Finland payroll and benefits guide
What global businesses need to know about payroll in Finland
Finland stands out from its Nordic cousins as the only Scandinavian country to adopt the euro. It’s also a country that has built a strong track record for progressive employment rights, with generous maternity leave provision and a healthy focus on work/life balance.
The Finnish economy is extremely diversified. For example, on one hand, it has long been established as a technological leader, and ranked seventh in the world in the 2025 Global Innovation Index. But on the other hand, forestry-related exports like timber and paper still make major economic contributions. No single country accounts for more than a small fraction of Finland’s exports, making its economy relatively resilient to geopolitical factors, despite its proximity to Russia.
The other side of the coin is that while both quality of life and the quality of business in Finland is high, this comes at a high price. Income taxes are high, and both VAT and corporation tax rates are also relatively high. Add in the major influence of collective bargaining and this can make running payroll in Finland a complex endeavor.
Getting Started
Setting up a business in Finland is a straightforward process — but can no longer be done on paper. As of January 1 2026, all business notifications and applications are legally required to be done online with the Finnish Trade Register.
Companies must begin by confirming the use of their name in Finland at the Trade Register and the Finnish Patent and Registration Office. After this, an in-country bank account should be opened, although this is relatively easy to set up, and a ‘start of business’ notification should be filed with the Trade Register and relevant Tax Administration registers.
The minimum share capital for public limited companies is €80,000 (approximately £69,000; $92,500). There is no minimum share capital requirement for private limited companies, but there is a handling fee for online company registration of €330 (approx. £285; $380).
Employment Considerations
A formal written contract is not required for hiring an employee, but employers are required to provide a written statement detailing the basic terms of employment. Collective bargaining plays a strong role in the country’s economy and is usually done at industry level, although it may be done at company level as well.
Finland has a ‘duty of loyalty’ built into employment, meaning both employee and employer must show loyalty to each other. For example, if an organization undertakes a major downsizing, they may be obliged to rehire employees if their finances recover and the employees want to return.
As an EU country, Finland’s working hours are in line with the Working Time Directive, which means that work is limited to 48 hours a week, inclusive of overtime (averaged over a four-month period). The standard working week is 40 hours, eight per day from Monday to Friday.
Anything over this is considered overtime, which employees must specifically agree to work. Overtime is limited to eight hours per week, 138 hours over four months, and 250 hours per year (this can be extended to 330 hours through collective bargaining). Overtime should be paid at 150% for the first two extra hours worked each day. Work beyond this, or any overtime work on a rest day or at the weekend, should be paid at 200%.
Notice periods start at 14 days within the first year of employment, after which they rise to a month. They increase again to two months after four years of service, four months after eight years, and six months after 12 years. Collective bargaining can increase these provisions. Probationary periods can last for a maximum of six months.
Compensation, Bonuses and Severance
Finland is relatively unusual in Europe in that there is no fixed statutory minimum wage: instead, collective bargaining determines minimum pay levels on an industry-by-industry basis. Where collective bargaining is not in place, wage levels are entirely up for negotiation between employees and employers, to be agreed in employment contracts.
For reference, Statistics Finland has found that the average monthly full-time salary in Finland in 2024 — the most recently available figure at the time of writing — was €4,070 (approx. £3,500; $4,700).
Finland also has a 13th-month bonus scheme called the Lomahara, which means that employees receive an extra half a month’s salary in July, in time for their summer holiday. This is counted as normal salary and taxed in the same way.
It’s common for many employers to offer a range of benefits, such as meal vouchers, housing allowances, transport support, gym memberships, and cell phone and internet subscriptions. Discretionary bonus schemes are commonplace in Finland, and there are few restrictions with regard to these, as long as the awarding of bonuses to some employees and not others is not discriminatory under the terms of the Employment Contracts Act.
Severance pay is not mandated, and any provision for it should be contractually agreed. However, employers are required to give employees notice of their termination and pay any unused holiday or accrued vacation time.
Tax and Social Security in Finland
As is common in Scandinavian countries, the income tax system in Finland is multi-layered and therefore relatively complex. There are four main taxes to consider:
- National income tax: levied progressively across six bands, increased from five at the start of 2026. The lowest band of 12.64% applies to the first €22,000 earned each year (approx. £19,000; $25,400), after which bands of 19%, 30.25%, 34% and 41.75% apply. The highest rate of 44.25% applies to all annual earnings over €155,000 (approx. £134,000; $179,000)
- Municipal income tax: between 4.7% and 10.9%, varying between different municipalities
- Church tax: between 1% and 2.25%, varying between different parishes (only applied to members of the Finnish German, Orthodox, or Evangelic Lutheran churches)
- Public broadcasting tax: 2.5% on all annual income over €15,150 (approx. £13,100; $17,500), up to a maximum of €160 a year
Non-residents are generally taxed at a flat rate of 35% on their income sourced in Finland. Corporation tax remains at 20% for 2026, with a planned reduction to 18% from January 1, 2027. VAT was increased from 24% to 25.5% on September 1, 2024.
There are a number of social security contributions to make, and many of the rates have been revised in recent years:
- Pension insurance: 17.1% employer, 7.3% employee
- Health insurance: 1.91% employer, 1.98% employee
- Unemployment insurance: 0.51% employer, 0.89% employee
Employers will also be expected to make contributions to accident insurance and group life insurance, and these vary according to employee salary, level of risk, and collective bargaining.
Holidays and Leave
Finland has some unusual rules regarding paid leave. Employees generally get four weeks (or accrue two days per month if in their first year of employment), but this counts as 24 days; Saturdays are counted as working days even if the employee normally only works Monday to Friday.
Holiday is normally taken between May and September, and can only be taken outside this period with mutual agreement. At least two weeks of the holiday entitlement must be taken as one continuous block. Unused leave can be carried over into the following year, and it’s also possible for unused holiday to be converted into shorter working hours if the employer agrees.
There are 15 days of public holidays in Finland each year. Employees should be paid for them, but only if they fall on days when they would normally be working. Holidays that fall on weekends are not normally replaced by a weekday off in lieu.
Maternity leave entitlement is 105 days. Normally it starts 30 working days before the due date, but mothers have the option of moving this forward by 20 days and starting 50 days prior. Paternity leave entitlement is 54 days; up to 18 days of it can be taken while the mother is on maternity leave, and the rest is taken in one or two blocks before the child turns two. On top of this, there is also a parental leave allowance of 160 days per parent (single parents can use both, for a total of 320 days), that should be used before the child turns two. One parent can transfer a maximum of 63 days of their entitlement to the other if they so wish.
Maternity, paternity, and parental benefits are paid in the same way. Employees are normally entitled to some allowances and benefits from the state, which varies according to the parent’s income — the statutory minimum is €31.99 per working day (approx. £28, $37). There is no legal requirement for employers to pay their staff during these types of leave, but many choose to do so (or allow it to be negotiated through collective bargaining).
Paid sick leave entitlement can vary according to collective bargaining, but generally starts at four weeks for employees with less than three years of service. Employers pay full salary for the first ten days, after which social security kicks in. The level of social security payment is normally much lower than the employee’s regular salary; whether the employer tops up that payment is decided by contractual negotiation or collective bargaining.
In Summary: Payroll in Finland
What’s clear from this guide is that there is a lot of flexibility in Finnish payroll and employment, thanks to the influence of collective bargaining and the many areas that are open for negotiation. This is good news for the workforce, and bolsters Finland’s reputation as a progressive nation, but it can complicate matters from an operational payroll perspective. Working with a global payroll partner, especially one that can connect you to in-country expertise, can help you achieve and maintain payroll compliance, whichever industry you’re in and whatever the makeup of your workforce.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.