Hiring in Finland: A Comprehensive Guide for US Companies

Finland stands out in the global talent market for its highly educated workforce, strong technological infrastructure, and stable business environment. 

The country is renowned for its world-class education system, which consistently produces top-tier talent in technology, engineering, and business. 

For foreign companies, especially those from the US, Finland offers strategic advantages such as access to a skilled talent pool, a transparent legal system, and a culture that values innovation and work-life balance. These factors make Finland an attractive destination for international hiring and business expansion.

How to Hire Employees in Finland

Assess Your Hiring Needs

Before hiring in Finland, it’s essential to clarify your business objectives:

• Full-time vs. project-based support: Determine whether you need permanent employees for ongoing roles or contractors for specific projects. Finland’s labor market supports both, but each comes with unique compliance requirements.
• Local compliance requirements: Finnish employment laws are strict. Ensure your hiring plan aligns with local regulations, collective agreements, and union rules.
• Onboarding speed vs. long-term control: If you need to hire quickly, consider solutions that minimize setup time. For long-term operations, direct employment through a local entity may offer more control.

Hiring Options in Finland

You have two main routes for hiring in Finland:

• Set Up a Legal Entity: Establishing a Finnish subsidiary or branch gives you full control over your local team and operations. This is best for companies planning a significant, long-term presence.
• Partner with an Employer of Record (EOR): An EOR acts as the legal employer on your behalf, handling payroll, benefits, and compliance. This is ideal for fast market entry or when testing the Finnish market.

Employer of Record (EOR) vs. Setting Up a Legal Entity

Feature	EOR in Finland	Legal Entity in Finland
Setup time	Days to weeks	Several months
Compliance	EOR handles all compliance	Your responsibility
Control over employees	Limited (via EOR policies)	Full control
Cost	Ongoing EOR service fees	Higher upfront and ongoing costs
Payroll & benefits	Managed by EOR	Managed in-house
Ideal for	Fast entry, small teams, pilot projects	Long-term, large-scale operations
Risk of PE	Lower	Higher

Looking to expand into Finland without setting up a local entity? Learn how an EOR can simplify your global hiring.

Understanding Worker Classification

Employees vs. Contractors in Finland

Accurate worker classification is critical in Finland. Here’s how employees and contractors differ:

Aspect	Employee	Contractor
Work control	Employer directs work and schedule	Self-directed, controls own work
Relationship	Ongoing, long-term	Project or task-based
Benefits	Entitled to statutory benefits, leave, etc.	No statutory benefits
Payroll taxes	Employer withholds and remits	Contractor handles own taxes
Social security	Employer pays contributions	Contractor pays own contributions
Legal protection	Full labor law coverage	Limited protection

Legal Implications and Risks of Misclassification

Misclassifying workers in Finland can lead to:

• Retroactive payment of taxes, social security, and benefits.
• Fines and penalties from Finnish authorities.
• Legal disputes and reputational damage.
• Increased scrutiny for future hiring.

Finnish authorities enforce strict rules, and collective agreements often set additional requirements. Always assess the nature of the working relationship and consult local experts if in doubt.

For more on global worker classification, check out W-2 and 1099 Forms: Differences, Usage, and Classification Regulations.

Hiring Costs and Payroll

Hiring Costs Overview

Hiring in Finland involves more than just base salary. Employers must account for:

• Competitive salaries (e.g., €3,000–€4,500/month for tech roles).
• Employer payroll contributions (pension, social security, unemployment, accident, group life insurance).
• Annual leave (minimum 25 days).
• Sick leave, occupational healthcare, and training.
• Possible supplementary benefits (transport, meals, etc.).

Payroll Setup Steps

• Register as an employer with Finnish authorities.
• Collect employee tax cards and set up payroll software.
• Calculate gross salary, deduct income tax, and add employer contributions.
• Remit taxes and contributions monthly to the appropriate agencies.
• File required reports with the Incomes Register.

Income Tax Rates

• Income tax is withheld at source based on employee tax cards.
• Employer social security and pension contributions add approximately 20–25% to gross salary costs.
• Corporate tax is a flat 20% on profits.

Payment Methods

• Direct deposit (SEPA): Standard and preferred for local employees.
• International wire transfers: Used for employees with non-Finnish bank accounts.
• EOR payroll: If using an EOR, all payments and compliance are managed for you.

Using Global Payroll Services

Global payroll platforms streamline compliance, automate calculations, and ensure timely payments. They help manage multi-country payrolls and adapt to local law changes.

Discover more about global payroll solutions in Employer of Record: Complete Guide for Global Employers.

How to Properly Hire and Pay Contractors

• Draft a clear service agreement outlining deliverables, timelines, and payment terms.
• Confirm contractor status to avoid misclassification.
• Pay contractors via secure bank transfer, using platforms that support multi-currency payments if needed.
• Ensure contractors handle their own taxes and social security contributions.

Read more about best practices in Freelancers, Independent Contractors & Consultants: Exploring Opportunities & Challenges.

Compliance Risks

Incorrect Payroll Contributions

Mistakes in calculating or remitting payroll taxes and social security can result in fines and back payments. Finnish payroll is complex, especially with collective agreement requirements.

Permanent Establishment Risk

Operating in Finland without a legal entity can trigger permanent establishment (PE) status, leading to unexpected tax liabilities. Remote work arrangements and business activities must be carefully structured.

Learn more about PE risks in Navigating Complexities in North American Markets: Ensuring Local Compliance.

Statutory Benefits

Failure to provide mandatory benefits—such as paid leave, pension, or occupational healthcare—can result in legal action and compensation claims.

Misclassification Risks

Misclassifying employees as contractors exposes your business to retroactive liabilities and penalties. Finnish authorities are vigilant about proper classification.

Provincial/Regional Law Variances

Finland’s employment laws are largely national, but collective agreements may introduce sector-specific rules. Always review the relevant agreement for your industry.

Intellectual Property Rights

Employers should secure IP rights through employment contracts, especially for tech and creative roles. Common IP types include:

• Copyright (for creative works)
• Patents (for inventions)
• Trademarks (for branding)
• Trade secrets (confidential business information)

Include confidentiality and IP assignment clauses in all employment and contractor agreements.

Learn more:  Managing Intellectual Property (IP) Through EOR: Key Considerations for Businesses.

Onboarding Process

Before Their First Day

• Prepare compliant employment contracts referencing collective agreements.
• Register new hires with tax authorities and arrange mandatory insurances.
• Set up payroll and benefits administration.

On Day 1

• Conduct orientation on company policies and Finnish workplace norms.
• Introduce the employee to their team and supervisor.
• Ensure all equipment and system access are ready.

During Their First 90 Days

• Provide job-specific training and clarify performance expectations.
• Schedule regular check-ins and feedback sessions.
• Review benefits, leave policies, and professional development options.

Offer Letter Essentials

• Clearly state job title, salary, benefits, and working hours.
• Specify probation period, notice period, and reference applicable collective agreements.
• Include confidentiality and IP clauses.

NDAs and Confidentiality

• Use NDAs to protect sensitive business information.
• Ensure all employees and contractors sign confidentiality agreements, especially in tech and R&D roles.

Running Background Checks

• Obtain candidate consent before conducting checks.
• Verify employment history, education, and references as permitted by Finnish law.

Explore Top Eight Best Practices for Onboarding International Employees: How EOR Can Help.

Remote Employee Management

Managing remote teams in Finland requires robust processes:

• Computer and app access: Provide secure devices and use cloud-based collaboration tools. Set up VPNs and two-factor authentication for sensitive systems.
• IP protection: Use contracts to assign IP rights to the company. Regularly review access permissions and monitor data security.
• Best practices: Schedule regular video check-ins, foster open communication, and encourage participation in virtual team-building activities.

Understand How to Manage Employees Remotely and Globally.

Labor Law Compliance

Key Working Condition Requirements

• Standard workweek: 40 hours.
• Overtime: Requires consent and extra pay.
• Annual leave: Minimum 25 days.
• Sick leave: Paid from day one.
• Parental leave: Generous, with shared options.

Working Conditions by Employment Type

• Employees receive full statutory protections and benefits.
• Contractors have more flexibility but fewer legal protections.

No At-Will Employment

Finland does not allow at-will termination. Dismissals require just cause and proper notice.

Trade Unions and Collective Bargaining

• High union membership shapes wages and working conditions.
• Collective agreements often set industry-specific standards.
• Employers must comply with relevant agreements and engage with unions as required.

Explore Employment Compliance and Its Importance.

Termination Guidelines

Acceptable Termination Reasons

In Finland, termination must be based on valid grounds, such as:

• Redundancy due to business or operational changes.
• Employee misconduct or underperformance (with documented warnings).
• Mutual agreement between employer and employee.

Unjustified dismissals can result in legal claims and compensation.

Notice Periods and Legal Protections

• Notice periods range from 14 days to 6 months, depending on tenure and contract terms.
• Employees on sick or parental leave generally cannot be terminated.
• Severance pay may be required under collective agreements.
• Employers must document reasons for termination and follow due process.

Here are the Severance Regulations Across Countries.

Benefits of Hiring in Finland

• Highly skilled talent pool: World-class education and strong technical expertise.
• Stable business environment: Transparent laws and reliable institutions.
• Cost efficiency: Competitive salary-to-skill ratio compared to other Western European countries.
• Time zone advantages: Overlaps with both US and Asian markets for global operations.
• Modern infrastructure: Excellent digital connectivity and public services.
• Work-life balance: High employee satisfaction and retention.

Build Global Teams Smarter with Finland’s Talent Advantage

Finland offers foreign companies a unique blend of skilled talent, robust infrastructure, and a transparent regulatory environment. By understanding local hiring options, compliance requirements, and cultural expectations, US-based companies can build successful teams in Finland with confidence. Whether you choose to set up a legal entity or leverage an Employer of Record, careful planning and local expertise are key to a smooth market entry and ongoing compliance.

Ready to hire in Finland? Talk to our experts about global hiring solutions.