Our guide to Payroll in Finland

Investing in Finland

The Finnish operating environment is stable and predictable. Finland is a member of the European Union and is the only Nordic country with the Euro and has a low corporate tax rate, only 20%. Therefore, many foreign companies have established operations in Finland for the long-term and enjoy high return on investment. With access to top high-tech talent and a Silicon Valley inspired business culture, Finland is an R&D hotspot and a testing ground for companies looking for business transformation. Engineering and high technology industries are the leading branches of manufacturing.

International companies are warmly welcomed to Finland. They can access the same benefits and grants as Finnish companies. Finns themselves are highly internationally oriented, and English is the common second language of the business community. Over 90% of Finns under thirty speak English.

Basic Facts about Finland

Common Phrases

Hello: Hei 
Good Morning: Hyvää huomenta
Good Evening: Hyvää iltaa
Do you speak English?: Puhutko englantia?
Goodbye: Näkemiin / Hei hei
Thank you: Kiitos
See you later: Nähdään myöhemmin

Registrations and Establishing an Entity

The most common forms of business organizations in Finland include limited liability company, foreign subsidiary, limited partnership, general partnership, and cooperative or branch of a foreign company. For a foreign organization, a registration as a foreign entity can in many situations be sufficient.

Depending on the type of business, a registration in the Trade Register and also to the respective registers kept by the Tax Administration might be necessary. These registers are VAT Register, Prepayment Register and the Employer Register. The Trade Register is a register for public use. All registration matters are handled by the Finnish Patent and Registration Office which is responsible for the Trade Register and works together with the Finnish Tax Administration.

As most of the Finnish authorities have digitalized their services and it is not possible to give filings or for example tax returns on paper, all entities need to either apply a Suomi.fi e-Authorization or give authorization electronically to an accounting company to do the filings electronically. The online identification works through your online banking credentials.

Banking

It is not mandatory to make payments to employees or the authorities from an in-country bank account.  Salary and 3rd party payments can be made on the clients´ behalf if the client has their own bank account in Finland.  Payments can only be made using bank transfers to both the employee’s and the authorities, cash is not accepted. Usually, bank transfers will only take a day to complete but international transfers will take 3-4 working days.

Working Week

The working week in Finland is from Monday to Friday.  The normal opening hours of for example a governmental office is usually eight hours, typically from 8:00AM to 4:00PM. 

National minimum wage

Finland does not have a government-mandated national minimum wage. Instead, minimum wage levels are determined by collective bargaining agreements relevant to each sector or industry. These agreements are negotiated between unions and employers, setting the minimum wages for different types of work. If a collective agreement does not exist in a specific sector, the employer and employee can agree on a reasonable salary. However, in general, wages must align with what is considered usual and reasonable for the work in question.

Employment Law / Annual Leave Act

The right to annual leave in Finland is covered by the Annual Holiday Act and exceptional situations are regulated by Collective Agreements.

For every full month worked, an employee is entitled to 2.5 days of holiday, totalling to 30 days per year. The entitlement is reduced to 2 days for each full month if the employment has lasted less than 12 months. To be entitled for holiday, employees must work for a minimum of 14 days or 35 hours during the month in question.  The holiday accrual period is from April 1st – March 31st.

Typically, bonus holiday pay amounts to 50% of holiday pay salary and is triggered once the employee returns. Bonus holiday pay is based on collective bargaining, not legislation. There are no other additional holiday payment entitlements in Finland unless otherwise agreed. Finnish workers also enjoy 8-13 public holidays a year in addition to the annual holiday entitlement.

Employment Contracts Act

According to the Employment Contracts Act, employees are entitled to take leave from work for the period when they receive parental allowance. The purpose of family leave is usually to care for the employee’s own child. Family leave is also allowed in case of compelling reasons if the immediate presence of the employee is necessary because of an unforeseeable event suffered by their family.

According to the Employment Contracts Act, it is not required to pay wages for the duration of family leave. However, many collective agreements specify that wages must continue to be paid during maternity leave and short-term absences due to a child falling ill (temporary child-care leave). An employer who pays employees on leave wages and holiday pay or holiday compensation may apply to Kela for compensation.

Sickness

Employees who cannot work due to accident or illness are entitled to:

• Full salary for 10 days if employment has lasted for 1 month or more
• Half salary for 10 days if the employment lasted for less than half a month
• After 10 days, a national sickness allowance is based on the employee’s earned income and is payable by Kela (Social Insurance Institution) under the Sickness Insurance Act 2004. It is paid for a maximum of 300 days.

Employers cannot normally recover the salary they pay during the first 10 days, but if obliged by a collective agreement to pay a sickness allowance for more than that period, then they can be reimbursed the national sickness allowance by Kela for that period to the amount paid to the employee. 

National Service

Every male Finnish citizen is liable for military service starting from the beginning of the year in which he turns 18 years old until he reaches 60 years old. A call up letter for military service will be sent to a male citizen that lives abroad. Employers are not required to pay salary during the military service by law, but it´s an obligation in some collective agreements. Law requires employers to continue any pre-existing contracts once the employee has completed the service.

Tax & Social Security 

The tax year runs from January 1st to December 31st.

Income Tax

Personal income tax returns in Finland are due in May. The exact date that the tax return is due will be printed on the pre-completed tax return form, which each taxpayer will receive from the tax authorities. There are no joint assessments available.

Residents in Finland are taxed on their worldwide income, while non-residents are liable to pay tax at source on the income received from Finnish sources. An individual will be resident if he/she has a principal place of abode in Finland or he/she spends more than 6 months in Finland. Any temporary absence will not break the continuity of the 6 months period.

Finland has a dual income tax system for individuals, under which income is divided into earned income and capital income. Any earned income is subject to national income tax, municipal income tax, church tax and social security contributions. Employers are obliged to pay tax withheld at the source from all wages paid to employees. The national income tax rate is progressive up to 31,25% and the municipal tax rate is 16,5%-23,5%. Capital income is taxed with a flat rate of 30% (up to EUR 30,000) or 34% (over EUR 30,000).

All employers who have deducted tax, need to make a monthly declaration. The declaration must be submitted electronically to the Incomes Register by the employer or a representative. Tax payment must be recorded in the Tax Office’s account no later than on the 12th of the following month after salary payments have been made.

Social Security

The statutory social insurance contributions payable by private employers involve earnings related pension contribution, employment accident insurance contribution, unemployment insurance contribution and employees’ group life insurance contribution plus the social security contribution.  The employer will withhold pension insurance and unemployment insurance contributions from an employee’s salary. The rest are employer´s costs.

Employees will pay a pension contribution of 7,30% of their salary. The employer´s part of pension contribution is on average 17,10 % depending on the discounts the company receives. The employer pays the pensions monthly to the pension company.

Unemployment insurance is collected from employees between the ages of 18 and 64 by the Unemployment Insurance Fund at the rate of 0,89 % of an employee’s monthly salary. The employer´s part of unemployment insurance is 0,31 %. Employer pays the unemployment insurances quarterly to the Employment Fund.

The employer pays also health insurance premium 1,91%, group life insurance 0,06% and accident insurance about 0,3% - 7% depending on industry.  According to Finnish Law, the employer is obliged to insure all employees working in Finland.

The employer must provide employees with statutory occupational health care. Every employee is entitled to occupational health care, regardless of the nature and duration of the employment relationship. Occupational health care must be provided and paid for by the employer. 

Summary of the 2026 percent:

Employee’s part:

• Pension Insurance Contribution 7,30%
• Unemployment insurance contribution 0,89 %
• Health insurance daily allowance contribution (0,88% Included in payroll tax, per diem payment)

Employer’s part:

• Pension Insurance Contribution 17,10 % (average)
• Total earnings-related pension insurance contribution rate 24,85 % (basic, without administrative costs)
• Unemployment insurance contribution 0,31 % up to 2 509 500 euros 1,23 % beyond
• Employer's health insurance premium/ social security payment 1,91 %
• Accident insurance premium 1 % - 7 %
• Group life insurance premium 0,06 %

Payroll

The information required from each employee for Finnish payroll purposes includes full employee information (including an address), employment contract at least in English, tax card information and an A1 form if the employee is a posted employee. Net based salaries are not typical in Finland and due to the progressive taxation nearly impossible to handle in payroll. Payroll reports must be archived for at least ten years.

Pay slip Example

It is legally acceptable in Finland to provide employees with online payslips that the employees can access using their online banking credentials. 

Reporting

Incomes Register

The Incomes Register is a national online database. It contains comprehensive information on individuals' wages, pensions and benefits. Data providers report individuals' earnings to the Incomes Register in real time, whenever a payment is made.

Only those organisations and authorities that are entitled to do so according to the Incomes Register act can browse and search data submitted to the Incomes Register. The data can only be used for the purposes and to the extent permitted by law.

Data users include:

• The Finnish Tax Administration

• The Social Insurance Institution of Finland (Kela)

• Employment Fund

• earnings-related pension providers

• Finnish Centre for Pensions (ETK)

• Ministry of Economic Affairs and Employment’s administrative branch

• Statistics Finland

• non-life insurance providers

• unemployment funds

• municipalities and joint municipal authorities

• Workers’ Compensation Center

• Patient Insurance Centre

• occupational safety and health authorities

• Province of Åland and its authorities

• Motor Insurers' Centre

• State Treasury

• National Enforcement Authority Finland

• The Housing Finance and Development Centre of Finland (ARA)

• wellbeing services counties

• Finnish Immigration Service

• The Ministry of Justice's administrative branch

• The police of Finland

• Finnish customs

• The Positive credit register

It is important that the data reported to the Incomes Register is reported on time and that the data is correct. This ensures that insurance contributions related to payments can be collected and payments to tax recipients made on time. If the reporting obligation is neglected, penalty fees will be imposed. The purpose of penalty fees is to encourage the reporting of correct information at the right time.

Monthly Reports

There are two separate report types to be submitted to the incomes register. First, all wages and earnings must be reported to the incomes register within 5 days of the payment to the employee. If the salaries are paid twice a month, this report needs to be filed twice as well. Secondly the employer makes another report called the employer’s separate report. This must be filed even if there weren’t any wages paid during the reporting period.

Data can be submitted via an interface, by uploading files in the Incomes Register's e-service or by entering the information in an online form. Information can only be submitted on paper in special circumstances. The Finnish Tax Administration's Incomes Register Unit will maintain the register and serve as the responsible authority.

Annual Reports

As the incomes register includes real time and more detailed data about wages, there aren’t any annual reports to be filed after tax year 2018.

New employees

When hiring a new employee, employer should include employee to statutory occupational health care services. Insurance companies will receive information of new employee through Incomes Register. Employer has no other obligation to register employee. 

Leavers

When employee’s employment is terminated, employer is required to pay any outstanding holiday balance in the final payroll, which should be paid in the last working day unless collective agreement applicable provides different information or something else has been agreed on employment contract. Payroll requires a reason for termination (e.g. employee´s resignation, retirement, financial and production related grounds) and the last payroll´s salary notification to Incomes register includes this information as well as ending date of employment.

Employee Benefits

Tax Free Benefits

All work-related general expenses such as travel costs can be compensated tax free to employees up to a limit confirmed by the tax authorities every year.

Work-related car mileage of the employee’s own car can be compensated for €0,55 per km. Any car benefit must be considered and recorded when company cars are used. This is calculated by the tax authority. In addition, a daily allowance of €54 can be paid by the employer for each day when the employee has travelled for 10 hours or more within Finland. Different allowances apply abroad. The employer can pay €25 per day for travelling 6-10 hours.

Fringe Benefits

Generally, all benefits are taxable in Finland unless there is an exception in the law. Employers can, for example, provide employees with company health care up to certain limits tax free.

The taxable amount is the value of the benefit, but for some benefits there are certain values defined regardless of the real usage or the monetary value of the benefit.

The Tax Administration evaluates the fringe benefits annually. The most common benefits are:

• Phone
• Company cars
• Meals
• Accommodation
• Garages

If you intend to work in Finland, you need a residence permit granted by the state of Finland. For Citizens of the EU, Iceland, Liechtenstein, Norway or Switzerland, a residence permit will not be required.

Foreign nationals must have a residence permit to stay in Finland for three months or longer. A residence permit may be granted on the grounds of family ties in Finland, employment/ studies, Finnish Descent, return migration, on humanitarian grounds or other exceptional reasons. It is issued to a foreign national for purposes other than tourism or short-term stays.

You will always need a residence permit if your work lasts for over 90 days. It is not possible to apply for a first residence permit based on working if you are already in Finland. There are some jobs which you may entitle you to work without a residence permit for a maximum of 90 days. (More info: https://migri.fi/en/work-without-residence-permit )

Residence permits may either be for a fixed term or permanent. The first fixed-term residence permit is generally issued for one year. The type of residence permit depends on the purpose of the stay. The residence permits are granted by the Finnish Immigration Service.

In most cases, you must submit the application for a first residence permit abroad. The permit can be completed online. The online application requires registration with the Finnish Immigration Service and a personal visit to a Finnish mission (embassy or consulate) in the country of origin. Applications for a first residence permit can also be filled in personally with the Finnish Embassy or Consulate in the country of origin. The Finnish Immigration Service will decide whether or not the permit can be granted.  Applications may be submitted in Finnish, Swedish or English.

Key updates in 2026

Tax cards 2026

Tax cards are valid from 1st January 2026. Income ceiling is calculated for the full year, but revised tax card can be applied at any time of the year in case income estimation changes from the original.

You will receive your tax card for 2026 both in MyTax and by post by the end of December 2025. Everyone can find their tax cards in MyTax in mid-December.

VAT Changes proposed as of 2026

The Government proposes changes to the application of VAT rates as of 1 January 2026. According to the proposal, goods and services currently subject VAT of 14% would in future be subject to reduced VAT of 13,5%.

The change will also concern newspapers and magazines or public broadcasting – which have been subject to reduced VAT of 10%

VAT rules for small business remain the same – the threshold of small-scale business is 20 000,00€, and the VAT remains abolished

Based on the provisions of the SME Directive, new VAT rules affecting small businesses were set into force as of 1 January 2025. The Finnish parliament accepted the amendments to VAT legislation needed for implementation of the SME Directive.

The Directive aims to lower the administrative burden for small businesses in the EU, create a situation in which everyone has the same chance of succeeding, and help small enterprises sell their goods and services more efficiently in the EU.

The new VAT rules concern all small enterprises including limited-liability companies, general partnerships, limited partnerships, the self-employed, and operators of agriculture and forestry. In other words, the small enterprise’s type or legal form will not be important.

Taxation of Earned Income (wages and pensions)

The change in tax rates for employees 2026 will depend on factors such as income level, number of dependent children and place of residence. The progression of payroll taxes will be steeper, with lower income levels usually taxed more lightly and higher income levels taxed more heavily.

The number of children will continue to reduce taxation, especially for low- and middle-income earners, with the introduction of a new child tax credit for the earned income tax credit.

Daily Allowances for Parents 

Employers have no obligation to pay salary during parental leave by legislation. Many collective agreements, however, set demands for employers to pay full salary to employee on parental leave for a certain period (2-3 months is a common time).

Kela, the Social Insurance Institution of Finland, pays daily allowances for parents regardless of family structure. In some cases, payment of daily allowances for parents may be affected if the family structure is an adoptive family, a multiple-birth family, a rainbow family, a stepfamily, or a one-parent family.

Pregnancy leave usually starts 30 working days before the estimated due date of the baby. When your pregnancy leave starts, you will get pregnancy allowance from Kela. Pregnancy allowance is paid for 40 working days.

If, at workplace, you are exposed to radiation, chemical agents or infectious disease, and you cannot be reassigned to other duties, you can stay away from work as soon as your pregnancy has been confirmed. During that period, you will get special pregnancy allowance.

You can start taking parental leave after the baby is born. Parental allowance is paid by Kela for a total of 320 working days. If a child has two parents, the days are divided equally between both parents. If you wish, you can give up some of your parental allowance days for the benefit of someone else. You and another person participating in the care of the child can get daily allowances for parents at the same time for a maximum of 18 days.

You can also work part-time and apply for partial parental allowance for that same period.

Further Information

For more information, or assistance with Finland tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country.  You should always seek specific advice for each specific situation.  This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.