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Hiring in Finland
Background checks in Finland
Hiring an employee in Finland
Language requirements in Finland
Corporate presence requirements and payroll setup in Finland
Easily hire employees in Finland with our EoR solution
Employer of record in Finland
Hiring in Finland usually means setting up a local legal entity, which can be a time-consuming process. You’ll need to submit the right business documents, open a bank account, and register for taxes and social security — all before you’ve hired a single Finnish employee.
Some companies prefer to skip this administration and engage independent contractors in Finland instead. However, this option comes with a substantial risk of employee misclassification, which could leave your company facing fines and other legal consequences. There is another solution: hiring employees through an employer of record, or EoR.
What is an employer of record (EoR)?
An employer of record (EoR) is a company that hires workers on behalf of other companies. EoRs act as the legal employer for their clients’ workers, meaning they’re responsible for things like withholding taxes and social security contributions, complying with labour laws, and providing employees with mandatory benefits. These companies typically also handle HR processes like payroll, onboarding, and absence management on your behalf too.
Using an employer of record (EoR) in Finland
Working with an employer of record in Finland can help you to quickly access Finnish talent without the administrative burden of setting up a legal entity. Because they’ll handle everything from onboarding to offboarding on your behalf, all you’ll need to think about is finding the right person for the job. That gives you the time and energy you need to focus on what matters: growing your business.
What to know before hiring in Finland
Whether or not you choose to use an employer of record to hire in Finland, you’ll need a solid understanding of the labour laws, regulations, and cultural norms that apply there. This will allow you to not only ensure compliance with the law, but also build strong, productive relationships with your Finnish employees. In this section, we’ll take you through everything you need to know to hire employees in Finland — with or without an EoR.
Hiring in Finland
Finland is known for its strong economy, robust social welfare system, and highly skilled, education workforce. This makes it a popular destination for international business expansion. Before hiring in Finland, you’ll need to ensure you have a thorough understanding of the labour laws, regulations, and cultural norms that apply there.
Understanding Finnish labour law
Some of the most important employment legislation in Finland include the Employment Contracts Act, the Working Hours Act, and the Annual Holidays Act. These contain key provisions that can’t be departed from to the disadvantage of an employee. They also include some terms that can be altered by collective agreement and others that apply only when no other agreement is in place.
Collective bargaining agreements in Finland
As in other Nordic countries, trade unions play a significant role in the Finnish labour market, with many employees belonging to unions. Unions with employers’ associations to develop collective bargaining agreements (or collective agreements), which set minimum wage requirements, maximum working hours, notice periods, and other key standards that employers in Finland have to abide by.
In Finland, collective agreements can be specific to a company or a group of companies or apply to an entire industry. If you’re hiring in Finland, it’s likely that a collective bargaining agreement will apply to your employees. You’ll need to be aware of the agreement that applies so you can ensure your hiring practices are compliant.
Taxes and social security contributions in Finland
Employers hiring in Finland should also understand the tax and social security systems that they’ll need to pay into. Employees pay national tax according to a progressive scale, as well as a local tax, which varies by municipality. Employers are responsible for withholding this tax from their employees’ wages and remitting them to the tax authorities.
Employers and employees also both pay into the social security system, which covers unemployment insurance, sickness pay, and pensions. Again, employers must withhold employees’ contributions from their wages and pay them on their behalf. Employers in Finland must also make additional contributions for accident insurance and group life insurance for their employees.
Cost of hiring in Finland
The cost of labour in Finland is above the European average, but lower than other Scandinavian countries like Sweden and Norway. Employers hiring in Finland must also consider additional costs, including statutory and additional benefits. As a general guide, you should account for an additional 25% on top of each employee’s base salary to cover the cost of mandatory benefits.
Employers should also consider additional costs including:
- Business establishment fees.
- Recruitment agency fees.
- Pre-employment screening.
Hiring process in Finland
Foreign companies hiring in Finland must first establish a local entity, such as a branch or subsidiary. They must also open a local bank account, submit business documents, and register with the Finnish tax authorities. Alternatively, employers can reduce their costs and administration by hiring in Finland through an employer of record (EoR).
Background checks in Finland
Employers often carry out background checks on potential employees to verify information and confirm their suitability for a role. However, there are certain rules and limitations that you should be aware of before conducting a background check in Finland.
Required background checks for employment in Finland
Employers in Finland are required to verify that the people they hire have the right to work in the country. For EU and EEA nationals, this simply means checking a passport or other ID document. Employers hiring workers from third countries should ensure that they have the correct visa and work permit, or they could face fines for non-compliance.
Other background checks could be required in Finland depending on the nature of the position to be filled. For example, criminal records checks are obligatory if the role will involve working with children.
Other possible background checks for employment in Finland
Here are some of the other types of background checks you could carry out on potential employees in Finland, depending on the circumstances:
- Credit history checks: This type of check is only permitted when it’s necessary to comply with the law. For example, it might be required for roles that involve significant responsibility for company finances.
- Criminal records check: Again, this is usually only possible if it is required by law, for example for roles that involve working with children. It’s generally not possible for employers to access information about a potential employee’s criminal history directly. Instead, the employee must request an extract from the criminal record and present it to the employer.
- Medical checks: Medical examinations are another possible form of background check in Finland. However, these are only permitted if the purpose is to assess the candidate’s ability to perform the role in question. Employers are not allowed to use past medical history or perform new medical tests to deny job opportunities.
- Reference and education checks: This is a common type of background check in Finland, which allows employers to verify information provided by the applicant. Employers must have the candidate’s consent before performing this type of check.
- Social media screening: Browsing a candidate’s public social media profiles is a legitimate form of background check in Finland. This type of background check allows employers to assess potential employees’ alignment with company values. However, employers must ensure that their checks comply with data protection laws.
Restrictions to employee background checks in Finland
As in many countries, there are some limitations on background checks in Finland. Employers are not allowed to conduct invasive inquiries into a candidate’s personal life if the information they’re seeking isn’t relevant to the job in question. Access to candidates’ medical records is also heavily restricted. Employers may not perform checks that could lead to discrimination, such as seeking information on the candidate’s political opinions, religious beliefs, or personal life.
Hiring an employee in Finland
Before hiring an employee in Finland, it’s important to consider whether this is the right choice for your business, or whether another engagement structure would be better. For example, depending on your situation, it may be better to engage an independent contractor. Below, we’ll discuss the main hiring options in Finland to help you decide what’s best for your business.
Hiring options in Finland
There are three main hiring options in Finland, depending on your company’s needs and situation:
- Employee: Employees are workers engaged with an employment contract. Unless otherwise agreed, employment contracts in Finland are valid until further notice. Employees can work either part time or full time. Fixed-term contracts are also possible as long as certain conditions are met.
- Independent contractor: Independent contractors are independent professionals who manage their own time and resources. In Finland, they may work under a business name or through a company. Independent contractors are not considered to be in an employment relationship, and do not benefit from the protections of various employment laws in Finland.
- Temporary agency worker: Employers can also hire workers for a fixed period through temporary work agencies. In Finland, agency workers are commonly engaged under fixed-term contracts, but there needs to be a valid reason for the fixed term to apply. Agency workers have the right to equal treatment with permanent employees. Some collective agreements limit the use of temporary agency workers.
Using an employer of record as an alternative hiring option in Finland
Hiring an employee in Finland usually means setting up a local legal entity, which can be expensive and time-consuming. While hiring an independent contractor is generally easier, there are still legal and tax considerations to deal with. You’ll also need to ensure you don’t inadvertently misclassify employees as independent contractors, which carries hefty penalties.
Working with an employer of record to hire employees in Finland is a simpler option, which can give you faster access to Finnish talent without the administrative burden. Employer of record providers act as your workers’ legal employer and handle things like payroll and benefits administration on your behalf.
Language requirements in Finland
In Finland, there’s no statutory requirement for employment contracts and other documents to be in Finnish or any other language. However, employers must ensure documentation is in a language that the employee understands.
What is the official language in Finland?
Finland has two official languages: Finnish and Swedish. However, Finnish is by far the most common language used in Finland. Most Finns who have Swedish as their native language live in the Åland Islands, an autonomous Finnish region situated in the Baltic Sea between Finland and Sweden. Many people in Finland also speak English or German.
English language proficiency in Finland
English is widely spoken in Finland, especially in big cities like Helsinki and Tampere. Finland is ranked 14th in Europe for English language proficiency according to language education company Education First.
Corporate presence requirements and payroll setup in Finland
technically possible for a foreign entity to hire employees in Finland. However, there are certain business and corporate tax planning considerations that you’ll need to keep in mind. Businesses must also comply with payroll requirements and tax regulations. In practice, hiring employees in Finland usually means setting up a local legal entity (or working with a third-party intermediary like an employer of record).
Steps to set up payroll in Finland
Here are the steps to follow if you want to start hiring employees in Finland:
- Choose a structure for your business: The first step is to choose the right business structure for your Finnish company. You could either set up a foreign branch of your company or opt for a private or public limited liability company.
- Open a local bank account: Businesses in Finland require a minimum share capital, which means you’ll need to open a local bank account.
- Submit business documents: There are several documents that will need to be submitted in order to open your business in Finland. For example, you’ll need to draft and submit foundation deeds, a Memorandum of Association, and an explanation of your company’s business and banking activity.
- File a start of business notification and register for taxes: Filing a start of business notification allows you to register with the Trade Register and Tax Administration in Finland. This is essential if you want to do business in Finland and hire Finnish employees.
- Take out insurance policies: Employers in Finland must also take out private insurance policies, including pensions insurance, workers’ compensation insurance, and group life insurance. You must purchase these from an authorised provider before hiring employees.
Easily hire employees in Finland with our EoR solution
Hiring employees in Finland usually means setting up a legal entity, which can be costly and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.
Through our EoR solution, you can confidently hire employees in Finland, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.
Compliantly hire workers anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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