Employment Conditions in Finland

KPMG
CONFEDERATION OF FINNISH INDUSTRIES EK
Employment
Conditions in
Finland
Foreword
This booklet entails the essential parts of the Finnish social and employment legislation as well
as the mechanisms of the labour market. The purpose of this booklet is to help foreign companies to quickly grasp the principles of employment conditions, employment legislation and
norms, social security, corresponding contributions and taxation of the employees in Finland.
The booklet has been prepared by KPMG Finland, in cooperation with Confederation of Finnish
Industries (EK).
The information provided in on the following pages is neither exhaustive nor is it intended to be
so. Decisions concerning operations and employment in Finland should be made only on the basis of specific and detailed advice.
KPMG Finland
March 2010
1 EMPLOYMENT AND LABOUR LEGISLATION............................................................ 5

1.1 ACTS AND REGULATIONS............................................................................................... 5
1.2 COLLECTIVE AGREEMENTS............................................................................................. 5
2 LABOUR COSTS ........................................................................................................... 7
2.1 THE LEVEL OF LABOUR COSTS ........................................................................................ 7
2.2 INDIRECT LABOUR COSTS ............................................................................................... 8
3 EMPLOYMENT RELATIONSHIP .................................................................................. 9
3.1 BASIS OF EMPLOYMENT................................................................................................. 9
3.2 PROBATIONARY PERIOD ............................................................................................... 10
3.3 TRAINEESHIP............................................................................................................... 10
3.4 FIXED-TERM EMPLOYMENT .......................................................................................... 10
3.5 EQUAL OPPORTUNITIES ............................................................................................... 10
3.6 EMPLOYMENT OF YOUNG PEOPLE ................................................................................ 11
3.7 TRANSFER OF UNDERTAKINGS ..................................................................................... 11
3.8 CONTRACTORS OBLIGATIONS AND LIABILITY WHEN WORK IS CONTRACTED OUT ............ 11
3.9 PRIVACY AT WORKPLACE ............................................................................................. 12
3.10 INTELLECTUAL PROPERTY RIGHTS............................................................................... 12
3.11 WORKING HOURS ...................................................................................................... 12
3.11.1 FULL-TIME EMPLOYMENT........................................................................................ 13
3.11.2 PART-TIME EMPLOYMENT ....................................................................................... 13
3.11.3 REST PERIODS ........................................................................................................ 13
3.11.4 OVERTIME ............................................................................................................. 13
3.11.5 SCHEDULING OF WORKING HOURS .......................................................................... 14
3.11.6 NIGHT WORK ......................................................................................................... 14
3.11.7 WORK ON SUNDAYS AND FINNISH RELIGIOUS HOLIDAYS ......................................... 14
3.12 ANNUAL HOLIDAY AND OTHER LEAVES ....................................................................... 14
3.12.1 ANNUAL HOLIDAY .................................................................................................. 14
3.12.2 SICK LEAVE ............................................................................................................ 15
3.12.3 PUBLIC HOLIDAYS................................................................................................... 15
3.12.4 PARENTAL LEAVES ................................................................................................. 16
3.13 HEALTH AND SAFETY AT WORK .................................................................................. 17
3.13.1 EMPLOYERS OBLIGATIONS ..................................................................................... 17
3.13.2 SAFETY ORGANISATION .......................................................................................... 17
3.13.3 OCCUPATIONAL HEALTH SERVICES .......................................................................... 17
3.13.4 SECTORAL SAFETY BOARDS .................................................................................... 18
3.13.5 HEALTH AND SAFETY EXECUTIVE ............................................................................ 18
4 EMPLOYEE PARTICIPATION ..................................................................................... 18

4.1 CO-OPERATION WITHIN UNDERTAKINGS ....................................................................... 18
4.2 CO-OPERATION WITHIN A GROUP OF COMPANIES .......................................................... 19
4.3 EMPLOYEE REPRESENTATION IN THE MANAGEMENT OF COMPANIES .............................. 19
4.4 PERSONNEL FUNDS ..................................................................................................... 19
5 DISMISSAL ................................................................................................................. 20
5.1 JOB SECURITY ............................................................................................................. 20
5.2 TERMINATION BY NOTICE ............................................................................................. 20
5.3 TERMINATION WITHOUT NOTICE................................................................................... 20
5.4 ILLEGAL DISMISSAL ..................................................................................................... 21
5.5 COLLECTIVE DISMISSAL ............................................................................................... 21
5.6 PROTECTED EMPLOYEES .............................................................................................. 22
5.7 IN CONNECTION TO A TRANSFER OF UNDERTAKINGS ..................................................... 22
6 SOCIAL INSURANCE CONTRIBUTIONS AND BENEFITS ....................................... 22
6.1 SOCIAL INSURANCE COVERAGE.................................................................................... 22
6.2 SOCIAL INSURANCE CONTRIBUTIONS ........................................................................... 22
6.3 PAYMENT OF SOCIAL INSURANCE CONTRIBUTIONS ....................................................... 23
6.4 SOCIAL INSURANCE BENEFITS ...................................................................................... 23
6.4.1 UNEMPLOYMENT BENEFITS ...................................................................................... 23
6.4.2 SICKNESS BENEFITS ................................................................................................. 24
6.4.3 STATUTORY ACCIDENT INSURANCE ........................................................................... 24
6.4.4 PENSION SCHEMES .................................................................................................. 25
6.4.5 PARENTAL BENEFITS ................................................................................................ 25
7 TAXATION .................................................................................................................. 26
7.1 TAXABLE INCOME........................................................................................................ 26
7.2 DEDUCTIONS .............................................................................................................. 26
7.3 TAX RATES ................................................................................................................. 27
7.4 COLLECTION OF TAX .................................................................................................... 27
8 FOREIGN EMPLOYEES IN FINLAND......................................................................... 28
8.1 IMMIGRATION ............................................................................................................. 28
8.1.1 VISITORS ................................................................................................................. 28
8.1.2 NORDIC CITIZENS ..................................................................................................... 29
8.1.3 EU/EEA/SWISS CITIZENS ........................................................................................ 29
8.1.4 THIRD COUNTRY CITIZENS ......................................................................................... 29
8.1.4.1 Residence permit for an employed person ......................................................... 29
8.1.4.2 Residence permit ................................................................................................ 29

8.1.5 FAMILY MEMBERS .................................................................................................... 30
8.1.6 FUTURE CHANGES ................................................................................................... 30
8.2 APPLICABLE TERMS OF EMPLOYMENT........................................................................... 30
8.2.1 POSTED WORKERS ACT............................................................................................ 30
8.3 LIABILITY TO TAX......................................................................................................... 31
8.4 SOCIAL INSURANCE ENTITLEMENTS ............................................................................. 31
8.5 EMPLOYERS OBLIGATIONS .......................................................................................... 32
8.6 FOREIGN EMPLOYERS OBLIGATION TO NAME A REPRESENTATIVE .................................. 33
9 RELEVANT CONTACTS AND ADDRESSES.............................................................. 33
9.1 KPMG FINLAND ......................................................................................................... 33
9.2 EK CONFEDERATION OF FINNISH INDUSTRIES ............................................................ 33
1 Employment and labour legislation

1.1 Acts and regulations
Employment law in the widest sense of the word means a considerable complex of statutes, both national
and supranational, that are to be observed by the parties of individual employment relationship and their
collective representatives in employer associations and employee unions.
The following three parliamentary acts form the backbone of Finnish employment law regime but in addition
to those there are statutes covering co-operation matters, occupational health and safety rules and a substantial amount of legislation dealing with social insurance rights. Furthermore, in various fields of trade
there are trade-specific provisions dealing with health and safety requirements, such as Government Decree on the Safe Use and Inspection of Work Equipment (403/2008)
Employment Contracts Act
The Employment Contracts Act (55/2001) is the general statute in Finnish employment law regime and is
applicable in both private and public sectors. The application of ECA requires that the constituent elements
of an employment relationship are found simultaneously. The elements are i) a contract, ii) working on behalf of an employer, iii) remuneration and iv) working under the direction and supervision of the employer.
Working Hours Act
The provisions regarding working time have been laid down in the Working Hours Act (605/1996).The act is
applicable in both private and public sectors but there is a limited number of special acts regarding working
hours of certain trades, such as the Seamens Working Hours Act and the Act on Working Hours on Vessels
in Domestic Traffic.
Annual Holidays Act
Excluding certain cases, the Annual Holidays Act (162/2005) applies to both private and public sector employment. It lays down provisions on annual holiday rights: the length of the annual holiday, holiday pay,
holiday compensation and the time of the annual holiday.
1.2 Collective agreements

A collective agreement is an agreement concluded between a number of employees (normally a trade union) and one or more employers (normally an employers' association) governing pay and working conditions.
A collective agreement normally covers a limited period of time (typically a two-three year period). Most
agreements contain provisions governing:
working hours, pay schemes and pay regulation
overtime, irregular working hours and shift work
rules on public holiday payments, holiday pay and additional holiday pay
pay period, method of payment
special rules on sickness, industrial injury, pregnancy and child birth
other rights and duties, e.g. with respect to working clothes, time clocks, etc.
notice of termination of employment (often the same provisions as laid down by the law)
regulations on employees representatives and industrial safety delegates
term of collective agreements and rules governing term of noticing and expiration rules on procedures
for labour disputes.
The General Agreement of 1997 between the central organisations of the private labour market, the Confederation of Finnish Industry and Employers (EK) and the Central Organisation of Finnish Trade Unions
(SAK) lays out the foundations of the labour market in several important sectors.
The General Agreement contains rules on the following:
basic rights (freedom of association)
the employer's right to hire and dismiss employees and issue instructions on the execution of work
advance notice of industrial disputes
co-operation in enterprises
employees representatives
health and safety at work
employer's obligation to give certain information
training
use of external work force
The member associations of EK, SAK and other central organisations may deviate from the General Agreement in their collective agreements with the exception of the provisions concerning the employment protection of the employees representatives.
In 1940, during Winter War, the central organisations of the private labour market concluded an agreement
(so called Engagement of January), which confirms that pay and employment conditions are matters to
be dealt with at collective bargaining rounds. At the same time the trade unions were accepted as negotiating partners.
As a rule collective agreements are concluded between an employers' association and the corresponding
trade union. Some collective agreements cover several employers' associations and trade unions and, in
some cases, they cover only one enterprise.
Collective agreements usually cover a period of two or three years. If the parties fail to agree on the renewal of the agreement the negotiations should normally continue with assistance from the office of the
State Official Conciliator and the old collective agreement is applied until the new agreement has come into
force.
The State Official Conciliators duty is to determine if there is a possibility to present a settlement proposal
satisfying both parties. If he does not succeed in mediating, the trade unions may call a strike, and the employers can respond by issuing lockout notices.
2 Labour costs
2.1 The level of labour costs
The level of labour costs in Finnish industry is above the EU and Euro average. The charts below show the
level of employers labour costs for worked hour in various countries. The cost competitiveness of Finnish
industry has improved considerably because industrial productivity has risen faster than in other EU and
OECD countries.
Labour costs in the EU countries in 2008

Industrial workers
Denmark
Sweden
Belgium
Luxembourg
Netherlands
Finland
Germany
Austria
United Kingdom
France
Ireland
Italy
Spain
Greece
Cyprus
Slovenia
Portugal
Malta
Czech Republic
Hungary
Poland
Slovakia
Estonia
Lithuania
Latvia
34,74
33,18
32,86
32,66
29,02
28,26
27,66
27,14
26,10
24,96
22,24
21,62
16,43
13,81
12,27
12,27
11,54
8,84
8,11
7,38
7,18
6,66
6,24
5,41
4,89
0
Euro/hour
10
15
20
25
30
35
Source: Confederation of Swedish Enterprise, Confederation of Finnish Industries EK.

18.2.2010
Saukkonen
Labour costs in various countries in 2008

Industrial workers
Denmark
Norway
Sweden
Belgium
Netherlands
Finland
Germany
Austria
United Kingdom
France
Italy
Australia
Canada
USA
Spain
Japan
Portugal
Rep. of Korea
Singapore
Taiwan
Brazil
Hong Kong
Mexico
Philippines
Sri Lanka
34,74
34,67
33,18
32,86
29,02
28,26
27,66
27,14
26,10
24,96
21,62
21,54
20,64
17,55
16,43
14,10
11,54
11,44
5,96
4,70
4,25
4,13
2,08
0,79
0,44
0
Euro/hour
10
15
20
25
30
35
Source: Confederation of Sw edish Enterprise, U.S. Department of Labor, Confederation of Finnish Industries.
18.2.2010
Saukkonen
Cost competitiveness of Finnish industry in 1980 - 2010

compared to the OECD average
150
Index
Relative unit labour costs

140
Exchange rate
Productivity
130
Labour costs
120
110
100
90
80
70
20
10
*
20
09
*
20
07
20
08
*
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
92
19
93
19
91
19
89
19
90
19
88
19
87
19
86
19
85
19
84
19
83
19
82
19
81
19
80
60
Source: The Research Institute of the Finnish Economy (ETLA). The rise of the curve indicates
that the relative position of Finland is getting better compared to the other OECD countries.
The relative unit labour costs are indexed in the average of 1986-2005
18.2.2010
Saukkonen
2.2 Indirect labour costs

The following table indicates estimated indirect labour costs in industry in year 2010 calculated as a percentage of wages for time worked. The table is based on estimated average costs for all employees. The
estimated total figure for workers is about 79 % and for salaried employees about 64 %.
Estimated Indirect Labour Costs in Finnish Industry 2010

Obligatory costs as a percentage of wages for time worked
Indirect wages:
1. Pay during annual vacation
2. Extra annual vacation bonus
3. Pay during holidays
4. Pay during sickness
5. Pay during absence due to other causes
13.0
6.5
6.9
3.0
8.0
15 TOTAL
Social insurance contributions:
37.4
6. Social insurance
7. Industrial Injury Insurance
8. Unemployment Insurance
9. Employment Pension Insurance
10. Group Life Insurance (approximately)
4.4
1.4
2.9
23.0
0.3
610 TOTAL
32.0
110 TOTAL OBLIGATORY COSTS
69.4
TOTAL VOLUNTARY COSTS
3.5
TOTAL INDIRECT LABOUR COSTS
72.9
3 Employment relationship
3.1 Basis of employment
The basic provisions regarding conditions of employment are included in the Employment Contracts Act,
which applies to both blue-collar workers and salaried employees. Only managing directors in limited companies and co-operatives fall outside the scope of these provisions.
Collective agreements complement the Employment Contracts Act. Many crucial provisions are solely laid
down in the Act. The grounds for dismissal, for instance, are defined in the Employment Contracts Act. The
management of a company and salaried employees in leading positions are not normally covered by collective agreements. The Employment Contracts Act, however, covers these groups, excluding managing directors as mentioned above.
Employment contracts may be written, electric or oral or they may be of an implied/tacit character. In the
case of an oral agreement the employer is, without a request, obliged to give a written specification of the
main conditions of the employment to the employee.
The employment contract must not include terms and conditions that are in contravention of the mandatory
law or provisions laid down in the applicable collective agreements.
3.2 Probationary period

At the commencement of employment, the parties may agree on a probationary period of a maximum of
four months counted from the beginning of the employment. If the employer offers the new employee a
training period exceeding four months, the probationary period may be prolonged to a maximum of six
months. However, the probationary period can in no case exceed one half of the employment contracts
duration.
During the probationary period, either party is free to terminate the employment contract without notice.
However, the employment contract cannot be terminated due to discriminatory reasons or reasons against
to the probationary periods purpose.
3.3 Traineeship
According to the law, an employer and a person over the age of 15 years can enter into an agreement for
practical training of the person in question. The trainee, by such an agreement, obliges himself to work under the guidance, instruction and control of the employer. The majority of the training period consists of
vocational experience at the relevant business under guidance from the employer in return for a wage
specified in the collective agreement. The theoretical part of the education, for which the employer pays no
wage, takes place at governmental employment training centres.
Pursuant to the collective agreement the trainees minimum wage might be lower than that of a skilled
worker.
3.4 Fixed-term employment
As a main rule the employment contract applies for an indefinite period. Fixed-term employment contracts
may be entered into, if the employer has legal grounds such as hiring a substitute or in case of seasonal
work. A fixed-term contract may also be entered into, if in connection with the operation of the enterprise
or the character of the work it is well-founded to do so. A fixed-term contract may always be entered into
on the employees own initiative.
If someone has entered into a fixed-term employment contract under circumstances not approved by the
law, the contract shall be considered to apply for an indefinite period. The Employment Contracts Act does
not require written employment contract in case of fixed-term employment but it is highly recommended. If
the employment contract has not been made in written form employer has to give the main conditions of
the employment to the employee under penalty of fine.
A fixed-term contract can not be terminated on individual grounds with notice but it can be terminated
without notice on same grounds as indefinitely valid contract.
3.5 Equal opportunities
The Employment Contracts Act imposes on the employer the responsibility to treat all employees equally
irrespective of sex, religion, age, political affiliation or the like. The principle of equal opportunities also applies when an employee is recruited.
According to the Act on Equality between Women and Men the employer acts in a discriminatory way, if a
person who is better qualified than a person of the opposite sex is ignored when deciding who to recruit or
who to offer training. The act of the employer is considered discriminatory, unless opposite can be shown
with a reference to the character of work. Similar rules on discrimination apply during the employment.
10
According to the Equality Act an employer that regularly has at least 30 employees should have an annually
updated equality plan. The content of the equality plan is now specified in the Equality Act. It is for instance
required that the equality plan includes a specific wage survey that covers the whole personnel.
In addition, the Non-Discrimination Act is to foster and safeguard equality. The Act is applied to both existing employees and recruitment procedure.
3.6 Employment of young people
A person under the age of 18 years is defined as a young employee and the young employees work conditions are defined in the Young Workers Act. The employer is under an obligation to ensure that the work
does not harm the young person's physical, mental or moral development. The character of the work must
be in accordance with reasonable expectations. Young persons at the age of 14 may, under certain circumstances, take a job during their holidays. Provisions on working conditions and rest periods for young persons are stricter than those for adults. Young persons are not allowed to carry out certain categories of
work and in some cases a young person needs a special permission.
3.7 Transfer of undertakings
Upon the transfer of undertakings the transferee automatically takes over all the transferors rights and obligations according to the Employment Contracts Act. The new owner may give notice to terminate the employment contracts, if there is a valid reason to do so. Furthermore, the provisions of the Act on
Co-operation within Undertakings (334/2007) have to be taken into consideration. All transferors employees
in the scope of the transfer are transferred to the service of the transferee as an so called old employees
with same benefits and salaries as they had before transfer. The transferee employer does not have a right
to terminate the transferors employees contracts due to the transfer. However, both the transferee and
the transferor may resort to normal dismissal grounds.
In case of transfer of undertakings transferee and transferor should note the information and dialogue regulations as defined in the Act on Co-operation within Undertakings if applicable. These co-operation obligations are applied also to mergers and demergers.
3.8 Contractors obligations and liability when work is contracted out
The Act on the Contractors Obligations and Liability when Work is Contracted Out (1233/2006, Contractors
Liability Act) entered into force on 1 January 2007. The objective of this act is to combat the negative effects of so called grey economy and unhealthy competition. The Act obliges the contractor to acquire certain information about their contracting party before signing the contract to ensure that the contracting party
is reliable and that they intend to act in compliance with Finnish legislation.
The contractor referred to in the Contractors Liability Act is a party that uses temporary agency workers or
workers employed under a subcontract. A temporary agency worker refers to an employee who has signed
an employment contract with an employer who has assigned the employee with his or her consent for the
use of another employer.
Small subcontracts and contracts on the use of temporary agency workers are excluded from the scope of
application of the Act by setting limit values. The Act is not applied if the total duration of the work for
which a temporary agency worker or workers are hired does not exceed 10 working days or in the case of a
subcontract the value of compensation, excluding VAT is less than EUR 7,500.
11
3.9 Privacy at workplace

The Act on the Protection of Privacy in Working Life (756/2004) lays down provisions on matters such as
the processing of personal data, retrieving work-related email messages, the processing of information on
drug use and camera surveillance in the workplace.
In Finland employers are allowed to gather and process personal information on their employees for their
own needs but only when such information is directly necessary for the employees employment relationship. The protection of privacy also includes the right of a jobseeker or employee to know and decide on the
content of their personal data and how it is handled and processed. The jobseeker and employee have the
right to assessed on the basis of accurate personal information.
The employer has the right to process employees health information only if the information has been collected from the employee him/herself or with the employees written consent and the information needs to
be processed in order to pay health related benefits or to establish whether there is a justifiable reason for
absence.
3.10 Intellectual property rights
Intellectual property rights are usually divided into two main sectors which are industrial property rights and
copyright. Industrial property rights include for example patents, utility models, trademarks and trade
names.
Copyright generally belongs to the creator of the work and it is therefore important to agree with employees in their employment contracts about the assignment of copyright of all works created in the employment relationship. There are specific provisions in Copyright Act (404/1961) regarding computer programs,
databases and circuit designs created in an employment relationship.
The inventor normally has full rights to his or her invention but The Act on the Right in Employee Inventions
(656/1967) automatically entitles the employer to at least part of the right, depending on the circumstances
under which the invention was made by the employee. Full rights can be claimed by the employer when an
invention is a result of a particular work assignment or if the outcome is significantly influenced by the experience gained while working for the employer. The inventor is entitled to a reasonable compensation for
the work done in the benefit of the employer and in practice many companies have pre-determined compensation rules for employee inventions.
3.11 Working hours
A majority of the employees are covered by the Working Hours Act. Usually the employees with director or
similar independent position are not covered by the Working Hours Act.
The Working Hours Act is a general law, which applies to all sectors. Separate provisions on working hours
apply to seamen. Legislation covering young employees also contains provisions on working hours.
The collective agreements contain trade specific provisions on working hours. As a rule these provisions are
additional to the legislation on working hours.
Generally, working hours only cover the time it takes to carry out the task in question. Time spent while
travelling to or from work, if the employee is not working during such travel, is not considered working
time, unless separately agreed in the collective agreement or in the individual employment contract. Training is not usually working time, unless the employer has obliged the employee to participate in training considered essential to perform his or her professional duties.
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3.11.1 Full-time employment

The normal working hours according to the law are eight hours a day and 40 hours a week at maximum. A
normal working week consists of five days (normally from Monday to Friday) of eight hours each.
The working week can be organised as an average. This means that the total working hours make an average of 40 hours in a period not exceeding 52 weeks. Most collective agreements, though, contain provisions on flexible working-time arrangements.
Special working hours arrangements are allowed for certain trades within the transport and service sector
such as hotels, provision shops, transport of persons and goods, the police, customs service, postal services and telecommunication, radio stations and hospitals. For employees working in these kinds of
branches normal working hours are maximum 80 hours during a period of two weeks or 120 hours during a
period of three weeks. The regular daily and weekly working hours are not subject to restrictions.
Collective agreements on reducing working hours by 12.5 days a year have reduced the current annual
working hours for employees working 40 hours a week (so called Pekkanen-leave). Special agreements on
how to distribute these days have been concluded in collective agreements.
Several collective agreements also include a working week shorter than 40 hours. For example salaried
employees in the industrial sector generally work 7.5 hours a day and 37.5 hours a week.
3.11.2 Part-time employment
Finnish legislation does not have special provisions for part-time employment. It is governed by the same
rules as full-time employment.
However, special provisions on annual holidays apply to part-time employment.
3.11.3 Rest periods
Employees, whose working hours exceed 6 hours a day, are entitled to at least one break of one hour each
working day. This break may be cut down to 30 minutes by agreement. The employee may leave the work
place during the break. In case of shift work exceeding 6 hours, the employee is entitled to a short meal
break. If the employee is allowed to leave the work place during the break, it is not included in the working
hours.
Employees are entitled to a total rest period of at least 11 hours within each 24-hour period, calculated from
the commencement of normal working hours. However, deviations of this provision can in several cases be
made. Employees are entitled to a continuous weekly rest period of at least 35 hours.
3.11.4 Overtime
Overtime is work performed outside the normal, maximum working hours as defined in the legislation and
collective agreements. Overtime always requires the employee's consent on a case-by-case basis. If the
actual normal working hours are less than those stipulated in the legislation, overtime is defined as work
exceeding the maximum working hours mentioned in the law (i.e. 8 hours a day, 40 hours a week). Additional work is working hours that are not covered by the definition of working hours set in collective agreements or the statutory working hours. Normally this kind of additional work does not entitle the employee
to higher pay rate.
Work that exceeds eight hours a day is called daily overtime and work exceeding forty hours a week is
called weekly overtime.
Employees are not allowed to work overtime for more than 138 hours within a period of four months or 250
hours within a calendar year. A special local agreement to exceed the limits mentioned above by 80 hours
in calendar year can be concluded.
13
Overtime pay, which is paid in addition to the normal pay amounts, is either 50 % or 100 % of the hourly
rate 50 % of the hourly rate for the first two hours after the 8 ordinary working hours and thereafter 100
%. Weekly overtime pay amounts to 50 % of the hourly rate. In some collective agreements 100 % overtime pay after 8 weekly overtime hours has been agreed upon. It is possible to agree between employer
and employee that overtime can be given as an overtime leave followed by same rules as compensating
overtime.
In connection with periodical working hours, overtime is defined as work exceeding 80 hours within a period of 2 weeks or 120 hours within a period of three weeks. There is no difference between weekly overtime and daily overtime.
3.11.5 Scheduling of working hours
There is no legislation regulating the scheduling of working hours except the rules applying to night work
and obligatory rest periods.
The employer, however, is obliged to provide a timetable showing the commencement and termination of
working hours as well as lunch and rest breaks at least one week before the working period starts.
3.11.6 Night work
Night work is defined as work carried out between 11.00 p.m. and 6.00 a.m. Night work is only permitted
under conditions defined in the law. Jobs that typically necessitate night work are jobs requiring periodical
working hours, shift work, life-saving services and certain other services and maintenance.
The legislation does not provide for night work pay increases. However, increases are included in most collective agreements.
3.11.7 Work on Sundays and Finnish religious holidays
Work on Sundays or Finnish religious holidays requires the employees consent. However, it does not apply
in emergency situations or when an employee normally is required to work on Sundays. The pay increase
for work on Sundays and religious holidays is l00 %.
3.12 Annual holiday and other leaves
3.12.1 Annual holiday
The Annual Holidays Act (162/2005) came into force in 2005. The current Act features improved holiday
rights of part-time and fixed-term employees and introduces more flexibility to the timing of the holidays
than before.
According to the Annual Holidays Act an employee becomes eligible for paid annual vacation based on the
length of his or her employment. The employee is entitled to 2 or 2.5 days' holiday each full holiday credit
month. Annual holiday year defined as the period between 1 April and 30 March.
A full holiday credit month is a calendar month during which an employee has worked for at least 14 days,
or at least 35 hours. The Annual Holidays Act contains a comprehensive and detailed description of absence
which is comparable with workdays when determining the full holiday credit months. Such are for example
absence due to sickness or maternity leave.
According to the Annual Holidays Act, an employee who works for less than 14 days or 35 hours during all
calendar months is entitled to two weekdays of leave for each calendar month if he or she so desires.
For the first year of employment the employee is entitled to 2 days holiday per month. After one years
seniority the number of holiday days per month is increased to 2.5. The number of vacation days accrued
during one year is 24 or 30 respectively. Sundays and public holidays are not considered vacation days,
14
which means that one holiday week consists of maximum 6 days. 24 and 30 days of holiday thus entitle the
employee to either 4 or 5 weeks holiday annually.
The employer shall take into consideration the wishes of the employee and then determines the timing of
the annual holiday. The employee is entitled to a total of 24 days of summer holiday during the holiday season (between May 2 and September 30). If the granting of the holiday during the holiday season results in
substantial difficulties for the employers operations in seasonal work, the summer holiday may be granted
outside the holiday season during the same calendar year.
The winter holiday must be granted by the start of the following holiday season. Only employees with more
than one year's seniority are entitled to winter holiday.
The employer and the employee may agree that the employee will take the portion of the holiday that exceeds 12 weekdays in one or more periods. It can also be agreed that the portion of the holiday that exceeds 12 weekdays is taken within one year of the end of the holiday season, and that the portion of the
holiday that exceeds 18 days is taken during the following holiday season or thereafter as carriedover holiday. On the initiative of the employee, the portion of the annual holiday exceeding 24 weekdays can be
converted into shortened working hours (for example as half-days).
The employee has a right to postpone the holiday in case he or she is incapacitated because of childbirth,
illness or accident when the holiday was to begin or if he or she is incapacitated for more than 7 days during
the holiday. In the latter situation postponing of the holiday days is only applicable for the days which exceed the 7 days.
An employee with holiday entitlement will receive holiday pay for the period of his or her holiday. The employee is entitled to receive the holiday pay when the holiday starts. According to collective agreements,
the employees are paid a holiday bonus (lomaraha in Finnish), which normally amounts to 50 % of the
statutory holiday pay.
The employer is required to pay the employee holiday compensation for possible unused holiday days when
an employment relationship comes to an end.
3.12.2 Sick leave
In Finland, the most common reason for employees absence from work is illness. In case of illness or accident, the employee is entitled to the absence but the employer must be informed of such disability without
undue delay.
The employer is liable to pay wages during sick leave. Please see section 6.4.2, below for applicable provisions and rates. At the request of the employer, the employee is obliged to present a doctors certificate
containing a diagnosis. Collective agreements commonly contain further provisions regarding absence due
to illness, including a stipulation omitting the sick pay if the employee has caused the absence deliberately
or by grave negligence.
3.12.3 Public holidays
According to the Finnish law, the First of May, Independence Day (December 6), Christmas Eve, Midsummer Eve and Easter Saturday are public holidays. If any of these holidays fall on a weekday, the employees
are entitled to salary. Collective agreements contain provisions on further holidays with full salary entitlement. Such holidays include New Year's Day (January 1), Twelfth day, Good Friday, Easter Monday and
Ascension Day.
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3.12.4 Parental leaves

Employee is entitled to maternity and paternity leave and also parental leave. The total period of the leaves
is 263 weekdays (Saturdays included).
The employee herself can choose to commence maternity leave from 30-50 weekdays prior to the birth of
the child. Maternity leave amounts to 105 weekdays, during which the employee receives a daily maternity
benefit from the Social Insurance Institution. The compensation rate is approximately 90 % for the 56 first
weekdays and 70 % for the rest of the period.
Most collective agreements contain provisions, which oblige the employer to grant the employee full pay in
the beginning of the maternity leave. For this period the daily maternity allowance is accrued to the employer.
Parental leave follows immediately after the maternity leave. Parental leave covers 158 weekdays and can
be obtained either by the mother or the father. Part-time parental leave is also possible. The legislation contains rules on terms of notice and on the staggering of parental leave. During the parental leave the employee receives a benefit, which corresponds to the daily maternity benefit.
The father receives a benefit of the same amount as during parental leave. The father is allowed to take an
up to 18 weekday long leave from work to participate in child care. The paternity leave may be extended
with the daddy month by 1-12 days if the father takes the last 12 weekdays of the parental leave (total 24
days). In the autumn of 2010 the daddy month period is to be extended to a maximum of 36 days.
Upon returning from maternity or parental leave the employee is entitled to get back his or her former job or
a similar job.
Child Care Leave
After parental leave and until the child reaches the age of three years, a parent is entitled to be absent from
work to take care of the child. During child care leave the employee receives a benefit consisting of a basic
rate and an income-tested supplement. The basic rate in 2010 for the first child under three years is EUR
314,28 per month, EUR 94.09 per month for other children under three years, and EUR 60.46 per month for
other children under school age. The full income-tested supplement is EUR 168.19 per month. Also most of
the communities pays child care benefits and the amounts vary between the communities.
Partial Child Care Leave
The employee is entitled to reduce his or her working hours to 30 hours or less when taking care of a child
under three years old or until the end of the childs second year at school. The legislation stipulates that
reduction of working hours should be agreed upon between the employer and the employee. If an agreement cannot be obtained, working hours will be reduced to 6 hours a day and 30 hours a week.
The employer can refuse a reduction of working hours only on the basis of well-founded reasons as, for
instance, shift work.
The employee on partial child care leave is entitled to a monthly allowance of EUR 90 (2010). The benefit is
taxable income.
Child Allowance
Child allowance is paid for each child under the age of 17 residing in Finland. The value of the child allowance is scaled in accordance with the number of children in the family. In 2010 EUR 100 a month is paid for
the first child and EUR 110.50 a year for the second child, EUR 141 a month for the third child, EUR 161.50
a month for the fourth child, EUR 182 a month for the fifth child and further children. Child allowance is not
subject to tax.
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Child's Sickness
The employee is entitled to temporary absence from work in order to nurse his or her sick child under the
age of ten years. Temporary absence covers 4 workdays maximum. According to most collective agreements the employee receives salary during these days, normally for three days.
3.13 Health and safety at work
The working environment is governed by the Health and Safety at Work Act (738/2002). Section 2 in the Act
refers to the employer's general obligations. The employer shall, when organising the work, take into consideration the employee's personal qualifications and the works nature and conditions so that the employee is protected against accidents, injuries and diseases in connection with his or her work. Furthermore
the Health and Safety at Work Act contains additional special provisions as to working conditions and detailed provisions on the quality of the working environment. The same Act applies to the employer who
uses the leased workforce in its activities.
3.13.1 Employers obligations
The employer is responsible for the observance of the Health and Safety at Work Act and the executive
orders applying to this area. Generally, the obligations can be divided into three categories:
1) The technical obligation
The workplace must observe the technical requirements on a sound working environment.
2) The duty of employee information
The employer has a duty to inform the employees about the risks for accidents and diseases in connection
with their work. The employer also has a duty to direct the employees in finding safe working methods.
3) The duty of supervision
The workplace's technical installations must be under constant control and the employer has a duty to supervise that the work is carried out according to the safety rules.
The employer is subject to punishment if non-observance in the provisions of the Health and Safety at Work
Act occurs or if the executive orders either intentionally or unintentionally are not observed.
3.13.2 Safety organisation
According to the Act on Supervision and Cooperation in Safety at Work Matters (44/2006) the employer and
the employees are obliged to co-operate on matters relating to health and safety at work. The co-operation
is also governed by collective agreements.
According to the Act the employer appoints a safety manager/executive, who is responsible for the
co-operation. Enterprises with 10 or more employees are obliged to elect a safety representative who
represents the employees in matters of health and safety at work. The salaried employees may elect their
own safety representative.
The scope of the co-operation is decided locally. If nothing else is agreed, enterprises with 20 or more employees are obliged to set up a safety committee.
3.13.3 Occupational health services
According to the Act on Occupational Health Service (1383/2001) the employer is obliged to organise certain statutory occupational health services. The Act includes all employers who are obligated to observe the
Act on Health and Safety at Work.
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The employer may set up the Occupational Health Services
alone or together with other employers;
by buying the services from a private institution; or
through a public health centre.
Under the Act on Sickness Insurance the public authorities have to reimburse the employer 50 % (60 % in
some cases) of the necessary and reasonable costs accepted by the National Pension Institute.
3.13.4 Sectoral safety boards
Co-operation on matters relating to health and safety at work also takes place at a sectoral level through the
sectoral safety boards. Their main task is to follow the sectors development in the safety work and to find
solutions to problems, which might occur as a consequence of the technological development. The sectoral
safety boards issue advisory leaflets on health and safety at work for use in the relevant sectors.
3.13.5 Health and safety executive
The task of the Health and Safety Executive is to ensure that the rules on health and safety at work are observed. Supervising authorities are the Ministry of Social Affairs and the local labour protection authorities.
The most visible part are the inspections at the work place.
4 Employee participation
The employee representation in Finland is covered by the co-operation procedures which affects to companies and group of companies as well as the employee participation in transnational companies.
4.1 Co-operation within undertakings
The Act on Co-operation within Undertakings (334/2007) applies to companies with 20 or more employees
on regular basis. The Act provides some exceptions for enterprises with 2029 employees regarding cooperation with different plans and to obligation to negotiate with employees in case of collective dismissal.
According to the Act the employer has to negotiate with the employee representatives or employees before making decisions affecting the employment relationship. The employer also has to give information
regarding the basis and the consequences of the decisions and possible alternatives regarding the planned
decisions. Issues subject to negotiation are listed in the Act on Co-operation.
The objective of the Act is to contribute to the companys internal development and to increase the employee participation in areas such as personnel, business transfers, closing down or moving an company or
parts of it and redundancies due to finance or production related grounds. Also, according to the law, issues
subject to negotiation are: principles and practices applied in recruitment, plan regarding personnel and
training objectives, principles of the use of temporary workers, internal communication, handling plans,
principles and practices based on other legislation and all other changes in employers activities affecting to
the personnel and arrangement of work.
The co-operation parties are the employer and the personnel normally represented by employee representative(s) of different personnel groups.
Co-operation implies that the employer is obliged to negotiate with individual employees or employee representatives regarding the consequences of planned managerial decisions. In certain cases, negotiation
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should include possibilities to relocation and retraining. The co-operation system seldom implies a duty to
reach a mutual agreement, although it is the aim defined in the law. As a rule, the employer makes the final
decision.
Unless otherwise has been agreed between the parties, the negotiation period of six weeks concerns termination of the employment on finance or production related grounds, redundancies, moving to part-time
working and lay-offs for more than 90 days affecting minimum of 10 employees. The negotiation period is
14 days if such measures concern 9 or less employees or lay-offs for maximum of 90 days. However, the
negotiation obligation of 14 days is applicable to all cases where the employer employs 2029 employees.
The negotiation proposal must be given five days in advance in case of possible terminations, moving to
part-time work or lay-offs.
The maximum compensation is EUR 30,000 per employee if the employer neglects the procedural rules or
negotiation obligation regarding the grounds, consequences and alternatives regarding redundancies and
other measures in relation to the financial and production grounds.
In addition, some collective agreements define some additional provisions regarding for example negotiation procedure and dismissals, moving to part-time working and lay-offs.
The Act on Co-operation also includes rules regarding the obligation of informing the employees on the financial situation of the enterprise twice a year, to give salary information, information of employment relationships and the principles for use of external employees.
4.2 Co-operation within a group of companies
The Act on Co-operation within Finnish and Community-wide Groups of Undertakings (335/2007) includes
the rules on information and hearing of the employee representatives within the Finnish groups of companies, which applies to groups of companies employing at least 500 employees. The provisions of the community-wide co-operation including informing and hearing are applied when a Finnish based company is
employing a minimum of 1,000 employees in EEA countries of which a minimum of 150 employees in two
EEA countries each. The employer and its employees may agree on the character of such co-operation. If
the parties do not agree, the legislation stipulates what information the employees are entitled to receive.
4.3 Employee representation in the management of companies
According to the Act on Personnel Representation in the Administration of Undertakings (725/1990), employees are entitled to be represented in decision-making bodies of the companies employing at least 150
employees. If the parties agree, they are allowed to decide the number of employee representatives.
If they do not reach an agreement, the legislation contains detailed provisions on employee representation.
In cases where no agreement has been reached, the company may decide on whether its employees
should be represented in the management group, the board or the supervisory board.
4.4 Personnel funds
The employees have the possibility to establish a personnel fund with the purpose of managing the profit
bonus items and other assets referred to it. The personnel fund for the profit distribution is optional and
requires the agreement between the employer and employees.
The Act on Personnel Funds (814/1989) includes rules regarding the administration of the fund and the distribution of its assets. The fund may decide to invest its money in the parent company or outside. The statutes of the fund establish whether fund members have equal rights and whether the profit shares should
be fixed as a proportion of wages.
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The Act applies to enterprises with 30 or more employees and to enterprises with 1029 employees with
restrictions.
5 Dismissal
5.1 Job security
Rules on job security protect the employee against unfair dismissal. The rules on job security are laid down
in the Employment Contracts Act and in the collective agreements.
5.2 Termination by notice
The employee and the employer may agree of the maximum six months notice period in the employment
agreement. The notice period for the employee may not be longer than for the employer. If the notice period is not agreed in the employment contract, the Employment Contracts Act and the collective agreements shall define the applicable notice periods.
The employee can give notice of termination without stating the contributing reasons. According to the
Employment Contracts Act the terms of notice are 14 days if the employment length with the current employer is no more than 5 years and one month if the employment length exceeds 5 years.
The employer may dismiss an employee only for proper and weighty reasons. The relevant legislation contains a list of reasons, which are not considered proper and weighty. The list is not exhaustive and each
case must be evaluated individually. According to the law employees who have neglected their duties arising from the employment contract or committed a breach thereof have to be warned and given a possibility
to amend their conduct before giving the notice of termination.
The employer has to pay normal salary during the notice period and the employee has to work normally
unless otherwise agreed. The employers statutory notice period depends on the length of the employment:
Term of notice
Length of employment
_____________________________________________
14 days
up to 1 year
1 month
more than 1 and up to 4 years
2 months
4 months
6 months
more than 12 years
_____________________________________________
5.3 Termination without notice

Irrespective of the agreed work period or term of notice, an employment contract may be terminated without a notice period if extremely weighty grounds exist. Termination without the notice, in other words, requires a weightier reason than termination by means of a notice.
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The party wishing to terminate the employment agreement without the notice period must do so within 14
days after receiving the information on the grounds for termination.
5.4 Illegal dismissal
If an employee is dismissed without just cause, the dismissal is considered illegal and the employer might
be ordered to pay compensation. According to the law, employees may be awarded compensation equal to
3-24 months' pay (maximum of 30 months pay to employees representative). The employer cannot be
forced to re-engage the employee.
If the employer fails to give a sufficient term of dismissal notice, the employee is entitled receive an
amount of pay equivalent to the pay due for the non-observed part of the notice period.
If the employer or the employee terminates the employment agreement without the notice period and lacking a just cause, the employer or the employee is liable to pay compensation. On the assumption that there
was a just cause for termination of the employment contract, but not for a termination without the notice,
the employee is entitled to compensation corresponding to his pay for the period of notice.
Within a period of two years from the termination of the employment contract, the employee may institute
legal proceedings against the employer. Under the Finnish legislation, the employment terminates at the
point of expiration of the term of notice even if the employee has already instituted proceedings against his
or her employer.
5.5 Collective dismissal
The employer is entitled to dismiss an employee if the work to be offered has diminished substantially and
permanently for financial or production related reasons or for reasons arising from reorganisation of the employers operations. Employers right to dismiss has been restricted if employer will hire in the near future
or has hired in the near past a new employee for same or similar work or work has not in fact diminished
after reorganization of the employers operations. Employer has to, before dismissal, offer reasonable conversion training, relocation or transfer if this kind of work is available in the same enterprise or in certain
cases in the group of companies.
The statutory provisions for collective dismissals contain no limitation as to the number of persons to be
included in such a dismissal. This implies that the dismissal of only one person based on the financial and
production-related grounds is to be considered a collective dismissal.
Finnish legislation does not include any provisions on the order according to which dismissals should take
place. Most collective agreements, however, stipulate that persons of crucial importance to the operation of
the enterprise, and persons who have lost part of their working capacity in their employment for the same
employer, are the last to be dismissed. In addition, seniority and the number of persons dependent on the
employee in question are taken into consideration. Employer is not allowed to dismiss fixed-term contract
employees unless closing down the entire business.
As regards collective dismissals, the provisions as to terms of notice and time-limits for appeal are the
same as those mentioned in 5.4, above.
The compensation system is the same as mentioned above (5.4) with the exception that no minimum is set
for the compensation, only the maximum of 24 (30) months pay.
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5.6 Protected employees

A pregnant employee or an employee on family leave cannot be dismissed due to the pregnancy or the fact
that he or she is on the family leave. If the employee is dismissed the employer must be able to prove that
the dismissal is not linked to the pregnancy or the fact that he or she is on a family leave.
Employees representative can be dismissed only in cases where the majority of the employees the representative of employees represent agree to it or in cases of shortage of work, where there is no possibility
of finding other work corresponding to the qualifications of the employees representative. Furthermore, the
reasons for dismissing the employees representative must be just as weighty as those applying to other
dismissals. Similar specially protected employees are industrial safety representative and personnels representative in co-operation within undertakings.
5.7 In connection to a transfer of undertakings
When a business is transferred, the new owner shall take over all the employees. Employees, in such situations, have a special option to terminate the employment contract.
The employee might, irrespective of terms of notices, terminate the employment as from the date of transfer or as from a month from the date of transfer if he or she has not received the information earlier. Employees with fixed-term contract have the same right as employees with indefinitely valid contract.
Both the transferor and transferee may terminate the employments on regular dismissal grounds.
The notice periods as to dismissals in connection with transfers are identical with those stated in 5.2. The
former and the present owner of the company are jointly liable for the employees receivables due before
the transfer.
6 Social insurance contributions and benefits

6.1 Social insurance coverage
The statutory social insurance in Finland is based either on residence or on gainful employment. Everyone
residing in Finland is normally entitled to residence-based social insurance benefits despite his/her employment or family status. Employees (salaried persons) and self-employed persons are additionally covered by
the earnings-related social insurance.
Eligibility for social insurance benefits provided by the Social Insurance Institution (Kela) is based on residence in Finland. A personal sickness insurance card (Kela-card) is issued to a person covered by the Finnish residence-based social insurance. Kela provides a wide range of social insurance benefits, while municipalities offer social and health services, including health care and income support.
Employment-based benefits include statutory earnings-related pensions (TyEL), earnings-related unemployment benefits, and benefits in respect of work accidents and occupational diseases.
6.2 Social insurance contributions
The Finnish Social Insurance System is financed by:
employer contributions
contributions from employees and self-employed persons, and
taxes.
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In 2010 the social insurance contributions are on average as follows:
Scheme
Employer %
Employee %
Employers social insurance contribu 2.23

tion
Employees sickness insurance
2.4
Unemployment insurance
2.95
Group life insurance
0.072 (av)
Accident insurance
1 (av)
Employment pension insurance (TyEL) 16.9 (av)
0.4
4.5
(1) Divided in two different contributions (medical treatment 1.47 % and daily allowance 0.93 %)
(2) The contribution is 0.75 % for the first EUR 1,846,500 of annual payroll.
(3) The contribution is 5.7 % for persons aged 53 or more.
As a general rule, the employees gross salary without ceiling is subject to Finnish social insurance contributions.
6.3 Payment of social insurance contributions
The employer pays the total amount of the employer and the employees contributions to Finnish authorities (tax office, pension insurance institution, and accident insurance institution).
Before remitting the contributions, the employer concludes a separate contract with the pension and accident insurance institution chosen by the employer.
The employer should deduct the employees pension and unemployment insurance contributions (calculated from the gross salary) from his/her net salary. If the employer has not deducted the contributions
when paying the salary, the employer cannot normally reclaim contributions from the employee.
6.4 Social insurance benefits
There are various social insurance schemes to cover for loss of income that an employee suffers due to for
example unemployment, sickness, industrial injury, retirement or child birth. The main branches of social
insurance schemes are briefly described below; however the payment of the benefits requires prerequisites
to be fulfilled and therefore eligibility for the benefits should always be checked on individual basis.
Social insurance benefits are usually taxable income.
6.4.1 Unemployment benefits
Unemployed registered job seekers can receive unemployment allowance from one of two different systems: Basic Unemployment Allowance is paid by the Social Insurance Institution of Finland (Kela), whereas
Earnings-related Unemployment Allowance is paid by the unemployment funds.
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Basic Unemployment Allowance and Labour Market Subsidy

The Basic Unemployment Allowance is paid to registered job seekers, who have been employed for at least
8 months during the two years preceding the unemployment. The basic allowance is paid for a maximum of
500 days. The Basic Unemployment Allowance is a flat-rate allowance. The amount is on average EUR 551
per month (in 2010). The amount is increased if the unemployed person has children under 18 years old
living in the same household, or if for example the dismissal is for business or production related reasons.
An unemployed person, who is not entitled to the basic allowance, may be eligible for Labour Market Subsidy.
Earnings-related Unemployment Allowance
The Earnings-related Unemployment Allowance is paid to unemployed members of the unemployment
funds. It comprises a basic component, an earnings-related component and child increases. Earningsrelated allowance is paid for a maximum of 500 days of unemployment. Persons who remain unemployed
after the 500 days of allowance may apply for Labour Market Subsidy.
6.4.2 Sickness benefits
Sickness Allowance
When an employee is sick, the employer pays his/her salary for the first 9 days according to law. From the
tenth day of sickness (Saturday included) the employee receives a Sickness Allowance from Kela.
However, according to most collective agreements regarding blue-collar workers, the employer pays salary
as from the second day lost through sickness for a period of 4 to 8 weeks depending on the length of employment. The one-day waiting period is not applicable after a certain time of employment (usually 6
months). Salaried employees are entitled to full pay from 4 weeks up to 3 months depending on the length
of employment. If, at the same time, the person who has fallen ill receives Sickness Allowance from the
Kela, the allowance is paid to the employer.
The Sickness Allowance constitutes up to approximately 70 % of the salary of the insured person. However, the compensation rate is lower for higher incomes. It can be paid for a maximum period of 300 working days (Saturdays included).
Medical Treatment
Public healthcare is available to all residents in Finland. Public healthcare services comprise primary healthcare, provided by municipal health centres, and specialized hospital care. The health centre fee is approximately EUR 14 and the hospital fee is approximately EUR 32.50 per day (in 2010).
Kela reimburses part of costs of private health care. Doctor's fees and examination and treatment charges
are reimbursed according to a schedule of fixed charges.
Also cost of medicines prescribed by a doctor can be reimbursed partly by Kela.
6.4.3 Statutory accident insurance
Work accidents and occupational diseases are compensated through the statutory accident insurance system. All enterprises are obliged to take out industrial injury insurance with a private insurance company for
all of their employees. The insurance covers necessary treatment and provides for daily allowances as from
the day following the accident in case the employee is unfit for work for at least three days.
Daily allowance is given as compensation for loss of income and is paid for a maximum of one year.
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6.4.4 Pension schemes

Finnish pension provision consists mainly of the statutory earnings-related pension and the residence-based
National pension. National pension provides a minimum income. Employer-specific pension provision or
pension provision based on labour market agreements as well as pension provision based on personal insurance policies are not as common in Finland as in many other European countries.
Earnings-related pension
The statutory earnings-related pension (TyEL) is accrued from most earnings and there is no pension ceiling.
The accrual of pension starts at the age of 18. The pensionable age is flexible between 63 and 68 years.
The employee can choose to work until the age of 68 which also means considerably higher pension earnings.
The statutory earnings-related pension insurance provides protection for old age, in the event of incapacity
for work, the death of the breadwinner and unemployment of an ageing person.
The earnings-related pensions are financed jointly by the employers and the employees. In addition the
State participates in the financing of the self-employed persons and seamens pensions.
The administration of the earnings-related pension scheme is decentralized. Earnings-related pensions are
handled by pension insurance companies, company pension funds and industry-wide pension funds as well
as the seamens and the farmers specialized pension providers. Their activities are coordinated by the Finnish Centre for Pensions (ETK).
National pension
National pensions offer a basic income for persons who are entitled only to a very small earnings-related
pension or to none at all. They are granted and paid by Kela. The National pensions are financed through
employer contributions and tax revenues.
The National Pension Act covers persons over 16 years of age living in Finland. The pension covers old-age
pensions (in 2010: 65 years old or older), disability pensions (21-64 years old), unemployment pensions (6064 years old), survivors pensions and early old-age pensions (62-64 years old).
6.4.5 Parental benefits
There are a variety of parental benefits granted and paid by Kela, for instance the following:
Maternity Grant, which can be chosen either as a cash benefit (approximately EUR 140, tax free) or a
maternity package (including clothes for the baby and other useful items)
Maternity Allowance or Paternity Allowance paid during Maternity or Paternity Leave. The amount is
based on taxable earnings, the minimum being approximately EUR 22 per day. Maternity Allowance is
paid for 105 days; Paternity Allowance is paid for a maximum of 18 days.
Parental Allowance for either the mother or the father staying home taking care of a child. The
amount is based on taxable earnings, minimum being approximately EUR 22 per day. The Parental Allowance is paid for a maximum of 158 working days.
Daddy month for fathers who take the last 12 working days of the Parental Allowance period. They get
a 112 working days additional leave and corresponding compensation.
Child Home Care Allowance to support the home care of small children. One of the children has to be
less than 3 years old. The amount is approximately EUR 315 for one child, and with siblings staying at
home the amount is higher.
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Private Care Allowance is paid to a private child care provider designated by the parents. It is payable
for each eligible child in the family from the end of the parental allowance period until the child starts
school.
Child Benefit for each child under 17 years of age. The amount for the first child is approximately EUR
100 per month. The amount increases for the next children, being approximately EUR 110 for the second child and EUR 140 for the third child.
A person must have lived in Finland for at least 180 days immediately before the calculated due date of the
baby to qualify for Maternity, Paternity and Parental allowances.
7 Taxation
7.1 Taxable income
Taxable income is divided into two categories: earned income and capital income.
Earned income includes among other all compensation received by an employee for work performed for an
employer.
Earned income includes among others:
Base salaries
Fringe benefits
Bonuses
Incentive compensations
Income derived from exercise of employment related stock options
Employer contributions to a voluntary Finnish or foreign pension plan unless certain conditions are met
Benefits derived from equity based plans
Fringe benefits are taxed at their market value. For certain fringe benefits fixed valuation rules exist (e.g.
company car, free housing and meals) which are decided annually by the National Board of Taxes.
Reimbursement for travelling expenses incurred in connection with a business trip is not taxable. The tax
authorities determine annually the amount of per diems and kilometre allowances that are tax exempted.
Capital income includes among others:
Interest income on bank deposits and bonds
Rental income
Dividend income
Capital gains
Please note that specific rules apply to business and farm income.
7.2 Deductions
In general, the taxpayer is allowed to deduct for income tax purposes all expenses incurred in acquiring and
maintaining chargeable income.
Residents are allowed the following deductions from earned income (in 2010) among others:
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A standard deduction for work-related expenses EUR 620 (or actual expenses)
Costs incurred travelling to and from work using the cheapest means of transport, exceeding EUR 600
up to EUR 7,000
Union membership fees
Payments to unemployment funds
Statutory pension and unemployment contributions
Non-deductible expenses are those incurred in acquiring tax-exempt income, as well as expenses related to
the taxpayers living costs including rent for the taxpayers flat and expenses for household management
and child care.
However, some expenses related to purchased household help and renovation work, give right to a credit
for domestic work.
The taxpayer has the right to deduct the expenses incurred in acquiring and maintaining capital income.
These include for instance certain types of interest paid. In the computation of taxable capital gains, the
taxpayer has an option to deduct either the acquisition cost of the asset (reduced by any depreciation), or 20
percent of the sales proceeds for assets that have been owned for a period of less than 10 years, or 40
percent if the period is at least 10 years.
7.3 Tax rates
State income tax for 2010 is levied as follows.
Taxable income
Tax at the lower limit
Tax in excess of the lower limit
EUR
EUR
15,200 22,600
6.5
22,600 36,800
489
17.5
36,800 66,400
2,974
21.5
66,400
9,338
30.0
Municipal income tax is levied at flat rates varying between 16.5 and 21 %. The local authorities fix the
tax rate every year, and as examples can be mentioned the municipalities of Helsinki, which has a tax
rate of 17.5 %, and Espoo, which has a tax rate of 17.75 % (in 2010)
The church tax rate is a flat rate tax and varies between 1 and 2 %. It is paid only by individuals who
belong to the Finnish church. The church tax rate is calculated on the same tax base as the municipal
tax rate. In the major cities the church tax rate is as follows: Helsinki 1 %, Espoo 1 % and Vantaa 1 %
The earned income of non-residents is taxed according to a flat rate of 35 %. The gross amount of Finnish-source salary is subject to a final tax at source that replaces both state and municipal taxes.
Foreign experts who qualify under the special tax regime are taxed at a flat rate of 35 % on earned income for work performed in Finland.
Capital income is taxed at a flat rate of 28 % (in 2010).
7.4 Collection of tax

Income taxes are primarily collected through prepayments under the Prepayment Act. Tax is withheld by all
employers from salary paid to employees. The withholding is done on the gross amount, including both
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cash salary and fringe benefits. The withheld taxes are remitted monthly to tax authorities on employers
own initiative (see chapter 8.5 Employers obligations)
The withholding tax rate appears on the employees tax card. The tax rate is drawn up according to the latest assessment so as to match as closely as possible the taxpayers final taxes for a full tax year. Prepayments withheld are credited against final taxes. Any excess tax is refunded to the taxpayer in December
following the tax year. Consequently, any outstanding tax is payable in December following the tax year and
in February following the assessment year.
Most individual taxpayers will receive a pre-completed tax return form in April. The taxpayer must review it
and make necessary corrections. If corrections are made, the tax return shall be sent back to the tax office
by the date (in May) stated on the pre-completed tax return form.
The tax year coincides with the calendar year.
Married couples are taxed separately.
8 Foreign employees in Finland

8.1 Immigration
The EEA Agreement states that all citizens within the EEA will be able to move and work throughout all
membership nations without restriction. As a consequence, any existing discrimination within the EEA
countries based on nationality, employment, remuneration and other labor-valued conditions must be abolished.
Individuals may take up employment within any EEA state but, whilst employed in that country, must abide
by laws and regulations.
Foreign employees coming from outside the EEA countries are required to obtain a workers residence
permit for work in Finland and they are entitled to be treated on equal terms with Finnish employees with
regards to terms of employment.
The permit rules concerning the foreign employees working in Finland are to be found in the Aliens Act
(301/2004). The Aliens Act is a general act which includes the permit requirements for Nordic citizens, for
citizens from the old EU/EEA countries and citizens from the third countries.
It is the responsibility of the employer to ascertain that a foreign employee has the necessary permit to
work in Finland. Contractors and companies which use leased employees have the same responsibility if
the employee works in Finland for a foreign employer.
8.1.1 Visitors
Short term visitors travelling either in business or tourism purposes will require a visa if not visa exempt due
to EEA or visa exemption rules. The term visa refers to the permit that a Finnish embassy issues to a
foreigner for a temporary stay in Finland, known as a Schengen Visa. The maximum validity of a Schengen Visa is 90 days within a given 180 day period. Schengen Visa is normally valid throughout the Schengen
Area (Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Iceland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and Switzerland).
Allowable activities on a Schengen visa are limited to tourism, business meetings, attending conferences
and visiting relatives and friends. Schengen visa is not a permit for a remunerated employment in Finland.
28
8.1.2 Nordic citizens

Nordic citizens do not need any kind of residence permit to reside and work in Finland. If their stay in
Finland exceeds six (6) months, they have to register themselves at the Local Register Office which maintains the national Population Information System, (www.maistraatti.fi).
8.1.3 EU/EEA/Swiss citizens

EU/EEA citizens and citizens of Switzerland have the right to reside and work in Finland without a residence
permit for an employed person. Citizens of EU/EEA and Switzerland are however, required to register their
right of residence at the local police of the employees district of residence within three months from arriving in Finland. Once the right of residence has been issued, the person should register at the Local Register
Office of his/her district of residence (www.maistraatti.fi).
8.1.4 Third country citizens

If the employee is not an EU/EEA citizen, Swiss citizen or a Nordic citizen, he or she needs a residence
permit for an employed person in order to work in Finland. However, an employee may have a right to work
in Finland with residence permit only (i.e. no need for a specific residence permit for an employed person).
Additionally there are certain exceptions under which employees do not need any kind of permit for their
short term employment in Finland.
8.1.4.1 Residence permit for an employed person

The term residence permit for an employed person refers to permission to engage in remunerated employment in Finland. After staying in Finland for at least four years, a foreigner is usually eligible to apply for
a permanent residence permit. Once he or she gets a permanent residence permit, a separate residence
permit for an employed person is no longer required.
An application for a residence permit for an employed person may be filed either by the employee or, on the
employees behalf, by the employer without a specific authorization. The application may be filed with the
Finnish embassy, an employment office or the District Police.
As a main rule, an employee must acquire the first residence permit for an employed person before arriving
in Finland. He or she can not start work in Finland before the residence permit for an employed person has
been issued.
8.1.4.2 Residence permit

Certain groups have been relieved from the requirement to obtain a residence permit for an employed person on special grounds such as the nature of employment. In cases where a residence permit for an employed person is not required, a residence permit may still be required. A person can be exempted from a
residence permit for employed person for example if he or she is working as an expert or in middle or top
management of a company.
The application process for residence permit is simpler and less time consuming than the application process for the residence permit for an employed person.
Some third country nationals can be released from the requirement to obtain a residence permit or a residence permit for employed person under certain circumstances. For example employees who arrive to
Finland on the basis of an invitation or agreement to work as an expert for a maximum of three months can
under certain circumstances work in Finland without any kind of a residence permit.
29
8.1.5 Family members

Family members may usually move to Finland accompanying the foreign employee if the living is financially
guaranteed by the foreign employees income.
Family members must apply for a residence permit in the same way as the employee. The residence permit
serves as a permission to enter the country, additional entry visa is not required in this case for visa nationals.
8.1.6 Future Changes

In December 2009, a bill was presented to amend the Aliens Act. If approved, the employees previously
exempted from obtaining the residence permit for employed person on grounds mentioned above in
8.1.4.2, will in the future require a residence permit for employed person. The bill also suggests significant
changes to the application process with the purpose of simplifying the process. The amended Aliens Act is
expected to come into force during the year 2011.
8.2 Applicable terms of employment
The assumption is that the posted employees are covered by home country employment legislation also
while working in Finland if the home country employment continues after returning from Finland. Therefore
the home country law and applicable collective agreements are applied to the workers also during the time
they work in Finland. However, some of the provisions provided by the Finnish employment legislation and
collective agreement are applicable if the Finnish provisions are more favourable to the employee than the
legal provisions that would otherwise be applicable.
However, if the employee comes to work in Finland by local agreement, the Finnish employment legislation
shall be applied, if not otherwise agreed. Generally the choice of law shall be made in the international employment, if not agreed otherwise, in accordance with Rome Convention. However, the choice of law has
been restricted by the mandatory provisions of the country where the work is performed. The Finnish employment legislation provides several mandatory provisions which has to be taken into consideration when
determining the terms and conditions of the employment.
8.2.1 Posted Workers Act

The Finnish Posted Workers Act (1146/1999) provides certain trade specific minimum standards which shall
apply to employment conditions of all foreign workers who are temporarily working in Finland. This law is
enforced in Finland by Occupational Safety Authority who conducts on-site reviews from time to time.
Therefore, the foreign terms and conditions of the employment have to be reviewed to comply with the
Finnish provisions and the applicable collective agreement.
The following provisions of Finnish law and Finnish collective agreement apply, in so far as they are more
favourable to the worker than the legal provisions that would otherwise be applicable:
1) as regards compensation and higher rates of pay on the grounds of working hours,
2) as regards compliance with the prescribed work and rest periods,
3) as regards the specification of annual holidays, annual holiday pay and holiday compensation,
4) as regards the specification of pay and employee housing,
5) as regards provisions concerning family leaves.
Also, the provisions of the Finnish generally applicable collective bargaining agreements concerning minimum wage, annual holiday, working hours and occupational safety shall apply to posted workers' employment relationships.
30
8.3 Liability to tax

Individuals who are resident in Finland are liable to tax on their entire income, whether derived from Finland
or abroad.
According to Finnish tax legislation an individual is deemed to be resident in Finland if he/she has his/her
main home and abode in Finland or stays in Finland for a continuous period of more than six months. The
stay in Finland may be regarded as continuous in spite of a temporary absence from the country. For example, an individual who stays in Finland can be treated as a resident even though he spends all the weekends
abroad. Also an individual who lives abroad but stays most of each week in Finland may be treated as a Finnish resident.
A Finnish citizen is considered to be resident in Finland until he/she has lived outside Finland for 3 calendar
years. If the person subject to world-wide taxation produces evidence that he/she no longer has considerable connections to Finland, this period might be shortened.
Resident individuals must pay Finnish state and municipal tax, as well as church tax if they belong to the
Lutheran Church or the Orthodox Church. Wealth tax was abolished from the beginning of year 2006. Resident individuals are liable to file a Finnish tax return.
However, qualifying foreign specialists and executives may apply for a special 35 % flat rate tax treatment
on their remuneration for work performed in Finland for the 48 first months of their employment and residence in Finland. To qualify for the foreign experts tax regime, certain conditions must be fulfilled. For instance, the foreign employee must not be a Finnish citizen or have been resident in Finland during any period in the 5 years preceding the employment. He/she has to be a teacher in an academic institution or a
non-for-profit researcher, or his/her cash salary has to be at least EUR 5,800 per month for the entire employment period. The salary must be paid from Finland. The application for the flat rate tax treatment has to
be made within 90 days of the commencement of the employment.
Non-resident individuals are those individuals who are not defined as residents. They are liable to tax on
their income derived from Finland.
If the employment is exercised primarily in Finland for a Finnish employer, the whole salary is usually considered to be Finnish-source income, even though the employee had had business trips abroad. Exceptionally it is possible that a part of working is regarded to have been exercised primarily in Finland and a part is
not in which case the salary may be divided to Finnish- and foreign-source portions.
The gross amount of a Finnish-source salary of a non-resident is subject to a final tax at source (35 %)
which replaces both the state income tax and local in-come taxes. A non-resident individual is not liable to
file a tax return.
Finnish internal tax legislation, as well as applicable tax treaties can restrict Finlands right to tax.
8.4 Social insurance entitlements
Entitlement to Finnish social insurance coverage depends on from which country the person is moving to
Finland and on the length of the stay in Finland. As a rule, individuals living permanently in Finland are covered by the Finnish social insurance.
Persons moving to Finland from another EU/EEA country, Switzerland and from countries with which
Finland has a social insurance agreement :
Working in Finland for less than four months: The employee will be covered by earnings-related social
insurance (pension, accident insurance etc.).
Working in Finland for more than four months: The employee is entitled to both earnings-related and
residence based social insurance. However, residence based social insurance has certain exceptions
31
and some benefits can only be granted if the employee is going to stay in Finland for more than two
years.
Employees posted to Finland from another EU/EEA country, from Switzerland or from countries with
which Finland has a social insurance agreement, may remain covered by the social insurance scheme
of their country of origin. In such cases, employees should have certificates of coverage showing that
they are covered by their home states social insurance. In such cases the employees do not normally
qualify for social insurance coverage in Finland. However, employees from EU/EEA countries and Switzerland have access to medical treatment in Finland by presenting a European Health Insurance Card.
Persons moving to Finland from other countries (i.e. countries with which EU Regulations or Social insurance Agreements are not applied):
Working in Finland for less than four months: The employee will be covered by earnings-related social
insurance (pension, accident insurance etc.).
Working in Finland for more than four months: The employee is entitled to earnings-related social insurance and to health insurance. Residence based social insurance will only be granted if the employee is
going to stay in Finland for more than two years.
Employees posted to Finland for less than two years will not be covered by earnings-related pension
scheme, if the requirements for the exemption are fulfilled.
Persons moving to Finland on a permanent basis must apply for coverage under the Finnish social insurance
scheme from Kela.
8.5 Employers obligations
The employer obligations are different for Finnish and foreign employers.
A Finnish employer (Finnish subsidiary or a permanent establishment of a foreign company) is liable to
withhold tax on paid salary. The tax is to be withheld on the gross amount, including both cash salary and
fringe benefits.
When the employee is regarded to be tax resident in Finland, the employer has to withhold the taxes according to the tax percentage stated in the employees tax card in every payroll period (at least monthly). If
the employee is regarded to be non-resident in Finland, the employer withholds the tax according to what is
stated in the employees tax-at-source card. If the employee does not show a tax card or a tax-at-source
card, the employer has to levy a withholding tax of 60 % on the salary including any fringe benefits.
The withheld taxes are remitted monthly to tax authorities on employers own initiative.
Employers who pay salary must report payroll salary and withholding taxes as well as paid employers social
insurance contributions to the tax authorities. The employer must also provide the tax authorities an Annual
Notification by the end of the January of the calendar year following the assessment year. If the reporting
obligation is neglected the tax authorities may deem a negligence fee. The reporting can be done electronically through the Tax Account Online system. Taxes are due on the 12th of every month.
If the employer is foreign without a permanent establishment in Finland, the employer does not have to
withhold any tax on paid salary. However, the employer shall submit an Annual Notification to the tax authorities on paid salary. In this case a resident employee working in Finland takes care of tax payments him
or herself, unless the employer registers voluntary to take care of the tax withholdings.
Finnish social insurance contributions are paid, if the employee is covered by corresponding social insurance
scheme and it is normally irrelevant whether the employer is Finnish or foreign. If payable, the employers
social insurance contribution is remitted monthly to the tax authorities in connection with the tax remittance
and statutory insurance contributions are remitted to the insurance company.
32
8.6 Foreign employers obligation to name a representative

A branch, which is any part of a foreign corporation or a fund that carries on with a trade or a profession on
behalf of an enterprise through a permanent establishment in Finland, shall have a named representative
with a domicile in Finland. This representative must be registered in the trade register.
According to the Posted Workers Act, a foreign employer which does not have a business entity in Finland
and posts employees to work in Finland for a Finnish company have an obligation to name a representative,
who is located in Finland, if the work performed in Finland lasts at least 14 days. Also, the representative
shall keep the employment related information required by the Posted Workers Act for 2 years after the
work has ended in Finland
A foreign employer with employees staying in Finland must in general file the employer payroll report to the
tax authorities.
9 Relevant contacts and addresses

9.1 KPMG Finland
KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. Our
purpose is to turn knowledge into value for the benefit of our clients, our people and the capital markets.
We have over 137,000 outstanding professionals working together to deliver value in 144 countries across
the world. In Finland, with over 650 professionals in 15 locations, KPMG is one of the leading providers
within our industry.
Juha Koskimaa is the head of employment law services at KPMG Finland. He may be contacted by telephone on +358 20 760 3537 or by email juha.koskimaa@kpmg.fi.
9.2 EK Confederation of Finnish Industries
Confederation of Finnish Industries EK represents all sectors of business and all sizes of companies.
About 16,000 member companies, of which 95 % are SMEs
Over 70 % of Finland's GDP
Over 95 % of Finland's exports
About 950,000 employees
EK's task is to create a better and more competitive operating environment for the business community in
Finland.
Contact information: Confederation of Finnish Industries EK, P.O. Box 30, FI-00131 Helsinki, Finland. Telephone +358 9 42020, email: netti@ek.fi.
33
kpmg.fi
KPMG
PO BOX 1037
(Mannerheimintie 20 B)
00101 Helsinki, Finland
Tel. +358 20 760 3000
Fax +358 20 760 3399
www.kpmg.fi
KPMG and the KPMG logo are registered

trademarks of KPMG International
Cooperative (KPMG International),
a Swiss entity.
2010 KPMG Oy Ab, a Finnish limited
liability company and a member firm of the
KPMG network of independent member
firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss
entity. All rights reserved. Printed in Finland.
The information contained herein is of a general nature

and is not intended to address the circumstances of any
particular individual or entity. Although we endeavor to
provide accurate and timely information, there can be
no guarantee that such information is accurate as of the
date it is received or that it will continue to be accurate
in the future. No one should act on such information
without appropriate professional advice after a thorough
examination of the particular situation.

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CONFEDERATION OF FINNISH INDUSTRIES EK

1 EMPLOYMENT AND LABOUR LEGISLATION............................................................ 5

4 EMPLOYEE PARTICIPATION ..................................................................................... 18

8.1.4.2 Residence permit ................................................................................................ 29

1 Employment and labour legislation

1.2 Collective agreements

working hours, pay schemes and pay regulation

overtime, irregular working hours and shift work

pay period, method of payment

special rules on sickness, industrial injury, pregnancy and child birth

regulations on employees representatives and industrial safety delegates

basic rights (freedom of association)

advance notice of industrial disputes

health and safety at work

employer's obligation to give certain information

use of external work force

Labour costs in the EU countries in 2008

Source: Confederation of Swedish Enterprise, Confederation of Finnish Industries EK.

Labour costs in various countries in 2008

Cost competitiveness of Finnish industry in 1980 - 2010

Relative unit labour costs

2.2 Indirect labour costs

Estimated Indirect Labour Costs in Finnish Industry 2010

110 TOTAL OBLIGATORY COSTS

TOTAL VOLUNTARY COSTS

TOTAL INDIRECT LABOUR COSTS

3.2 Probationary period

3.9 Privacy at workplace

3.11.1 Full-time employment

3.12.4 Parental leaves

The employer may set up the Occupational Health Services

alone or together with other employers;

by buying the services from a private institution; or

through a public health centre.

more than 1 and up to 4 years

more than 4 and up to 8 years

more than 8 and up to 12 years

5.3 Termination without notice

5.6 Protected employees

6 Social insurance contributions and benefits

contributions from employees and self-employed persons, and

In 2010 the social insurance contributions are on average as follows:

Employers social insurance contribu 2.23

Group life insurance

Employment pension insurance (TyEL) 16.9 (av)

Basic Unemployment Allowance and Labour Market Subsidy

6.4.4 Pension schemes

Union membership fees

Payments to unemployment funds

Statutory pension and unemployment contributions

State income tax for 2010 is levied as follows.

Tax at the lower limit

Tax in excess of the lower limit

Capital income is taxed at a flat rate of 28 % (in 2010).

7.4 Collection of tax

8 Foreign employees in Finland

8.1.2 Nordic citizens

8.1.3 EU/EEA/Swiss citizens

8.1.4 Third country citizens

8.1.4.1 Residence permit for an employed person

8.1.4.2 Residence permit

8.1.5 Family members

8.1.6 Future Changes