How to hire and pay remote workers in Finland

Finland is one of the best destinations for remote workers, thanks to a fast-growing tech industry and flexible remote work visa programs designed to attract digital nomads. Businesses looking to expand operations in Europe can take advantage of the country’s highly skilled workforce by hiring remote workers in Finland.

But, international hiring is not a straightforward process. There’s a lot to understand about hiring remote workers based in Finland — salaries, benefits, overtime pay, taxes and levies, and employment laws. You also have to make sure you classify workers correctly and establish payroll processes to pay your remote workers on time.

This article will take you through Finnish employment laws, and how you can pay your workers in Finland compliantly. We’ll also offer you expert guidance on managing remote teams and how your business can hire and pay remote workers in Finland easily.

How do foreign businesses pay remote workers in Finland?

There are several ways you can pay your remote workers based in Finland, depending on your company’s size, the number of workers you’re hiring, and the nature of the employment relationship (i.e., whether they’re contractors or employees).

Open a legal entity in Finland

A legal entity refers to a company or organization registered to do business in a jurisdiction. To create a Finnish legal entity, you need to:

• Choose the type of entity you want to form (whether it’ll be a general partnership, a limited partnership, a joint stock company, a cooperative, etc.)

• Register your business name with the Trade Register

• Create a business bank account

• Register with the tax authorities.

Your company might also be required to maintain a cash balance as share capital, which can be up to €80,000 if you’re registering a public limited company (Finnish: julkinen osakeyhtiö) for instance. The process can take anywhere from four to five weeks, depending on the type of entity you’re forming.

After your legal entity is fully set up, well, that’s when the heavy lifting starts. You’ll need to figure out how to:

• Process your remote employees’ or contractors’ payroll and benefits

• Track and withhold any required taxes and levies

• Secure your company’s intellectual property rights with water-tight contracts.

Work with a global employment partner

You could also use a global employment partner (i.e., an employer of record) to hire remote workers on behalf of your company. An EOR will also help you pay your remote workers, withhold taxes and any appropriate levies from your employees’ paychecks, and stay compliant with all the legal requirements required to hire international workers.

On paper, your workers are legally employed by the EOR, but they actually work for you. Since the EOR is listed as your remote workers’ official employer, they manage all the admin work (taxes, payroll, etc.) on your company’s behalf for a fee.

Instead of wading through the legal and compliance work required to hire Finnish remote workers, an employer of record can help you hire, onboard, and pay your remote workers quickly. 

Pay Finland workers as contractors

Alternatively, you can also hire Finnish remote workers on a contract basis. That is, you sign a contract that states the work to be delivered (either on a one-off or a recurring basis) and you pay your contractors the agreed rate for the work done.

Under Finnish law, employers are not required to provide benefits to contractors, such as health insurance, pensions, and unemployment coverage. They also don’t have to withhold taxes and levies.

This arrangement also comes with significant risks. If the authorities determine that you misclassified your employees as contractors, you will be required to pay the full entitlements and benefits the worker should have received, as well as any other fines the authorities may impose.

In what currency do companies pay remote workers in Finland?

Finland’s official currency is the euro (€) but there’s no law that states that employees must only be paid in euros. Salaries and invoices can also be paid in dollars, pounds, crypto, or whichever currency your workers prefer.

What are the tax rates for tax brackets in Finland?

Finland has progressive tax rates, which that range from 12% to 44% depending on the employee’s taxable income. Employers are required to withhold taxes and contributions and remit them to the authorities.

The national tax rates in 2023 are as follows:

• €0 to €19,900 = 12.6% 

• €19,900 to €29,700 = 19%

• €29,700 to €49,000 = 30.25%

• €49,000 and €85,800 = 34%

• €85,800 and above = 44%

For more guidance, read our helpful article on where remote employees pay taxes.

Which parts of salary in Finland are taxable?

Finland taxes residents on their worldwide income. This includes any income from copyrights, intellectual property, franchises, and investments (RSUs, stock options, and share warrants).

Is per diem taxable in Finland?

Per diem refers to fixed daily allowances a company gives an employee to cover any expenses they incur while doing their job, such as a business trip. This usually includes direct payments and reimbursements for expenses such as accommodation, transportation, etc.

Per diem allowances are tax-exempt if the destination of the business trip is more than 15 km from the employee’s home or office. Per diem allowances in 2023 are capped at €48 (for trips longer than 10 hours) and €12 for meals.

Is there a difference between allowance and reimbursement in Finland?

Allowances are capped, but there’s no limit to how much of their personal funds an employee can spend (on work-related expenses) and be reimbursed.

What payroll deductions are employers required to make in Finland?

Employers are expected to withhold and remit several payroll deductions, such as:

• national and municipal income taxes,

• pension insurance contribution 

• unemployment insurance contribution 

• group life insurance premium

• health insurance premium

• accident insurance premium

What is the minimum wage in Finland?

Like its Nordic neighbors (Denmark, Norway, Sweden, and Iceland), Finland doesn’t have a government-mandated minimum wage.

How much is overtime pay in Finland?

Employees are entitled to 50% extra pay for the first two hours of overtime they put in every day, which increases to 100% for any subsequent hours. For any overtime work that exceeds an employee’s weekly working hours (i.e., 40 hours per week), they’re entitled to a 50% premium on top of their regular pay.

What are the local labor laws in Finland?

The general employment law in Finland is covered under the Employment Contracts Act 2001. Related laws include:

•  Working Hours Act 2019

• Annual Holidays Act 2005

• Act on the Protection of Privacy in Working Life 2004

• Co-operation Act 2022.

Taken together, these laws govern labor standards with rules such as:

• Employment contracts are indefinite by default unless otherwise stated, for a particular reason.

• Written contracts are not required to hire an employee, although the employer must state certain key details in writing. Typically, a contract should include details such as the employee’s main duties, the duration of the contract, probation period, applicable collective agreements, salary and working hours, and the required notice period before the contract can be terminated.

• Working hours are limited to eight hours daily and 40 hours per week.

• Rest breaks: employees are entitled to at least an hour’s rest break per day if their working day exceeds six hours daily.

• Workers are entitled to paid injury leave if they are hurt on the job.

• Discrimination based on age, health status or disability, sexual orientation, religion, language, race, color, trade union membership, etc., is strictly prohibited by the 2014 Non-Discrimination Act, and the Penal Code.

How to pay contractors in Finland?

Instead of retaining Finnish remote workers as full-time employees, you can choose to hire and pay workers on a contract basis. This means you can pay contractors per hour, per day, or per deliverable via common payment options such as bank transfer, direct deposit, digital wallets, or an online money transfer service (Wise or PayPal)

However, you must understand the dangers of misclassifying employees as contractors. If your contractors are involved in your company’s day-to-day operations, and the government finds that you’re treating them as employees, it could lead to fines, penalties, and significant damage to your company’s reputation. 

To avoid such a scenario, you can convert your contractors to employees if you’ve accidentally misclassified them or if you want to give them a larger role in your company. In that case, you’ll need to offer benefits like healthcare, paid sick leave, maternity leave, parental leave, etc., to stay compliant with Finland's labor regulations. 

How to pay remote employees in Finland?

To pay remote workers in Finland, you’ll have to set up your own local entity in the country. As explained earlier, this is a time-consuming and expensive affair. Additionally, you’ll have to do all the hard work yourself — process benefits, withhold taxes, pay salaries, and stay compliant with Finnish labor laws. It also gets more complicated. If your company starts being established enough in Finland, and a significant degree of your company’s operations depends on your Finland-based remote workers, it could trigger permanent establishment. This means you could be subject to taxes on some or all of your company’s profits in Finland.

Instead of taking on the hassle and risk of hiring remote workers in Finland, you could partner with a global employment service like Remote. With Remote, you can wash your hands off the admin workload required to file taxes, manage payroll, and handle compliance across different countries where Remote currently operates.

Read our helpful guide for information on how to choose an employer of record for your business needs.

Pay remote workers in Finland with Remote

There’s great value in tapping into Finland’s highly educated and skilled workforce. But, to hire and pay workers in Finland, you’ll have to set up a local entity to manage your HR operations. However, this is a costly and long-winded process. The registration process can take weeks or even months. Alternatively, you could choose to employ remote workers as contractors. But you run the risk of financial penalties or legal issues if the authorities determine that you misclassified your employees, whether intentionally or not.

The best option is to work with a global employment service like Remote, which can help you hire safely in Finland. Remote offers an all-in-one global employment solution for businesses that want to scale globally. With Remote, you can:

• Maintain one source of truth for your employees’ contracts, invoicing, and HR data

• Offer a wide range of global benefits 

• Withhold and remit payroll taxes to the authorities with a few clicks

• Pay salaries and invoices in your workers’ local currencies

Download our guide to hiring remote employees for expert advice on global hiring. If you’re ready to start onboarding workers in Finland, sign up for Remote and say goodbye to the inconveniences of global employment.