Payroll in Finland
What tax considerations are there?
Finland’s residents are taxed on their worldwide income, according to how much they earn. Those earning less than €17,600 annually are exempt from tax; then it sits at a flat rate plus a percentage of additional earnings. The maximum amount is €10,413 + 31.25% on all income after the first €76,100.
In addition to the national tax, each municipality (there are 311 municipalities in Finland) also has its own local tax, between 16.5 and 22.5%. There are also Church taxes of between 1 and 2.2% for residents who are members of the Orthodox, Evangelic Lutheran, or Finnish German Church in Finland. There is also a Public broadcasting tax of 2.5% which applies to anyone over 18, earning more than €14,000.
Another tax to be aware of is that which applies to foreign experts; that is foreign workers earning an income from a Finnish source, whose work requires specific expert knowledge. These foreign workers are taxed at a rate of 35%, whereas other foreign workers are taxed at the same rate as Finnish residents.
Corporate Income Tax (CIT)
Corporate Income Tax in Finland is 20%. This applies to both Finnish resident companies and permanent establishments (PEs) of non-resident companies. The latter of these is taxed on any worldwide income that derives from the work of the PE.
Businesses are also required to pay a public service broadcasting tax. This is based on the company’s taxable income, which must be more than €50,000 for the tax to apply. The annual charge is either €140 or €140 + 0.35% of all income over €50,000. The maximum amount a company would pay is €3,000.
HR in Finland
What are the regular working hours in Finland?
Normal working hours in Finland are between 8am and 5pm, with either one or two hours for lunch. According to Finland’s Working Hours Act, regular hours must not go over 40 per week and 8 per day. Most people work a 7.5 hour day and a 37.5 hour week, like many European countries. Overtime must be paid at a higher rate. The first two hours (per day) will be paid at rate of an additional 50%, and anything over this is paid at an additional 100%. Sunday work should be paid as double time.
Vacation, maternity and sickness
Finland, and much of Scandinavia, is known for leading the way when it comes to work/life balance. As such, it will come as no surprise to learn that holiday allowance for employees in Finland is generous. It’s accrued at a rate of two days per month during the first year of employment, and 2½ days per month after that. The holiday year runs from 1st April to 31st March, and holiday season is from 2nd May to 30th September. Throughout most of Finland employees must take their holiday within this timeframe, however the final decision is up to the employer. In addition to this, there are 13 public holidays throughout the year.
Maternity leave in Finland is a maximum of 105 days, and it can begin between 30 and 50 days before the due date of the child. Maternity and paternity allowance is paid at a minimum of €27.86 per day for those with a gross annual salary of less than €11,943, and a maximum of €116.99 per day for those with a gross annual salary of more than €60,000.
Anyone who has worked for a company for more than one month in Finland will be paid their full salary while off sick, for up to nine days. Those who have worked for less than a month are entitled to 50% of their salary for this time. In the event that an employee has over nine days off sick, as long as they are a resident who has paid into the Finnish social security scheme, they can apply for sickness allowance.
In the event that either party wants to terminate their employment contract, a minimum notice period of 14 days must be adhered to. Employees who have worked for over twelve years at a company must be given six months notice of termination. There is no legal obligation to pay a severance.