Hire employees in Finland using an Employer of Record

Your competitor just hired three engineers in Finland in two weeks. You're still trying to figure out if you need a business entity.

Here's the uncomfortable truth: Finland's tech talent is world-class, but the hiring process can stop you cold if you don't know the options. You've got three ways to hire there, and only one makes sense if you need people fast.

Option 1: Set up your own entity

• Cost: €15,000-40,000 upfront, €8,000-15,000 annual maintenance

• Timeline: 4-6 months minimum

• Complexity: Full tax registration, payroll system, legal compliance, HR infrastructure

• Makes sense when: Hiring 20+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control

• Timeline: Immediate

• Risks: Misclassification fines up to €50,000, back taxes, legal disputes

• Makes sense when: Short projects (< 6 months), specialized skills

• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee

• Timeline: 2-3 days to hire

• Complexity: None - we handle everything

• Makes sense when: 1-50 employees, testing markets, multi-country teams

The math is pretty clear here. If you're hiring 1-10 people, entity setup costs more than 4-5 years of EOR fees ($179/month = $2,148/year per employee). An EOR like Hire with Columbus handles employment contracts, payroll, taxes, benefits, and compliance updates while you focus on building your team.

Ready to hire in Finland without the legal headaches? Get started with Hire with Columbus.

What employment types can you use?

You've got three ways to bring someone onboard in Finland, and most companies pick the wrong one first. Here's how to choose the right approach from the start.

How can you hire in Finland?

Set up your own entity

• Upfront costs: €2,500-€5,000 for incorporation plus legal fees

• Timeline: 3-6 months to establish and get operational

• Ongoing: €15,000-€25,000 annually for compliance, accounting, payroll systems

• When it makes sense: 20+ employees long-term, permanent market presence planned

• Complexity: Full tax registration, payroll infrastructure, legal compliance team, HR systems

Hire contractors/freelancers

• Speed: Can start immediately with signed agreements

• Risks: Misclassification fines up to €50,000, back taxes, social security penalties

• Limitations: Can't control work schedules, limited integration with your team

• When it makes sense: Short-term projects under 6 months, specialized consulting work

• Note: Hire with Columbus handles compliant contractor agreements and EUR payments too

Use an employer of record (Recommended)

• Hire with Columbus becomes the legal employer in Finland

• You manage day-to-day work, performance reviews, and team integration

• Cost: $179/month per employee

• Timeline: Hire in 2-3 days instead of months

• We handle: Employment contracts, payroll, tax compliance, benefits administration

• When it makes sense: 1-50 employees, testing the Finnish market, multi-country teams

• ROI example: 5 employees costs $895/month vs €25,000+ entity setup

Employment contract types in Finland

Once you've decided to hire employees (not contractors), you'll need to pick the right contract type. Finnish law is pretty specific about when you can use each one.

Permanent contracts (toistaiseksi voimassa oleva työsopimus)

This is your standard full-time employment contract with no end date. Most companies default to permanent contracts because they're the most straightforward.

• Use for: Core team members, long-term roles, anyone you want to keep

• Trial period: Up to 6 months (4 months for roles under 8 months)

• Notice periods: 14 days to 6 months depending on tenure

• Termination: Requires valid grounds and proper process

Fixed-term contracts (määräaikainen työsopimus)

Finland restricts fixed-term contracts more than many countries. You can't just use them to avoid permanent employment obligations.

• Valid reasons: Seasonal work, temporary replacement, specific project with clear end date

• Maximum duration: No legal limit, but must have genuine business reason

• Conversion rule: Multiple consecutive fixed-term contracts often become permanent automatically

• Use carefully: Finnish courts scrutinize these contracts heavily

Part-time contracts (osa-aikatyösopimus)

Part-time employees get the same rights as full-time workers, just prorated by hours worked.

• Minimum hours: No legal minimum, but must provide predictable schedule

• Benefits: Full access to healthcare, pension contributions, vacation days (prorated)

• Overtime: Anything over agreed hours counts as overtime

• Flexibility: Can be permanent or fixed-term

Zero-hour contracts

These don't really exist in Finland the way they do in other countries. Finnish law requires predictable work schedules and guaranteed minimum hours in most cases.

How Hire with Columbus handles contracts

We draft all employment contracts according to Finnish labor law and your specific needs. Whether you need permanent contracts for your core team or fixed-term agreements for project work, we make sure everything's compliant from day one.

Our legal team reviews every contract type and handles any changes or renewals. You focus on managing your team while we handle the paperwork and compliance requirements.

For most international companies hiring their first Finnish employees, permanent contracts work best. They're simpler to manage and show commitment to your Finnish team members.

How does payroll and taxation work?

Hiring in Finland will cost you about 35-40% more than the base salary once you factor in all employer contributions and taxes. That's actually on the lower end for Nordic countries, but it still catches a lot of companies off guard when they see the final numbers.

The good news? Finland's payroll system is pretty straightforward once you understand the basics. The bad news? Get it wrong and you're looking at penalties that start at €500 and can climb much higher.

Finnish tax brackets for 2025

Finland uses a progressive tax system where higher earners pay more. Your employees will pay these income tax rates:

On top of income tax, employees pay municipal tax (typically 18-23% depending on location) and church tax if they're members (1-2%). Most employees in Helsinki end up paying around 25-35% total tax on their salary.

Social security contributions breakdown

This is where it gets expensive for employers. You'll pay way more in social contributions than your employees do:

The work accident rate depends on your industry. Office work sits around 0.2%, while construction can hit 3.0%. Most international companies hiring remote workers pay the minimum rate.

Payment schedule and timing

Finnish employees get paid monthly, typically on the 15th of each month. Unlike some European countries, there's no mandatory 13th or 14th month bonus, but many companies offer a summer holiday bonus in June.

You'll also need to pay holiday allowance on top of regular salary. It's 50% of the employee's regular daily wage for each vacation day. For someone taking their full 25 days of annual leave, that's an extra 12.5% of their annual salary you'll pay out.

Payroll taxes need to be filed and paid by the 12th of the following month. Miss this deadline and you'll pay a 20% penalty on the late amount, minimum €5.

Total employment cost example

Let's say you hire a software developer in Helsinki for €60,000 per year. What you'll actually pay:

• Base salary: €60,000

• Employer social contributions (26%): €15,600

• Holiday allowance (12.5%): €7,500

• Total annual cost: €83,100

That's 38% more than the base salary. For a €40,000 salary, you're looking at around €55,200 total cost. For €80,000, expect to pay about €110,800.

Payroll cycle and deadlines

Finland runs on a tight payroll schedule that doesn't leave much room for error:

1. Monthly payroll: Process by the 15th of each month

2. Tax withholding: File by the 12th of the following month

3. Annual tax reconciliation: Submit by January 31st

4. Pension contributions: Pay monthly with salary

5. Year-end reporting: Complete by February 28th

The Finnish Tax Administration (Verohallinto) expects everything filed electronically through their Ilmoitin service. Paper submissions aren't accepted for most payroll filings anymore.

Common payroll mistakes in Finland

The most expensive mistake? Miscalculating pension contributions. The TyEL pension system has specific rules about contribution bases that trip up new employers. Get it wrong and you'll face back-payments plus interest.

Another costly error is missing the monthly tax filing deadline. That 20% penalty applies to the full amount due, not just the late portion. For a company with 10 employees, a late filing could cost €2,000-3,000 in penalties.

Many companies also forget about the work accident insurance requirements. Every employee needs coverage from day one, and the rates vary dramatically by job classification. Misclassify someone and you might pay 10x more than necessary.

Setting up payroll in Finland yourself:

• Local accounting firm: €800-1,200/month

• Payroll software: €200-400/month

• Compliance risk: Fines up to €50,000 for serious violations

• HR expertise needed: €55,000+ salary for someone who knows Finnish labor law

With Hire with Columbus: $179/month per employee, fully compliant, zero penalty risk.

We handle all the TyEL registrations, monthly filings, and year-end reconciliations. Your employees get paid on time, taxes get filed correctly, and you avoid those expensive compliance mistakes that catch most companies in their first year of Finnish payroll.

What benefits and leave are required?

Finnish employees get 30 vacation days minimum after working a full year. That's six weeks off, which might sound generous until you realize it's pretty standard across Nordic countries. The vacation year runs from April 1st to March 31st, and employees earn 2.5 days per month worked.

Here's where it gets a bit complex: employees can take their vacation whenever they want, but you can require them to take at least 18 days between May and September (the "vacation season"). Any unused vacation days carry over to the next year, but only for 18 months - after that, you have to pay them out at the employee's current salary rate.

Sick leave that actually works

Finland's sick leave system is refreshingly straightforward compared to other countries. Employees get unlimited sick days, but there's a catch - you only pay for the first day if the absence is three days or longer. For days 2-9, the Social Insurance Institution (Kela) covers the cost through sickness allowance.

Employees need a doctor's certificate for absences longer than three days. The daily sickness allowance is about 70% of their daily wage, capped at around €60 per day in 2025. Most employers top this up to full salary as a competitive benefit, but it's not legally required.

Parental leave that's actually generous

Finland offers some of the world's most flexible parental leave. As of 2025, parents get 160 working days each (about 32 weeks) that they can use however they want. Both parents can take leave simultaneously, or one can transfer their days to the other.

The leave is paid at about 70% of salary through Kela, capped at roughly €60 per day. Many companies supplement this to 100% salary for at least part of the leave period. Pregnant employees must take at least 30 working days before their due date and 56 days after birth - the rest is flexible.

Public holidays you need to know

Finland has 13 public holidays in 2025, though some fall on weekends. Here's what you're dealing with:

When a holiday falls on a weekend, there's no substitute day off - employees just get the regular weekend. Christmas Eve is only a half-day holiday (until 6 PM), but most companies treat it as a full day.

Mandatory benefits breakdown

Three benefits are non-negotiable in Finland: pension contributions, unemployment insurance, and accident insurance. Here's who pays what:

Pension contributions (TyEL):

• Employee: 7.15% of salary

• Employer: varies by company size and employee age, typically 17-19%

Unemployment insurance:

• Employee: 1.25% of salary

• Employer: 0.5-2.95% depending on payroll size

Accident insurance:

• Employer: 100% (rate varies by industry, typically 0.1-3% of payroll)

You'll also need professional liability insurance if your employees handle client work. Most companies bundle this with general business insurance, costing around €500-2,000 annually depending on your industry.

Benefits that help you compete

Beyond legal requirements, most Finnish companies offer occupational healthcare (about €500-800 per employee annually), lunch vouchers (tax-free up to €11 per day in 2025), and flexible working arrangements.

Many also provide a mobile phone allowance (around €20-40 monthly), transportation benefits, and additional vacation days beyond the legal minimum. Tech companies often throw in gym memberships, continuing education budgets, and home office equipment allowances.

Common mistakes that cost money

The biggest error? Not registering for the right insurance policies before your first employee starts. You can face retroactive premiums plus penalties of 10-20% if you're late registering for TyEL pension insurance.

Another expensive mistake is miscalculating vacation pay. When employees take vacation, you pay their regular salary plus a "vacation bonus" of 50% of vacation pay. Miss this and you'll owe back payments plus interest.

Not providing proper occupational healthcare can result in fines up to €10,000, and your employees lose their right to extended sick pay benefits through Kela.

Administering these benefits correctly requires local HR expertise (€55,000+ annual salary), benefits administration software (€200-500/month), and ongoing legal compliance monitoring. Hire with Columbus handles all Finnish benefit administration, compliance, and payments for $179/month per employee, including the headache of vacation calculations and insurance registrations.

What are the compliance requirements?

You can't just fire someone in Finland, even with cause. The country has some of the most employee-protective labor laws in Europe, and getting termination wrong can cost you months of salary plus legal fees. Let's break down what you absolutely need to know.

Employment contract requirements

Every employment contract in Finland must be written in Finnish or Swedish (the official languages). You can't just translate your standard US contract and call it done - Finnish law requires specific mandatory clauses that make the contract valid.

Your contract must include the employee's full name, job title, workplace location, salary amount and payment schedule, working hours, vacation entitlement, and applicable collective bargaining agreement (if any). Miss any of these and the entire contract can be deemed invalid.

You don't need to register the contract with any government agency, but you must provide a signed copy to the employee within one month of their start date. The contract can be indefinite (permanent) or fixed-term, but fixed-term contracts are heavily regulated and can only be used for specific justified reasons.

Probation periods

The standard probation period in Finland is four months for permanent employees. You can extend it up to six months if specified in a collective bargaining agreement, but that's the absolute maximum.

During probation, either party can terminate the employment with 14 days' notice without stating a reason. After probation ends, you need just cause and proper notice periods to terminate anyone.

Here's the catch: if you terminate someone during probation for discriminatory reasons (pregnancy, union membership, etc.), you'll face the same penalties as wrongful termination. The probation period isn't a free pass to fire people unfairly.

Working time regulations

The standard work week is 40 hours maximum, typically spread over five days. Employees can work up to 8 hours of overtime per week, but you need their written consent for anything beyond normal hours.

Daily rest breaks aren't legally mandated, but if the work day exceeds 6 hours, employees are entitled to a break. Most companies provide 30-60 minutes for lunch. Employees must have at least 11 consecutive hours of rest between work days.

You're required to keep detailed records of all working hours, overtime, and rest periods. Finnish labor authorities can audit these records, and missing documentation can result in fines up to €10,000.

Notice periods

Notice periods in Finland depend on how long someone has worked for you. Both employee and employer notice periods are the same, which is unusual compared to other countries.

These are minimums - collective bargaining agreements often require longer notice periods. You can't waive notice periods even if you pay in lieu, except during the probation period.

Termination process

Finland requires "just cause" for all terminations outside of probation. Just cause falls into two categories: individual reasons (employee misconduct, poor performance after warnings) or economic reasons (redundancy, business reorganization).

For individual terminations, you must provide written warnings and give the employee a chance to improve. The process typically takes 2-3 months minimum. For economic redundancies, you need to consult with employee representatives for at least 6 weeks before termination.

You cannot terminate employees who are pregnant, on parental leave, or on sick leave (with some exceptions after extended periods). Violating these protections can result in reinstatement orders plus compensation.

Severance pay

Finland doesn't have statutory severance pay for most terminations. However, if you terminate someone for economic reasons and they've worked for you for at least 5 years, you owe them severance.

Collective bargaining agreements often require higher severance amounts. If you terminate someone improperly, courts can award compensation equal to 4-24 months' salary depending on the severity.

Data protection

Finland follows GDPR rules strictly. You need explicit consent to process employee personal data beyond what's necessary for employment. This includes background checks, health information, and performance monitoring.

You must appoint a Data Protection Officer if you regularly monitor employees (security cameras, computer monitoring, etc.). Employees have the right to access all data you hold about them and can request corrections or deletions in some cases.

GDPR violations in employment contexts typically result in fines of 2-4% of global annual revenue. Even small companies face minimum fines of €20,000 for serious data protection breaches.

Common compliance mistakes

The biggest mistake is using invalid employment contracts. Many companies copy templates from other countries without including Finland's mandatory clauses. This makes the entire contract unenforceable and can void your termination rights.

Wrong termination procedures are expensive. Companies often skip the consultation requirements or fail to provide proper warnings. This can result in reinstatement orders plus 6-18 months of back pay.

Missing collective bargaining agreement requirements is another costly error. About 90% of Finnish employees are covered by collective agreements, which override individual contracts in many areas. You need to know which agreement applies to your industry.

Penalties for violations

Common compliance failures in Finland result in specific financial penalties:

• Invalid employment contract: €5,000-€15,000 fine plus contract deemed void

• Improper termination: €10,000-€50,000 compensation plus potential reinstatement

• Missing mandatory contract clauses: Back payments owed, contract invalidation

• Working time violations: €2,000-€10,000 fine per violation

• GDPR employment violations: €20,000-€100,000+ depending on company size

Hire with Columbus ensures every contract includes all mandatory Finnish clauses and handles terminations according to local law. We work with Finnish employment lawyers to keep you compliant and avoid these costly mistakes entirely.

What has changed recently?

Finland's employment scene got a major shake-up in 2025, especially around work flexibility and taxes. The biggest change? Finland introduced mandatory hybrid work rights in March 2025, giving employees the legal right to request remote work arrangements if their job allows it.

Employees can now formally request up to three days of remote work per week, and you need a legitimate business reason to deny it. The law applies to all companies with 10+ employees, and you've got 30 days to respond to requests in writing.

Tax changes hit in January 2025:

Lower tax rates across most brackets make Finland more attractive for international talent. But you'll need to update all your payroll calculations if you're already operating there.

Finland also tightened its contractor classification rules in September 2025. The new "economic dependency test" looks at whether someone derives more than 60% of their income from a single client. Cross that threshold, and they're automatically considered an employee for tax purposes, regardless of your contract terms.

Parental leave got more generous too. Starting August 2025, Finland extended paid parental leave from 164 to 180 working days that parents can split however they want. Plus, there's now a "daddy month" - 30 days reserved specifically for the non-birthing parent that can't be transferred.

The minimum wage jumped 4.2% across most sectors in 2025, with some collective agreements pushing increases even higher. If you're hiring through an EOR like Hire with Columbus, these updates get handled automatically, but direct employers need to audit their pay scales now.

One frustrating change: Finland's work permit processing times increased to 4-6 months for non-EU citizens, up from 2-3 months in 2024. The immigration office blamed staffing shortages, but it means you need to plan hiring timelines much further in advance.