How does finland work?

Collaborating with a local accounting firm is a strategic choice, for both small local businesses and foreign companies operating in Finland.


This partnership assists companies in navigating the complex tax system and ensures compliance with all laws and regulations. Without the right knowledge, there is a risk of conducting business incorrectly. Familiarize yourself below with the Finnish employment, social insurance, and tax regulations. 

Official languages

Finnish & Swedish




euro (€, EUR)


5.6 million


Four Distinct Seasons

Corporate tax regulations

Corporate tax regulations.

Income taxes for employees

Employees’ income taxes in Finland are collected by the Tax Administration. The Finnish tax system is progressive, meaning that the tax rate increases as your income rises. Here is a basic overview of how employees’ income taxes work: 


Taxable income: Taxable income includes salary, bonuses, and other compensation received from your employer. It’s important to note that certain benefits may also be considered taxable income. 


Tax rates: The tax rate (tax percentage) represents the percentage of tax levied on your income. The tax rate is determined based on your earned income during the calendar year. Earned income includes wages, pensions, and benefits, among others. The final tax rate is influenced by factors such as your annual income, municipality of residence, various deductions, and potential church affiliation. 


Withholding tax: Taxes are usually withheld from amounts paid by your employer. This means that your employer calculates and deducts income tax and social contributions from your salary before you receive it. 


Tax deductions: Finland offers various deductions that can reduce your taxable income. Common deductions include those related to housing costs, travel expenses, and certain work-related expenditures. There are also deductions unrelated to work. Most deductions need to be declared by you. You can specify deductions when applying for a tax card or in your personal tax return. 


Pre-filled tax return: The Tax Administration automatically sends a pre-filled tax return for individuals every spring. The pre-filled tax return contains information about the previous calendar year’s incomes and deductions. If your deductions are not taken into account in the pre-filled tax return, you can declare them within a given period so that they are considered in the final taxation decision. 


Tax refund or tax arrears: After the Tax Administration processes your personal tax return, you will receive a taxation decision indicating whether you have paid too much or too little tax. If you have paid too much, you will receive a tax refund. If you have paid too little, you must pay back taxes. 


Tax treaties: If you earn income from both your home country and another country, you may be liable to tax in both countries. To avoid paying tax twice on the same income, countries have entered into various tax treaties with each other. In these agreements, they agree on which country has the right to tax in different situations.

Legally mandated employer social security fees

In Finland, as in many other countries, there are social insurance contributions paid by both employers and employees to fund various social benefits and services. These contributions partially finance the Finnish welfare system and help cover the costs of healthcare, social benefits, and other public services. 


Below is an overview of employers’ and employees’ social security contributions in Finland: 


Employment Pension Insurance: Employees contribute a portion of their salary to the Finnish pension system, financing both current and future pensions. Employers typically deduct this contribution directly from the employee’s salary and remit it to the pension insurance company. Both the employer and the employee participate in financing employment pension insurance. 


Unemployment Insurance: This contribution finances, among other things, unemployment benefits and support for those who become unemployed. Employers usually deduct this contribution directly from the employee’s salary and pay it to the Employment Fund. Both the employer and the employee participate in financing unemployment insurance. 


Health Insurance Contribution: The sickness insurance contribution finances the expenses of the sickness insurance system, including compensation for sick leave, rehabilitation, and parental leave. Employers pay the sickness insurance contribution to the Tax Administration. The employee’s sickness insurance premium is included in the pre-withholding rate. 


Accident and Occupational Disease Insurance Premium: This contribution finances compensation for work-related accidents and injuries. It covers the costs of medical care and rehabilitation if you are injured at work. 


Group Life Insurance Premium: Employers must take out group life insurance for their employees if agreed upon in the collective agreement applicable to the employer. Group life insurance is arranged together with accident and occupational disease insurance. The group life insurance premium finances compensation in the event of the employee’s death. 

In addition to the above-mentioned contributions, there may be additional insurance premiums financing various benefits offered by the employer to its employees, such as group insurances or benefits according to collective agreements. 


It is important to note that the employer pays a portion of these social contributions, and the total amount deducted from your salary varies depending on your income and other factors. Employee social security contributions are usually automatically deducted from your salary each month. 


It is also worth mentioning that the Finnish social insurance system is comprehensive and includes many other benefits and services that are not necessarily financed through the aforementioned social insurance contributions. 

Working hours in finland

Employment Legislation: The employment legislation in Finland regulates matters such as the length of working hours, breaks and pauses, overtime, and rest periods. According to employment legislation, the regular working hours are 8 hours per day and 40 hours per week, but deviations from these times can occur through collective agreements or agreements between employers and employees. 


Overtime: If an employee works more than the regular working hours, this is considered overtime. Overtime is regulated by legislation and may involve increased pay or compensatory time off for the extra hours worked. 


Breaks and pauses: Employment legislation establishes minimum requirements for breaks and pauses. According to the law, employees should have at least a half-hour break if the working hours exceed 6 hours. This break is usually not counted as working hours and, therefore, is not paid as working time. 


Collective agreements: Many employers and employees in Finland are bound by collective agreements. These agreements may contain specific rules regarding working hours, overtime, and other working conditions. Collective agreements can vary depending on the industry and profession. 


Flexible working hours: Flexible working hours and part-time work are common in Finland. These arrangements can vary and can be advantageous for both employers and employees. They can also be regulated through collective agreements. 


Distribution of working hours: In some cases, working hours may be unevenly distributed over the week or a longer period. For example, an employee may work longer days during certain weeks and then have shorter working days or time off in other weeks. This can be regulated through collective agreements or agreements. 


Night work: Work performed during the night may be regulated specifically with regard to the health and safety of the employee. There are rules for night work and related compensation. 


Leisure time: Employment legislation also regulates the right to leisure time, including vacation, sick leave, parental leave, and other types of absence from work. 

Public holidays in finland

New Year’s Day: January 1st. 


Epiphany: January 6th. 


Good Friday: A movable holiday that occurs on the Friday before Easter. 


Easter: Easter Sunday and Easter Monday are movable holidays, usually  

celebrated in April. 


Vappu: May 1st is a celebrated holiday in Finland, often associated with spring and the labor movement. A big celebration especially for students. 


Ascension Day: A movable holiday that occurs 40 days after Easter. 


Midsummer Eve: Midsummer Eve is always celebrated on a Friday at the end of June. 


Independence Day: Finland’s Independence Day is celebrated on December 6th. 


Christmas Eve: December 24th is Christmas Eve and an important holiday in Finland. 


Christmas Day: December 25th. 


Boxing Day: December 26th. 

sick leave

In Finland, employees have the right to sick leave when they are ill and unable to perform their work. Sick leave is an essential part of the Finnish labor law system, aiming to provide employees with time to recover in order to return to work in good health. Here is an overview of how sick leave works in Finland. 


Right to sick leave: If you are employed and become sick or injured, rendering you unable to work, you have the right to take sick leave. This applies to both short-term and long-term illnesses or injuries. 


Sickness notification: When you are sick and cannot go to work, you must inform your employer about it. Many employers have specific procedures for reporting sick leave. 


Salary during sick leave: During sick leave, you are entitled to salary for the sick leave period from your employer according to the provisions of the Employment Contracts Act. Based on a collective agreement or individual employment contract, your employer may pay your salary during the sickness period even for a longer time than required by law. The salary during sick leave can vary depending on your employment contract and working conditions. 


Duration of sick leave: Sick leave typically lasts as long as your doctor determines that you are unable to work due to illness or injury. Your doctor will issue a medical certificate confirming your inability to work. 


Sickness allowance: If your sick leave lasts longer than what is covered by your employer’s sick pay, you can apply for sickness allowance from the Social Insurance Institution of Finland (Kela). Sickness allowance covers a part of your lost income when you are sick. The application for sickness allowance is usually made by submitting a medical certificate and an application form to Kela. 


Return to work: Once you have recovered and are ready to return to work, you must notify your employer about your return to work. Your employer will inform you about when you can resume work. 


It’s important to note that sick leave and sickness allowance are regulated by legislation and may vary depending on your employment contract and employer. For current and specific information about sick leave in Finland, you should consult your employer or contact the Social Insurance Institution of Finland (Kela). 

Parental leave

Parental leave in Finland is an essential part of the social support system for families and is designed to promote a balance between work and family life. It provides parents with the opportunity to be present and care for their child during the early stages of the child’s life. Here is an overview of how parental leave works in Finland. 


Pregnancy Leave: Pregnancy leave is the period when the expectant parent is on leave from work before the estimated due date. Typically, the leave starts 30 weekdays before the estimated date of childbirth. By agreement, the leave can start later, but it must commence no later than 14 weekdays before the estimated due date. Weekdays refer to Monday to Saturday, excluding church holidays. 


Pregnancy Allowance: The Social Insurance Institution of Finland (Kela) pays pregnancy allowance to the expectant parent. Pregnancy allowance is paid for 40 weekdays from the beginning of pregnancy leave. 


Parental Leave: After the child is born, both parents have the opportunity to take parental leave. During parental leave, parents can apply for parental allowance from Kela. 


Parental Allowance: Parental allowance is a financial benefit provided to parents during parental leave. Its purpose is to compensate for the lost work income. Parental allowance is paid by Kela. Parental allowance is paid for a total of 320 weekdays. These days are evenly distributed between the parents so that both can use 160 weekdays. Some of the parental allowance days can be transferred to the other parent. Parents can receive parental allowance concurrently for a maximum of 18 weekdays. 


Partial Parental Leave: Parents also have the option to take parental leave on a part-time basis. This means that the parent works part-time and takes care of the child for the remaining time. This flexibility can help parents gradually return to work while continuing to be present for their children. 


There are also specific rules and benefits for adoption, families with multiple children, and unique family situations. It is important to note that legislation regarding parental leave may change and can vary depending on your situation. For precise and up-to-date information about parental leave in Finland, you should contact Kela or consult with a qualified advisor in labor law or family law. 

Annual vacations

In Finland, employees have the right to annual vacation as part of their employment terms. Annual vacation allows employees the opportunity to rest and recover from work, and it is a crucial aspect of the Finnish labor law system. Here is an overview of how annual vacation works in Finland: 


Right to Annual Vacation: All employees in Finland have the right to annual vacation according to labor legislation. This right applies whether the employment is fixed term (temporary employment) or indefinite (permanent employment). 


Vacation Period: The annual vacation period in Finland is from May 2nd to September 30th. During this time, employees have the opportunity to take the majority of their annual vacation, known as summer vacation. The remaining part of the vacation, i.e., winter vacation, must be taken before the beginning of the next vacation period. 


Vacation Length: The length of the vacation depends on how many vacation days the employee has earned during the vacation qualification year, i.e., the period from April 1st to March 31st. If the employee has been employed for over a year by the end of the vacation qualification year on March 31st, they typically earn 2.5 vacation days per month. If the employee has been employed for less than a year by March 31st, they typically earn 2 vacation days per month. The length of the annual vacation is usually 30 days, but it can vary depending on the employment contract and work experience. 


Vacation Pay: During the vacation, the employee is entitled to vacation pay, which is normally the same as the salary during work. 


Vacation Allowance: Many employees are entitled to a vacation allowance. This is an additional payment that usually corresponds to 50% of the vacation pay. The vacation allowance is based on provisions in a collective agreement or the employer’s local agreement. 


Transfer of Vacation Days: In some cases, it may be possible to transfer unused vacation days to the following year. This is usually regulated by the employer’s internal policy or a collective agreement. 


Vacation Compensation: If an employee terminates their employment before the vacation period, they are entitled to vacation compensation for unused vacation days. 


Vacation Planning: The employer and the employee can discuss and plan the vacation together according to the workplace’s needs and the employee’s preferences. The employer must consider the employee’s vacation preferences, but the vacation cannot always be taken exactly when the employee wishes due to the needs of the workplace. 


It’s important to note that the rules regarding annual vacation can vary depending on the industry, collective agreement, and employer. 

protection against dismissal

In Finland, protection against dismissal (Finnish term: irtisanomissuoja) is a legal principle that provides employees with protection in situations of dismissal or termination of employment. This principle aims to safeguard the rights of employees and ensure a certain degree of economic protection if they lose their jobs. 


Here is an overview of how the protection against dismissal works in Finland: 


Protection for Employees: protection against dismissal means that employers must follow specific rules and procedures when terminating an employee. The termination must be justified according to labor legislation. 


Justifiable Grounds for Termination: An employer can terminate an employee for justifiable reasons, such as economic difficulties, a shortage of work, or personal reasons related to the employee. The termination must be justified and well-founded according to the law. 


Notice Period: If an employee is terminated, they have the right to a specific notice period, which depends on their length of service with the employer. The notice period can vary from a few weeks to several months depending on how long the person has worked for the employer. 


Severance Pay: If an employee is terminated without valid reasons according to the law, they may be entitled to severance pay. Severance pay is financial compensation that the employer must pay to the terminated employee as a form of compensation for not following the law in the termination process. 


Legal Review: If an employee believes they have been unjustifiably terminated or that severance pay has not been correctly paid, they may have the right to turn to the labor court or general court to review their case. 


It’s important to note that termination protection is regulated by labor legislation and can vary depending on specific circumstances and the industry. For precise and up-to-date information on termination protection in Finland, it’s advisable to consult with a qualified labor law attorney or contact the Finnish Employment and Economic Development Office (Työ- ja elinkeinotoimisto) for guidance and advice. 

Company Insurances

Liability Insurance. Liability insurance benefits businesses and associations to protect themselves against unwanted costs and legal issues. The liability insurance covers situations where the company or association may be liable for damages affecting other parties. The insurance takes care of damage investigation, negotiations, and any legal proceedings if liability for compensation exists. Liability insurances are fundamental for businesses and entrepreneurs, becoming an essential part of the risk management system for companies. Different industries may require different types of liability insurances, and it is important to tailor the insurance coverage to the specific business.


Legal expenses insurance. Legal protection insurance serves as protection against legal disputes and their costs. The insurance covers lawyer and court costs related to legal disputes or criminal cases that may arise in business operations. It is recommended to take out legal protection insurance from the start of business operations since it does not cover agreements made before the insurance is taken out. Legal protection insurance is suitable for various industries and small to medium-sized businesses, and the premium is determined based on the company’s industry and payroll sum.



Business Interruption Insurance. When taking out business interruption insurance, you ensure the continuity of operations in unexpected events that may lead to interruptions, such as fire, water damage, or damage to a key person. The insurance compensates for the loss of contribution margins and payroll costs during the interruption, providing financial security and enabling continued operations. There are various types of business interruption insurances for different purposes, such as for operations, rental income, disability, delivery interruptions, and epidemic interruptions. In addition to business interruption insurance, it is important to supplement with other insurances to ensure complete protection.


Equipment Insurance. By taking out insurance for your equipment, loose items that employees carry outside the company’s regular premises are insured. The insurance provides comprehensive protection for various devices and machines used by employees, including phones, computers, and tools. The insurance covers damages caused by sudden and unpredictable external influences, such as falls or overturns. Compensation includes repair costs up to the insurance amount if the device can be repaired. To ensure global coverage, tools and materials should be insured in Finland.


Entrepreneur’s Pension Insurance (YEL). YEL- insurance is mandatory for most entrepreneurs and cannot be replaced with voluntary insurances. It is recommended to take out pension insurance according to the law on pension for entrepreneurs early in business operations, no later than six months from the start of operations. YEL-insurance provides a pension for old age and protection in case of loss of work capacity, illness, or parental leave. Family members are entitled to family pension upon the entrepreneur’s death. To be covered by YEL- insurance, requirements such as residence in Finland, work in one’s own company, at least four months of continuous entrepreneurship, annual work income of at least 9010.28 euros (in 2024), and being between 18 and 68 years old must be met. Even shareholders in limited companies and other business forms are included. The insurance applies to sole traders and their family members, insured either with YEL or TYEL insurance. In 2024, YEL insurance work income varies from at least 9010.28 euros to a maximum of 204,625 euros.


Accident Insurance for Entrepreneurs. The contribution of entrepreneurs to the success of the business is critical, and short-term absence can directly impact results. Occupational accident and occupational disease insurance do not cover entrepreneurs, making it important to ensure sufficient insurance coverage. Accident insurance for entrepreneurs or Self-employed persons’ accident insurance, offers quick and comprehensive care in case of accidents or occupational diseases, ensuring recovery and return to work. The insurance, available for private practitioners and various business forms, covers costs such as medical expenses, travel expenses, daily allowance for work disability, rehabilitation costs, and provides security in case of permanent disability. Compensation is based on annual work income, tied to YEL work income. Accurate verification of work income is crucial to ensure adequate compensation according to law and insurance conditions.


It is worth mentioning that the range and conditions of insurance can vary among different insurance companies. You can find detailed information about the insurances on the insurance companies’ websites.


Employer obligations

The working life in Finland is regulated by several provisions that both employees and employers must adhere to. Legislation and collective bargaining agreements determine aspects such as minimum wages, working hours, holidays, sick leave pay, and conditions for termination.


Among the employer’s responsibilities is the obligation to follow laws and agreements, treat employees equally regardless of their origin, religion, gender, age, or political opinion, contribute to employees’ safety and occupational health, provide employees with a written statement on key work conditions, and promote a good working atmosphere, employee performance, and professional development. However, the employer has the right to lead the work, provide advice, and issue regulations related to the performance of work. The employer can also terminate and cancel an employment contract within the legal framework.  Read more detailed information about employer obligations in Finland below.


Employment Contract. An employer in Finland must draw up an employment contract for its employees according to the Finnish Employment Contracts Act. The agreement must include essential details such as the workplace address, job duties, salary, working hours, and notice period.


Binding Collective bargaining Agreements. The employer must follow collective bargaining agreements if one exists for the industry. For example, the employer cannot pay a lower wage or demand more work than specified in the collective bargaining agreement. Here you can read more about collective agreements.


Occupational Health Care. According to Finnish law, it is mandatory for the employer to provide free occupational health care to all employees, regardless of employment form and duration. Occupational health care aims to promote the health, work capacity, and safety of employees in the workplace. It may include regular health examinations, and it is up to the employer to decide if it should also cover other services such as medical care and visits to doctors, psychologists, or physiotherapists.

It is important to note that specialist services are not usually included in occupational health care. The employer must inform employees about the services and support available through occupational health care. The right to occupational health care services only covers employees, not the family members of employees.


Workplace Safety. In Finland, great care must be taken with occupational safety. The employer is responsible for ensuring that work does not jeopardize the safety or health of employees. The employer must also ensure that the workload or working hours do not burden employees to the extent that their health is jeopardized. Employees must also ensure to perform their work safely and follow instructions.

The employer is obliged to familiarize employees with workplace safety instructions and teach them the correct working methods. The employer should pay for necessary safety equipment at work, and there should be a sufficient number of people with knowledge of first aid, first aid equipment, and instructions for accidents in the workplace.


Reporting to the Income Register. The Income Register is a database where employers report wages paid to their employees (salaries, fringe benefits, fees, other earned income, tax-free, and taxable expense reimbursements). The report must be made within five days after the salary payment. In the Income Register, the employer also reports the employer’s own health insurance contribution through a separate employer’s report.


Mandatory Insurances and Withholding. The employer must reserve capital for statutory expenses such as pension insurance contributions, unemployment insurance contributions, health insurance contributions, accident and group life insurance contributions, to pay the already withheld employee contributions, and the employer’s share.


In addition to statutory social security costs, the employer must withhold and pay any advance withholdings. The employer must also take into account any holiday pay debts, as well as social security and advance withholding contributions related to holiday pay debts on the payment date.


Read more about employer obligations on the Tax Administration and Occupational Safety and Health Administration websites.

Financing and support

Companies can receive public support, grants, or financing at various stages of their operations. Support can be sought for starting a business, making investments, or developing an existing business. Generally, financing support does not need to be repaid but often requires self-financing. 


 Below, we list some common financing support and grants in Finland. 


Start-up Grant: The start-up grant is a needs-based support aimed at entrepreneurs initiating their business activities. The support is designed to assist aspiring entrepreneurs during the initial phase of their business. The start-up grant can be granted for up to 12 months and is applied for in six-month periods. The grant is provided by the Employment and Economic Development Office in your region or the employment services in your municipality. Learn more about how to apply for the start-up grant here.  


Business Development Aid: This needs-based support serves as a financing tool for companies carrying out development projects outside their normal operations. Support can be granted for internationalization, product development, service development, and investments. The decision on support is based on an assessment of the company and the project. The company itself must finance at least half of the development project. Decisions on support are made by the Centre for Economic Development, Transport and the Environment (NTM-centre). More information about the support and application process can be found here. 


Pay Subsidy: Wage subsidy is financial support that the Employment and Economic Development Office or the municipality can grant to employers for the wage costs of an unemployed job seeker and as compensation for the time spent on work guidance. Learn more about wage-subsidized work and how to apply for support here. 


Business Finland: Business Finland is a public organization that supports companies in innovation and international business development. Through Business Finland, companies can apply for both support and financing for various purposes. Financing support is targeted at small and medium-sized enterprises. Learn more about Business Finland and financing opportunities here. 


Finnvera: Finnvera is a state-owned financing and development company that promotes growth and competitiveness in the Finnish business sector. Companies can apply for financing from Finnvera for purchases, investments, and operational capital needs. Finnvera complements bank financing with loans and offers guarantees for bank loans for your company. Learn more here. 


Finland, there are various permits, notifications, and registrations that businesses need to make and maintain to conduct legal operations. Different licenses and permits may be required depending on the type and industry of the business. It is essential to find out about these requirements before initiating or expanding business operations into new areas. Below are some common registrations and permits often required for conducting business or a specific type of business. 


Company Registration: Businesses must register with the Finnish Patent and Registration Office (PRH) to obtain a Business ID, which serves as the company’s identification number. 


Business Name: The company must choose a unique trade or business name and register it with the PRH. 


VAT Registration: Businesses with an annual turnover above a certain threshold must register for value-added tax (VAT) with the Tax Administration and report VAT on their transactions. 


Employer Registration: If the company has employees, it must register as an employer with the Tax Administration and pay social security contributions for its employees. 


Beneficial Owner Notification: Limited companies, cooperatives, and some partnerships must submit a notification of the company’s beneficial owners to the PRH. Beneficial owners are individuals exercising ownership or controlling influence in the company. 


Industry-Specific Licenses: Certain industries and activities, such as restaurants, construction projects, the transportation sector, financial services, and other specialized operations, may require specific licenses or permits to operate legally. provides information on the permits and obligations required in your industry. 


Environmental Permit: Companies engaging in activities that can impact on the environment must apply for an environmental permit from the local or regional environmental authority. This is especially relevant for industrial facilities, waste management, chemical activities, and similar operations. More information about permits can be found on and Tukes. 


To obtain more detailed information about specific requirements and regulations, it is recommended to contact authorities such as the Finnish Patent and Registration Office and the Tax Administration. We can also assist in assessing needs and applying for various permits and registrations to ensure compliance with all applicable laws and regulations. 

Collective bargaining agreements

Collective bargaining agreements are agreements between trade unions and employers that regulate working conditions, wages, and other employment-related matters within a specific industry, sector, or company. Here is a brief overview of collective agreements in Finland: 


Generally Binding Collective Agreements: Generally binding collective agreements cover the entire industry or sector. These agreements are binding for all employers and employees within the specific industry. You can find the generally binding collective agreements on Finlex. 


Normally Binding Collective Agreements: Normally binding collective agreements apply only to the companies that have signed the agreements or belong to the employer federation that has signed the agreements. 


In addition to collective bargaining agreements, there may also be individual agreements between employers and employees. These agreements can complement collective agreements and may contain specific provisions applicable to the individual employment relationship.