the national pension or the statutory occupational pension based on their earnings. This includes the old age pension and disability pension in case of long-term injuries.

There are two complementary pension schemes in Finland; a compulsory occupational pension scheme and the National Pension public plan.

The compulsory occupational pension scheme is more dominant and better developed. Employees can choose early retirement from 62 to 68, although the benefits are better if they retire later.

Public Pensions

The Finnish public pension scheme aims to provide pensions to people with low earnings. This scheme is only available to citizens after living in Finland for a minimum of three years.

Compulsory Occupational Pensions

The earnings-related pension scheme covers public and private sector employees and self-employed people. Both employers and employees contribute funds.

Employees between 18 and 52 years contribute 7.15%, between 53 and 63 years 8.65%, and above 63 years 7.15%.

The amount employers pay depends on the company’s size. Companies are also required to pay unemployment insurance of 1.40% from 17 to 67 years and 0.68% for health insurance.

Statutory employers contributions for Finnish employees

• Health Insurance - 1.53% with no cap

• Group Life Insurance- Average of 0.07% with no cap

• Accident Insurance- Average of 0.8% with no cap

• Pension Insurance- Average of 16.95% with no cap

• Unemployment Insurance- For gross salaries up to €2.17million (US$2.55m), 0.50%. Above this amount, 1.9%

Voluntary occupational pensions

Voluntary occupational pension schemes are only available to about 15% of employees, most of whom are executives. Employees contribute about 3% of their salaries, but only the employer contributes to some plans.

By law, foreign employers should pay social insurance contributions to their employees. After living in Finland for more than a year, foreigners should enroll in the Population Information System to get a personal identity code.

This code helps apply for a Kela card, which they use to access benefits.

Minimum wage

Finland has no universal minimum wage, and the collective agreements determine the minimum wage and various work conditions. Although there's no legal labor agreement, employers must pay fair salaries depending on the specific industry or sector.

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Additional benefits to consider for Finnish employees

Supplemental benefits have a broad scope beyond primary healthcare and pension plans. For Finnish employees, some aspects to consider include additional leave provisions, unlimited paid time off, health/wellness allowances, and flexible working hours.

Every organization needs to customize a benefits plan based on the business model, industry specifications, company size, and maturity stage.

To help you develop a globally competitive benefits package, here are some guidelines that will empower you to attract top global talent.

Soft benefits for remote workers

Besides the mandated employee benefits in Finland, forward-thinking companies can also develop extra incentives to sweeten a basic compensation package and lure in top-notch candidates. It's an excellent chance for companies to impress candidates through their culture, policies, and work environment.

Through comprehensive research and first-hand experience, this guide to creative soft benefits will assist you in developing a solid plan to entice the best candidates in your industry.

Small business owners can also provide their remote workers with cost-effective benefits despite financial limitations. Although these benefits can be expensive, there are alternatives that small business owners can afford. This guide offers suggestions to demonstrate your care and concern to your remote employees.

How to set up and manage benefits for international employees

When you hire across borders, things can get complicated fast.

Building your own legal entity is out of reach for all but the largest corporations. The resources involved are exponentially more significant than for other alternatives.

Instead of partnering with multiple local experts in each new country of operation, you could consider an employer of record (EOR) to manage all of your international hiring needs with one singular point of contact.

This guide explains when to use an EOR and how a global employment partner can streamline your processes and fast-track your growth.

Rather than searching for multiple payroll partners, legal experts, and HR providers – an EOR offers you a much more scalable proposition (and in Remote’s case at a fraction of the cost)

Remote’s team of HR specialists are on the ground in region around the world. We act as our customers’ own team of local experts, building locally customized employment packages.

If you want to hire in Finland, you need expert knowledge to develop a compensation plan that is equitable and competitive in both a local and global context.

And that’s why we built Remote.

What you should expect from the best EOR providers

Seamless global hiring and onboarding

Remote has a range of powerful features that assist in developing compliant and competitive compensation advice. Our team of benefits experts becomes your local partners in developing a strong benefits package. Remote’s software is specifically designed to streamline the onboarding process and simplify otherwise complex operations with a user-friendly interface.

One major hurdle recruiters face is letting go of suitable candidates due to their country of residence. In such cases, using employers of the record is an effective solution.

Centralized documentation with one single data hub

Remote provides you with access to all documents in one simple, easy-to-use interface. Even with a large global workforce, Remote’s platform enables you to easily automate HR processes, manage employment contracts, and sync time off with payroll.

Simplify international payroll, taxation, and compensation

Managing global HR operations with specialist local expertise comes with so many challenges. An EOR like Remote provides you with a team of highly trained and specialized legal, finance, and HR professionals to manage the complicated aspects of global hiring.

You don't have to worry about statutory or country-specific employment taxation requirements, keeping up with changing legislation, or meeting new industry regulations.

An EOR like Remote can handle these complexities on your behalf and shoulders the burden of liability so you can focus on growing your business.

The best EORs will take responsibility for your global HR compliance

Local regulations are constantly changing, which significantly increases the associated business risks of misclassification and non-compliance. The dedicated team of legal experts at Remote ensure compliance and protect your business, while opening up an exponentially wider pool of talent.

With the help of Remote, you're able to quickly scale your global team and develop fair and competitive compensation packages that are both locally and globally competitive.

Employers must be aware of their local legal obligations in any country before taking the plunge to hire foreign employees or independent contractors. Every country has legislation that governs the minimum statutory requirements you must meet.

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