As your company grows, you may hire globally. Independent contractor relationships can support various project needs, but you must understand how to hire this type of worker. Once you’ve identified the characteristics of an independent contractor, you can begin your search for specialized skills.
Hiring independent contractors in Finland
Independent contractors can be valuable for completing projects or gaining highly trained expertise for a set time, but there are regulations to consider.
Independent contractors vs. full-time employees
Under Finnish employment law, independent contractors are not employees and do not perform work under an employer’s direction and supervision. Contractors have the freedom to determine work activities, hours, and place of work.
Full-time employees enter an employment contract and agree to perform work under an employer’s direction and supervision in exchange for pay or another form of remuneration. These employment relationships must meet the minimum requirements according to local labor laws, such as paid annual leave and minimum wage.
Penalties for misclassification
In the case of misclassifying a full-time employee as an independent contractor, employers will be required to extend full benefits to the individual. These full benefits may also include back payments for social security contributions and additional severance requirements. Authorities can also impose fines on employers for misclassification.
How to hire independent contractors in Finland
The contractor hiring process should involve three key steps.
1. Carefully conduct interviews
Interviewing is a crucial aspect of hiring, regardless of employee type. However, your approach to this process for an independent contractor should be different from a full-time employee.
First, when advertising your contractor requirements, emphasize the independent contractor status in your ad. Applicants should be fully aware of the logistics behind the position they apply for. During interviews, rather than focusing on character traits and contributions to company culture, focus on experience and skills that support project completion. Hiring an independent contractor is a business transaction and should be treated as such.
2. Create a service agreement
While contractors do not receive any statutory benefits from employers, clarifying hiring terms is a valuable step in defining the arrangement. Create a contract agreement to describe the terms of your business transaction. Essential information includes:
- Pay rate and arrangements
- Length of the contract
- Description of project
- Termination terms
3. Introduce necessities
Employers should be careful about training when hiring an independent contractor because it can signify direction and supervision that is not permitted. However, a brief introduction is helpful to situate your contractor and prepare them for the project. Quick introductions can include important people in project development, essential workflows, and in-house tools the contractor can use.
How to pay independent contractors in Finland
The Finnish tax authorities have various regulations regarding pay for independent contractors. Generally, payment falls into two categories — wages or trade income. Independent contractors and self-employed persons receive trade income.
Contractors will receive payments with an invoice, and employers will make payment arrangements before the project starts. Independent contractors may request a single fee for completing the project or provide an hourly rate for their services.
Often, employers will not be responsible for withholding taxes and social security contributions from contractor payments. Independent contractors typically file taxes and make contributions on their own. However, the Self-Employed Persons’ Pensions Act may determine that a self-employed person receives wages over trade income, and the tax authority will require the employer to withhold taxes and contributions.
Terminating independent contractors
Independent contractors do not have protection against dismissal like full-time employees do. Employers or independent contractors may terminate the contract on any grounds as long as it abides by the terms agreed upon before the project began.
Turn to Globalization Partners when hiring independent contractors in Finland
As an extension of Globalization Partners’ Global Employment Platform™, G-P Contractor allows companies to hire anyone, anywhere, for both short- and long-term projects. Whether you’re hiring employees or contractors, we streamline the process with a single solution for your global workforce. Contact us to learn more.
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Globalization Partners does not provide legal or tax advice and the information is not tailored to the specific situations of your company or your workforce. Globalization Partners makes no representations or warranties concerning the accuracy, completeness or timeliness of this information. Globalization Partners shall have no liability arising out of, or in connection with, the information, including any loss caused by use of, or reliance on, the information.