Running Payroll in Finland

For foreign companies planning to expand into Finland, setting up local payroll can initially seem complex due to various registration requirements that depend on the employer’s specific situation.

Employers must arrange mandatory insurances for their employees, such as pension, accident, and unemployment insurance, with contributions paid separately to each relevant provider. However, tax withholding is simplified through Finland’s tax card system, and income reporting is streamlined via the national Incomes Register, which requires a single submission after each payroll run.

Although there is no legal obligation to establish a local legal entity or register a branch in order to hire employees in Finland, foreign employers must still complete specific registration procedures and obtain statutory employee insurances before they can begin processing payroll.

Many registration requirements apply only if the employer is considered a regular employer, which is the case if:

• The employer pays wages or salaries to at least two employees on a regular basis, or

• The employer regularly pays wages or salaries to one employee and also to one or more employees whose employment is temporary or intended to be short-term, or

• The employer pays wages or salaries to at least six employees at the same time, even for short-term employment.

The first step in setting up payroll in Finland is to register with the Employer Register, which is administered by the Finnish Tax Administration. While registration may occur after the first employee starts working, it is legally required for regular employers. If a local entity or branch is established, registration can be completed as part of the electronic start-up notification submitted via the Business Information System (BIS).

Another essential requirement for running payroll in Finland is registering with the Incomes Register, Finland’s centralized database for submitting real-time wage and salary data. Additional registrations—such as with the Trade Register, VAT Register, or Prepayment Register—may be necessary depending on the business structure and activities.

In addition to these registration obligations, employers are legally required to arrange the following insurances for their employees:

• Employment pension insurance: Mandatory for all employers; contribution rates are set annually and vary slightly by provider. Employers must choose a provider from the authorized pension insurance companies.

• Occupational accident and disease insurance: Required if the employer pays more than EUR 1,500 in wages annually (updated threshold as of 2025).

• Group life insurance: Typically included with accident insurance and mandatory if a collective bargaining agreement (CBA) covering the sector requires it.

• Unemployment insurance: Compulsory for all employers and administered by the Employment Fund (Työllisyysrahasto).

The Finnish social security system can be complex for foreign companies, as it includes multiple mandatory insurances—only a few of which are administered by public authorities. The income tax system is also detailed, but the use of individual tax cards issued by the Finnish Tax Administration helps simplify withholding calculations for employers.

Tax Considerations

Income tax in Finland is collected at two levels: national and municipal. Municipal income tax is levied at a flat rate determined by each municipality and, as of 2025, ranges between 4.70% and 10.90%. National income tax is progressive, with rates ranging from 12.64% to 44.25%.

Members of certain religious communities must also pay church tax, set by the municipality and currently ranging between 1% and 2.25%.

Tax rates, deductions, and withholding details are listed on each employee’s personal tax card. If an employee fails to provide a valid tax card, the employer is obligated to withhold 60% of the employee’s gross wages as tax.

Taxable income from employment includes wages, salaries, bonuses, stock options, and other compensation provided either in cash or in kind (e.g. housing benefits, company car). Deductible items include mandatory pension and unemployment insurance contributions; partial deductions may apply to voluntary contributions. Employment-related expenses are deductible, either as actual costs or as a standard deduction of EUR 750 if no higher costs are reported.

Finnish tax residents are subject to taxation on their worldwide income, whereas non-residents are taxed only on Finnish-sourced income. Residency is determined based on either of the following:

• The individual has a permanent home in Finland; or

• The individual stays in Finland for more than six consecutive months within any 12-month period.

Non-residents are taxed at a flat rate of 35% on earned income unless they opt for progressive taxation by application and meet reporting obligations. Deduction rules for non-residents differ from those for residents.

A special tax regime applies to qualifying foreign key employees (typically executives, researchers, or highly skilled professionals). Under this scheme, employment income is taxed at a flat rate of 32% for up to 48 months, provided the employee meets eligibility criteria including minimum salary thresholds and has not been a Finnish resident in the five years preceding arrival.

Tax Withholding and Reporting 

Income tax in Finland must be withheld at source. Employers are responsible for calculating and deducting income tax from employees’ gross pay before disbursing salaries or wages. The withheld tax must be paid to the Finnish Tax Administration by the 12th day of the month following the payroll payment.

An earnings payment report must be submitted to the Incomes Register after each payroll run. This report includes details of all wages, salaries, and fringe benefits paid during the pay period. It must be submitted within five calendar days of the payment date and must be filed electronically through the Incomes Register’s e-service. Employers are required to submit a separate report for each individual employee for each payment. The report must include not only basic pay and bonuses, but also benefits such as housing, meal allowances, and company car usage, as well as any withheld taxes and insurance contributions.

For employees, filing an annual tax return is typically not required. The Finnish Tax Administration provides a pre-completed tax return in the spring of the year following the tax year. If the information in this return is accurate, no action is required. If corrections or additions are needed, the individual must submit the corrected return—usually by mid-May. The Finnish tax year follows the calendar year.

Social Security Contributions

Both employees and employers in Finland are required to make contributions to several statutory insurance schemes. This obligation applies to resident employees as well as non-resident employees, unless the employee can present a valid A1 certificate (or equivalent documentation) showing they are covered under the social security system of another country.

Mandatory social security coverage includes pension insurance, health insurance (divided into daily allowance and healthcare components), unemployment insurance, occupational accident insurance, and group life insurance. Contribution rates are revised annually. The current rates are shown in the table below.

Employers are responsible for contributing to all the above-listed insurance schemes, while employees contribute only to health, pension, and unemployment insurance. Notably, foreign key employees taxed under the 32% flat-rate scheme (the "foreign experts" regime) are not subject to separate Finnish social security contributions unless they voluntarily opt into Finnish social insurance. Foreign employers without a permanent establishment in Finland are not required to pay the employer’s share of the health insurance contribution.

Employers must withhold the employee’s share of pension, unemployment, and health insurance contributions and remit them—along with their own share—to the appropriate institutions. Health insurance contributions are paid to the Finnish Tax Administration, while contributions for pension, unemployment, accident, and life insurance are paid directly to the respective insurance providers.

• Health insurance contributions are due by the 12th day of the month following the payroll run.

• Unemployment insurance contributions are paid quarterly (January, April, July, October).

• Due dates for pension, accident, and group life insurance contributions vary depending on the chosen insurance provider.

Insurance providers calculate the contributions based on income data submitted through the Incomes Register. In addition to the standard earnings payment report, employers must file a separate monthly declaration for health insurance contributions. This must be submitted by the 5th day of the month following the pay period.

Employees in Finland are entitled to various benefits. These include:

• Annual leave and public holidays: Employees accrue annual leave based on the Annual Holidays Act. Typically, an employee earns 2.5 days of leave per month of full employment, totaling 30 days per year. During the first year of employment, the accrual may be 2 days per month, totaling 24 days. Finland also observes 15 public holidays annually.

• Pregnancy leave: Pregnant employees are entitled to 40 working days of pregnancy leave, which must commence between 14 and 30 working days before the estimated due date. This leave is compensated by the Social Insurance Institution of Finland (Kela).

• Parental leave: Each parent is entitled to 160 working days of parental leave, which can be taken in up to four separate periods until the child reaches the age of two. Parents can transfer up to 63 days of their quota to the other parent or another caregiver. In cases of multiple births, an additional 84 working days are granted for each additional child.

• Sick leave: Employees are entitled to sick leave when unable to work due to illness. The employer is obligated to pay the employee's salary during the period of incapacity, typically up to 9 working days. Thereafter, the employee may receive sickness allowance from Kela.

For more information on employee benefits and other employment requirements in Finland (including severance pay and termination procedures), check out our Global Hiring Guide.

There is no national minimum wage in Finland established by law. However, employers are typically required to comply with minimum wage levels set forth in the applicable collective bargaining agreement (CBA) for their sector. These agreements are legally binding and cover most industries, even for non-unionized employers and employees.

Overtime work is permitted, but the employer must obtain the employee’s consent in advance. Overtime pay is regulated by the Finnish Working Hours Act. The first two overtime hours must be compensated at 150% of the employee’s normal hourly wage. Any additional overtime hours must be paid at 200% of the regular hourly rate.

Finnish labor law does not mandate the payment of an annual bonus such as a 13th-month salary. However, many collective agreements include a holiday bonus, which is typically 50% of the employee’s holiday pay. The exact terms and conditions for this bonus depend on the applicable collective agreement.

In Finland, it is customary to process payroll once per month, unless a shorter pay period has been agreed upon in the employment contract or applicable collective agreement. Wages and salaries are generally due on the last day of the agreed pay period, though an alternative payday can be stipulated in the employment agreement.

All payments must be made directly to the employee’s bank account. While there is no legal requirement to pay salaries in euros, it is strongly recommended, as all payroll-related reporting must be submitted in euros.

After each pay period, the employee must receive a payslip. There are no formal requirements regarding the format—it may be issued electronically or in paper form—but it must contain at least the following information:

• Employer information

• Employee information

• Pay period

• Pay date

• Base salary, bonuses, and allowances

• Overtime compensation

• Fringe benefits and other compensation

• Withheld income tax, social security contributions, and any other applicable deductions