By Globalization PartnersFebruary 2021
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Finland is a Nordic country with a strong economy that encourages free enterprise and private ownership. It is also home to a highly skilled workforce. Whether you’re considering hiring a Finnish employee to work remotely for your company or hiring a whole team of employees in Finland, you need to understand some key aspects of the Finnish labor market, hiring practices, and employment laws. In our guide to hiring in Finland, we will cover these key points and provide some tips.
What to Know Before Hiring in Finland
International hiring requires some research and often legal assistance from local experts since every country has its own laws and customs that affect the process. The employment laws and hiring practices in Finland may differ from those of your home country. Let’s look at some important aspects of employment in Finland you should understand before recruiting employees there.
1. The Finnish labor market
The Finnish labor force stands out for its exceptionally high level of education. As of 2016, 87.9 percent of Finns over the age of 25 had attained an upper secondary or tertiary education. The average Finnish student is expected to complete about 20 years of education, which is three years above the average for the EU.
What are these students studying? In 2019, the largest percentage of degrees were earned in business, administration and law, and humanities and arts, closely followed by technology. More detailed data from 2017 shows that engineering, manufacturing, construction, journalism, and social sciences are popular subjects among university students as well. The most popular areas of study for doctoral students in 2019 included trade, administration and law, humanities and arts, technology, and health and welfare.
The largest sector in Finland by far is the service sector. Most Finnish employees work in this sector, which includes a broad range of industries, such as transportation, health and social services, and hospitality. The next largest sector in Finland is manufacturing. If your business belongs to one of these sectors, you will likely find highly skilled job candidates with experience in your field.
2. Collective bargaining agreements
Trade unions play a prominent role in the Finnish labor market. As with other Nordic countries, a high percentage of Finnish workers belong to a union. These trade unions negotiate with employers’ associations to create collective bargaining agreements (CBAs). CBAs add provisions to Finland’s statutory requirements for employees, often setting minimum wage requirements, maximum working hours, notice periods, and more.
Some CBAs are created for a specific company or group of companies. However, many CBAs in Finland apply to entire industries. This means that a CBA is likely to apply to your company and your Finnish hires, even if you don’t belong to an employers’ association in Finland or your employees are non-union members. In addition to learning Finland’s employment laws, you must also understand applicable CBAs to remain compliant.
3. Working hours and pay
The workweek in Finland must not exceed eight hours a day or 40 hours per week. Most white-collar workers are used to a slightly shorter workweek of 37.5 hours, divided into 7.5-hour days. Employees can work overtime if their employer requests it and they consent. Even with overtime hours, a workweek can generally not exceed an average of 48 hours across a four-month period.
Employees are entitled to a 50 percent premium on their normal hourly wages for the first two hours of overtime they work in a day. Additional overtime hours merit a 100 percent increase on normal wages. There is no national minimum wage in Finland since this standard is left up to CBAs. CBAs may also dictate different overtime pay.
4. Taxes and social benefits
Finnish employees pay income tax according to a progressive rate, as well as municipal income tax. Finnish Evangelical Lutheran and Orthodox church members are also subject to a church tax. Employers are responsible for withholding employees’ taxes from their paychecks.
Both employees and employers must pay into social welfare schemes. Employers alone contribute to accident insurance and group life insurance for their employees. Employers and employees contribute to unemployment insurance, sickness insurance, and pension insurance. The largest contributions by far go to pension insurance. In 2020, employers contributed an average of 16.95 percent of employees’ gross salaries to pension insurance. Employees contribute 7.15 percent or 8.65 percent, depending on their age. Employers must withhold employees’ contributions to social security.
5. Paid time off
The Annual Holiday Act entitles Finnish employees to paid leave and specifies that the holiday credit year runs from April through March. During an employee’s first year of work, they earn two days of paid leave for each month they work. After this period, employees earn a bit more each month, totaling 30 days, or five weeks, of annual paid leave. Employees also typically get 10 paid holidays off each year.
Finns are also entitled to paid sick leave. If workers become ill or suffer an injury and have to miss work, as long as those employees have been with your company for at least a month, you must continue paying them for up to 10 days. Employees who happen to fall ill before they’ve worked a full month are still entitled to half of their normal rate of pay.
6. Local languages
Finland has two official languages: Finnish and Swedish. Finnish is, by far, the more broadly spoken of the two. Most Finns who speak Swedish as their first language live in the Åland Islands, an autonomous part of Finland in the Baltic Sea. A 2018 survey found that 93 percent of Finnish residents aged 18-64 had some level of proficiency in at least one language besides their native language.
The most common second languages in Finland include English, Swedish, and German. Businesses based in English-speaking countries should know that about 90 percent of Finns attest to speaking some English. Speaking English is especially common in business settings. Still, learning a few Finnish phrases to use in conversation with your Finnish colleagues is a good way to show respect and goodwill.
The Cost of Hiring an Employee in Finland
When you’re hiring in a new country, you’ll have to consider the ongoing cost of labor and the upfront cost of the recruiting process. The cost of labor in Finland is slightly above the average for the EU. In addition to the salaries you pay your employees, you have to consider the additional cost of benefits. In Finland, we recommend budgeting an extra 25 percent of an employees’ salary to go to statutory benefits.
For the recruiting process, you should consider the following costs:
- Research and legal assistance to aid in compliance
- Business setup fees
- Your hiring committee’s time
- Third-party hiring agency
- Paid job ads
- Pre-employment screening
- Travel expenses
What Does a Company Need to Hire Employees in Finland?
When you want to hire employees in a new country, you have two main options: establish a business entity in the country or work with an Employer of Record (EOR). If you choose to set up a subsidiary, you will need to follow all the requirements for the specific location, in addition to the requirements laid out in Finland’s Limited Liability Companies Act. Setting up a business in Finland takes 13 days or more. You should plan to complete the following steps before you start hiring:
- Choose business structure: Generally, you’ll want to choose between a private or public limited liability company for your subsidiary. You can also set up a foreign branch of your company, but branches must operate in closer connection with your headquarters than a subsidiary. You will also need to determine your management structure.
- Open a bank account: You will need to open a bank account in Finland and meet the minimum share capital requirement for your business type.
- Submit business documents: You will have to draft and submit several documents, including foundation deeds, your Memorandum of Association, and an explanation of your company’s business and banking activity. You also need to submit identifying information for all shareholders and directors, including notarized copies of passports.
- File a start of the business notification: You also need to file a notification that you’re starting a business so you can be registered with the Trade Register and Tax Administration registers.
- Purchase insurance policies: You’ll need to take out private insurance policies. This includes employment pension insurance, workers’ compensation insurance, and group life insurance. Purchase policies from insurance companies authorized by Finnish law.
You can avoid this list of requirements if you choose to work with an EOR. When you partner with an EOR, also known as a professional employment organization (PEO), you don’t need to set up a business entity — the EOR serves as the official Finnish employer and is responsible for payroll, employee benefits, and HR tasks like onboarding so you can focus on growing your company. However, you still manage your employees and their day-to-day responsibilities.
Steps to Hiring in Finland
If you’re wondering how to hire in Finland, you’ll find that the process closely resembles that in many other countries. However, some aspects of Finnish law and culture should influence the way you go about each step.
1. Advertise job positions
Once you’re ready to begin your search, you need to create job ads. In most cases, you will want to compose these ads in Finnish, so you may need to hire a translator to help. You can also post ads in English if you want to attract fluent English speakers. Once you’ve created your job ad, you should seek out the best places to publish it.
Finland has an impressively high internet user penetration rate, so advertising jobs online is a solid strategy. You can still publish ads in newspapers or other traditional media, but online job boards like Monster.fi, Oikotie.fi, and Duunitori.fi are popular platforms. You can also post on job boards specific to your industry. Some Finns also look for jobs on social media sites, especially LinkedIn.
2. Choose top applicants
Finnish workers are used to submitting brief CVs and cover letters to apply for jobs. You may also want to build in questionnaires, skills tests, or other interactive steps into the application process, as long as you avoid any questions that could be deemed discriminatory. Your hiring agency or hiring committee will likely use software to sift through applications initially. As you narrow down the pool, you should begin to identify which candidates appear to be the best fit.
3. Interview candidates
Schedule in-person or virtual interviews with the most impressive applicants. Since Finns are used to digital communication, you shouldn’t run into any issues in conducting video call interviews. This is an especially valuable option if you are hiring remote employees in Finland. In-person interviews are an option, as well, and might be preferable if you’re setting up an office in Finland. If you’re conducting interviews long-distance, make sure you schedule them with the time zone difference in mind if your business is not located in Eastern European Time.
4. Extend job offers and review contracts
After one or multiple rounds of interviews, once you’ve identified the best candidates to join your company, you can formally offer them a position. This is also when you’ll need to settle on a salary and any other terms up for negotiation. Once an applicant has accepted your offer, you should create a detailed employment contract. Written contracts are customary in Finland.
You are required to give employees a written statement covering their key employment terms. You must provide them with this document by the end of their first pay period, and it should cover important contract features, including:
- Job duties
- Probationary period (if one exists)
- Applicable collective agreement
- Typical working hours and holidays
- Notice period in the case of termination
If you are hiring someone in Finland for a fixed period, you must also include this duration in the contract along with the reason justifying this fixed term. This is because Finland does not allow fixed-term contracts unless you have a valid reason for not making it an indefinite contract.
5. Onboard candidates
Finally, you can onboard your new hires, completing all the paperwork necessary for establishing payroll and adding the employees to your internal systems. If you haven’t already reviewed the employees’ contracts, make this a priority for their first day. You may also need to provide training to familiarize your new employees with your company and their job duties.
Globalization Partners Can Help You Build Your Finnish Team
This guide to hiring employees in Finland will help you get started with your global expansion process. However, as you can see, establishing a subsidiary and complying with all of Finland’s employment laws can be burdensome. If you want to simplify the process and start hiring new employees in Finland without dealing with the time and costs associated with establishing an entity, Globalization Partners can serve as your EOR in Finland. Our solution paired with in-country legal experts will handle payroll, benefits, and other HR tasks for all your Finnish employees. To get started with this solution, request a proposal from Globalization Partners today.