Comprehensive Guide to Hiring Employees in Finland

Finland, a Nordic country, is well known for its strong economy, which encourages free enterprise and private ownership. The country offers a well-trained and skilled workforce to companies establishing their presence in Finland.  

Since 2015, Finland has seen a steady rise in its job employment rate. More than 2.531 million people were employed in 2020. The technology sector will see job openings amounting to more than a lac in the next ten years, as per data from The Technology Industry Employers of Finland.

The Finnish workforce is well known for its high level of education. 87.9 percent of Finns above 25 had upper secondary or some tertiary education. 

Most degrees are in business studies, administration, law, humanities arts, and technology.

In 2021, Finland’s GDP touched more than 251 billion euros. It has a high economic output on a per capita basis. The Ministry of Economic Affairs and Employment of Finland handles all labor legislation for employment in Finland. Even hiring international employees isn’t any more complicated than hiring local employees in Finland.

The employment laws here are extensive, but you can learn the best ways to hire in Finland to experience ease as you expand your business. The guide for hiring employees in Finland will help you stay tuned into the best practices.

Things to Know Before Hiring in Finland

Before hiring employees and initiating recruitment and selection in Finland, you must take note of specific factors related to work.

• International hiring- This process will need research and legal assistance from experts locally due to the extensive employment laws.
• Largest sector- The service sector is the most prominent Finnish job niche. This covers industrial niches such as transportation, healthcare, and social services, besides hospitality. 
• Trade unions-These have a significant role to play in the Finnish labor market. These Unions help to negotiate with employer associations to create collective bargaining agreements. The latter helps add provisions to the country’s statutory needs for employees.
• Flat hierarchy- Finland’s workplaces have relatively few or no middle management levels,  and the top employers greatly value employee opinions.
• The Employment Contracts Act is Finland’s primary source of all employment norms. Additional references are the Working Hours Act 2019, the Annual Holidays Act 2005, the Co-operation Act 2007, the Equality and Non-Discriminations Acts, and the collective bargaining agreement plus EU-backed legislation.

Finnish legislation for employment is strict as well as detailed. Penalties for any non-compliance are significant.

Employment Contract

It is customary and recommended in Finland that the employee has an employment contract in written form. A written statement for all critical employment conditions can substitute If this entire contract fails to be produced. Most contracts in Finland are indefinite unless there is a fixed-term contract with terms explicitly laid down.

This contract or the written statement must state

• Employer and employee’s municipality for residence or the place of business
• Main duties of the employee
• Main location of work
• Duration of fixed-term employment contract
• Probationary period
• Collective agreement
• Salary terms
• Work hours
• Annual holiday
• Notice period

Termination

As per Finnish Employment Act, an employer can terminate an employment contract if the work offered diminishes due to financial and/or production reasons. The reasons could also be due to the reorganization of an employer’s operations.

Notice period

The notice period varies depending on the tenure of service. 

• 14 days when the period is up to 1 year
• 1 month when the service period is 1-4 years
• 2 months when the service period is 4-8 years
• 4 months when the service period is 8-12 years
• 6 months when the service period is more than 12 years

Employment laws

When dealing with a hiring process in Finland, you need to understand the employment laws well-

• Employers must draw the contract for a working relationship to be in force with an employee.
• Finnish laws encourage inclusiveness and non-discrimination in workplaces.
• An employer can direct the employee on how to perform the work, per prevailing laws.
• Finnish law does not distinguish the various types of workers.

Working hours and breaks

When hiring staff in Finland, these are the applicable working hours and breaks-

• Finnish working hours are 7.5 hours per day or around 37.5 hours per week.
• Overtime is mutually agreed upon for work and payment reasons.

Payroll

• Once you establish a company and hire employees in Finland, payment happens once every month unless otherwise agreed upon.

Minimum wage

• There is no minimum wage in Finland.
• The average wage in Finland has increased to 3758 EUR per month since the second quarter of 2022.

Bonuses

• While no law mandates this, and bonus components are not written down in the contract, several collective agreements mention this.
• It is usually  50% of the gross salary and paid post an employee’s annual vacation. 

Holidays for employees             

Official public holidays in Finland are listed below-

Other Leaves

Vacation Leave

• If an employment relationship is less than one year, an employee earns two days of leave each month. This is generally 24 to 30 days for a holiday credit year. 
• If it is less than one year, but less than 15 years, the leave goes up to three vacation days per month.
• Only weekdays are leave days for annual leave.

Maternity and Paternity Leave

• Pregnant employees are entitled to 105 days of unpaid maternity leaves. It can be used anywhere from 30 to 50 days before delivery.
• Fathers can also take paternity leave up to 54 workdays of unpaid paternity leave. It starts when the mother’s maternity leave begins. 
• Each parent will get a daycare subsidy for about 160 days, approximately a year.  Thus, parents may get up to 14 months’ leave to be with their children.
• Up to 63 reference days are transferable from one parent to the other.

Social security

Employees and employers must pay pension contributions and health insurance contributions. 

Health insurance

• The health insurance contribution is 1.34% of the taxable salary in Finland.
• Employers must give health insurance contributions for 16-67-year-old employees covered under Finnish social insurance.

Pension contributions

• Employees contributions:
  • The pension contribution stands at 25.3% of the taxable salary. This amount includes the employee’s part that is withheld before making a salary payment. 
  • This employee part is 7.15% for employees between the ages of 17-52 years, 8.65% for employees between 53-62 years, and 7.15% for employees who are 63 years or more.

• Employer contribution
  • The employer’s pension contribution is 24.1% if the employee’s age is 18-52 years, 25.6% if the employee’s age is 53-62 years, and 24.1% if the age is more than 63 years.

Unemployment contribution 

• The employer’s part of the unemployment contribution is 0.50% of the taxable salary for employers paying up to 2,086,500 euros annually. It goes up to 2.05% of the taxable salary for a salary of more than 2,086,500 euros every year).
• Employee’s part in this context is 1.50% of the taxable salary.

Taxation

• Finland’s corporate tax rate is 20%.
• The standard VAT rate is 24%.
• The income tax brackets are as below-

The Cost of Hiring an Employee in Finland

The recruitment fees in Finland depends on the company policies and requirements. Here are the main costs involved in the recruitment process in Finland. 

• Advertisement costs
• Hours for reviewing applicants
• Payroll costs
• Tax payments
• Social security
• Salary 
• Benefits
• Bonuses
• Contracting and legal costs

What Does a Firm Need to Hire Employees in Finland?

Employers in Finland may employ permanent as well as part-time employees. To hire employees in Finland, a company must establish a presence and meet taxation and legal compliances. Employers must fulfill the following requirements to launch businesses in Finland-

1. Registration with authority
2. Certificates of Registration
3. Local bank accounts
4. Employment contract
5. Tax ID 

Various Options for Hiring Employees in Finland                   

Once you understand the standards of recruitment in Finland, you can opt for the following-

1. Team up with a global EOR service: You can hire an employer of record (EOR) such as Multiplier for hiring in Finland. The latter can help with compliances, benefits, compensations, payroll, and workforce without establishing an entity directly.
2. Direct hiring process with an HR department: It becomes an expensive option due to all the costs included in hiring the HR team, advertising posts, and other processes. 

The Steps to Hiring in Finland

There are no fixed steps to conduct the hiring process in Finland. Companies can follow the following universal steps to initiate the recruitment process in Finland:

Step 1- Job advertisements

• Begin the hiring process in Finland by advertising current openings on job portals, job boards, and hiring sites.
• List all minimum requirements for the job position in the advertisement.

Step 2-Check on the applications

• Go over the applications for shortlisting those matching requirements for any role.

Step 3-Telephonic interviews

• A telephonic interaction helps employers to judge a candidate’s suitability.

Step 4- Schedule an interview

• Next step is to organize face-to-face or online interviews with potential candidates. 
• This allows the hiring manager to judge a candidate’s interests, experiences, and competencies. This might occur in multiple rounds.

Step 5-Reference checks

• The Act on the Protection of Privacy in Working Life regulates all background checks on prospective employees. 
• Criminal background checks, too, are permitted.
• Both reference and background checks need employee/prospective employee consent first.

Step 6-Final offer

• This is the last step of the hiring process in Finland. The HR department sends the offer letter to the chosen candidate mentioning all working conditions. 
• The employee accepts the letter before an employment contract is formally  drafted.

Let Multiplier be Your EOR Platform in Finland

Recruiting and onboarding employees takes time and effort. You must also ensure all compliance in Finland. Teaming up with a global PEO-EOR firm such as Multiplier.

Experts in our team make the recruitment process in Finland hassle-free for you. We offer SaaS-based Employer of Record solutions for hiring. Moreover, you will not need to establish any branch or subsidiary in Finland either. Multiplier lets you focus on handling new markets and setting up teams in new countries.