As your company grows, you may hire globally to explore new markets or scale your business. Independent contractors can support various project needs, but companies must understand how to engage this type of worker to ensure compliance in Finland.
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. employees
Under Finland’s employment laws, independent contractors are not employees and do not perform work under an employer’s direction and supervision. Independent contractors have the freedom to determine work activities, hours, and place of work.
Employees, on the other hand, agree to perform work under an employer’s direction and supervision in exchange for pay or another form of remuneration. Employer-employee relationships must meet the minimum requirements according to local labor laws, such as paid annual leave, working hours, and minimum wage.
Penalties for misclassification
In the case of misclassifying an employee as an independent contractor, employers will be required to extend full employment benefits to the individual. These 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 involves 3 key steps.
1. Carefully conduct interviews.
Interviewing is a crucial aspect of hiring, regardless of worker type. However, the approach to this process for independent contractors should be different from employees.
First, when advertising contractor requirements, emphasize the independent contractor status in your posting. 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, and are not entitled to employment related entitlements, clarifying the service terms is a valuable step in defining the arrangement. Create a service agreement to describe the terms of the business transaction. Essential information to include:
- Pay rate and arrangements
- Length of the contract
- Description of the project
- Termination terms
3. Know how to work with independent contractors.
Companies must be careful about training when hiring an independent contractor because it can signify direction and supervision that is not permitted. However, a brief overview is helpful to situate your contractor and prepare them for the project, such as introductions to important people in the project development, essential workflows, and in-house tools the independent contractor can leverage.
An important step in engaging the services of independent contractors is understanding how to work with them. Independent contractors should not receive the level of control or supervision that employees do as they are generally free to perform their work according to their own schedule and methods.
How to pay independent contractors in Finland
Finland’s tax authorities have various regulations regarding pay for independent contractors. Generally, payment falls into 2 categories — wages or trade income. Independent contractors and self-employed individuals receive trade income.
Independent contractors receive payments with an invoice, and companies 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, companies 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 as employees do. Companies working with 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 G-P when hiring independent contractors in Finland.
As a part of our #1 suite of global employment products, G-P Meridian Contractor™ allows companies to hire and pay global contractors faster, with self-service workflows and a wide set of flexible payment options. Whether you’re hiring employees or contractors, our platform streamlines the process with a single solution for your global workforce.
Contact us to learn more.