Costs of hiring employees in Finland

What are the costs of hiring an employee in Finland? Employee costs and taxes differ per country and industries in Europe. These differences can make it complex for North American employers to hire in Europe. In previous blogs, we have looked at the true cost of employment in several other European countries. In this blog, we will go into detail how it is arranged in Finland.

The cost of employment is a combination of short term, monthly recurring costs directly related to the employment of personnel, and costs that may or may not be incurred some years down the road. These "down-the-road" costs are largely depending on whether an employee decides to move on or is being made redundant. While this blog is not dealing with the subject of redundancy it is worth to read a blog  about some of the not so obvious costs employers face when hiring, but more importantly, firing an employee in Europe, Pitfalls of US employers in Europe.

Costs of hiring in Finland

Often referred to as “the land of a thousand lakes”, Finland is a sparsely populated country with roughly one lake (there are 187,888 lakes at last count) available for every 26 people. While many Europeans speak two or three languages, few of them can boast Finnish as a second or third language because it is rather complicated. To give but one example, the language does not have a future tense, and that could prove difficult if you want start in Finland as a wedding planner.

Hiring an employee in Finland is not much different than in other European countries but there are some peculiarities that few other countries have in common and that is the way the Employee and Employer’s social contributions are contracted and paid. Most European countries have laws and regulations governing the percentage that needs to be paid for certain mandatory employee benefits and/or insurances. Payments are typically made to a central or regional tax office and /or to an agency. In Finland however many of the insurances are contracted by the employer through commercial insurance companies and the employer withholds the employee part of this insurance from the wages and pays it to the insurance company.

Typical insurances that are contracted through a commercial insurance company are:

  • Workers compensation insurance
  • Unemployment insurance
  • Life insurance
  • Pension Insurance
  • Occupational Health Insurance (not mandatory)

In 2021. the total cost of employer’s social premiums and insurances is 17.9% of gross wages. This means that a monthly wage of EUR 5,000 sees an employer’s social premiums and insurances cost of EUR 895 making an employee’s annual gross wage of 60K costing just under 71K to the employer. The accrual of vacation days with associated social premiums is not included in this figure and for the salary mentioned above this comes to about 18% of gross wages.

The average wage in Finland ($45,498.00) is lower than in the United States ($65,836.00) and Canada ($53,198.00)

Please note that there will be variations for different industries and that collective bargaining agreements may affect the employer’s cost.

Holiday entitlement in Finland

The vacation year in Finland runs from 1st April to 31st March and an employee typically accrues 2.5 days per month, except for the first year of his/her employment during which the monthly accrual is 2 days per month. The employee is not allowed to take any holidays until the start of the new holiday year so the date of hiring has implications for the holiday plans of an employee. Hiring someone on 2nd April means that the employee accrues 2 days per month until 1st April the following year but is unable to take any of these accrued days for 12 months.

In conclusion, an employee in Finland has at least 24 vacation days. After his first year of employment this can lead up to 30 vacation days. To learn more about vacation days in Europe read our blog on Paid vacation days Europe 2021

Economy of Finland

Finland has a highly industrialized, largely free-market economy with per capita GDP almost as high as that of Austria and the Netherlands and slightly above that of Germany and Belgium. Trade is important, with exports accounting for over one-third of GDP in recent years. Finland is competitive in manufacturing, particularly in the wood, metals, engineering, telecommunications, and electronics industries.

Summary

In Finland, the monthly salary related expenses are about 118% of the gross wage.

Country

Finland (euros €)

Finland (dollars $)

Gross monthly salary Finland

€3,551.50

$3,808.16

Gross annual salary Finland

€42,618.00

$45,698.00

 

 

 

Employer's social premiums and insurances

17.9%

17.9%

 

 

 

Gross monthly employers cost Finland

€4,187.22

$4,489.82

Gross annual employers cost Finland

€50,246.62

$53,877.94

 

 

 

Paid leave Finland

Minimum 24 Days

Common 24 - 30 days

 

More information

In case you would like to have more information on hiring employees in Europe or other European HR related topics, do not hesitate to contact us. You can directly reach Monique Ramondt-Sanders - Executive Vice President of Human Resource Outsourcing at EuroDev - by clicking on the link. Interested in more information concerning our HR Outsourcing services? Please have a look at our HR Outsourcing page. EuroDev is your partner for PEO/EOR, payroll and consultancy services Finland. 

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About EuroDev

EuroDev, established in 1996 with offices in The Netherlands and France, has a single, defined purpose to help mid-sized North American companies expand their business in Europe. We have created a proven, successful business development model and since our founding, have partnered with over 300 companies to help them define and meet their European business goals. Services provided include Sales Outsourcing, HR Outsourcing and Digital Marketing.

Sources: OECD 

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