Hiring in Finland means taking on a well-defined set of statutory obligations from day one. The Finnish social insurance system is comprehensive, and employers are responsible not only for their own contributions but also for withholding the correct amounts from employees’ wages and remitting everything to the right authorities on time. This guide walks through every major cost, explains how the system is structured, and covers what you need to do before your first hire.
Registration before you hire
Before you pay a single salary, you need to be registered in the right places. Foreign companies hiring in Finland must register with the Finnish Tax Administration (Vero) as an employer liable to withhold tax. You’ll also need to register with the Finnish Centre for Pensions (ETK) to arrange pension insurance for your employees.
These registrations are not optional and can’t happen after the fact. Finnish authorities expect you to have your insurance arrangements confirmed before employment begins. If you’re using an Employer of Record (EOR), that provider handles registration on your behalf and takes on the legal employer role in Finland.
Pension contributions (tyel)
Finland’s occupational pension scheme is governed by the Employees’ Pensions Act, known as TyEL. It’s the largest single employer cost in the Finnish system and covers retirement, disability, and survivors’ pensions.
How the rates work
The total average TyEL contribution is 24.40% of gross wages. That cost is split between employer and employee:
- Employer average share: approximately 17.10% of gross wages
- Employee share: 7.30% of gross wages (the same rate for all employees aged 17–69)
The employee’s 7.30% is withheld from their salary and remitted by the employer, so you collect it but don’t bear it yourself.
Two additional rates are worth knowing:
- Basic contracted employer rate: 24.85% (applies to employers who have a standard pension insurance contract)
- Temporary/occasional employer rate: 25.85% (applies to employers who don’t have a standing pension insurance arrangement and hire only occasionally)
From 2026, two important changes took effect. The previous higher employee contribution rate that applied to employees aged 53–62 was removed, making the 7.30% rate uniform across all age groups from 17 to 69. The pension insurance age limit was also extended from 68 to 69, meaning contributions apply for an additional year of working life.
Who pays what
You pay the employer share directly to your pension insurance company. The employee share is deducted from gross pay and included in the remittance. Both portions count toward the employee’s eventual pension entitlement.
Health insurance contributions
Employers pay a health insurance (sickness insurance) contribution of 1.91% of gross wages. This contribution funds the statutory sickness allowance system and is paid entirely by the employer with no employee equivalent on top of it (the employee’s health insurance contribution is collected as part of their overall income tax withholding).
Unemployment insurance
Unemployment insurance contributions are split between employer and employee, with the employer’s rate varying by payroll size:
- On the first €2,509,500 of annual payroll: 0.31%
- On the portion above €2,509,500: 1.23%
- Employee share (withheld by employer): 0.89%
Most foreign companies entering Finland will initially sit in the lower band. The higher rate only kicks in once your Finnish payroll exceeds the threshold, which typically takes considerable headcount to reach.
Accident and occupational disease insurance
Employers are required to take out statutory accident insurance for their employees. The premium is approximately 0.70% of gross wages, though the exact figure depends on the industry and the risk classification applied to your business activities. Higher-risk sectors pay more; office-based roles sit at the lower end.
Total employer on-cost: what to budget
Adding up the standard employer-side contributions gives you a working estimate:
| Contribution | Approximate rate |
|---|---|
| TyEL (employer share) | ~17.10% |
| Health insurance | 1.91% |
| Unemployment insurance (lower band) | 0.31% |
| Accident insurance | ~0.70% |
| Total | ~20.02% |
For most foreign companies hiring a small team in Finland, the total employer on-cost sits in the range of 19–20% of gross wages. If your payroll grows above the unemployment insurance threshold, the blended rate increases slightly.
Income tax withholding
Finnish income tax is collected through an advance withholding system called ennakonpidätys. Employers deduct tax from each salary payment and remit it to Vero monthly. You don’t set the rate yourself: each employee has a tax card issued by Vero that specifies their personal withholding percentage, and you apply that rate.
State income tax brackets (2026)
Finland’s state income tax is progressive:
| Taxable income | Rate |
|---|---|
| €0–€21,200 | 0% |
| €21,200–€32,600 | 12.64% on amount over €21,200 |
| €32,600–€40,100 | 19.00% on amount over €32,600 |
| €40,100–€52,100 | 30.25% on amount over €40,100 |
| Above €52,100 | 33.25% marginal rate |
The marginal state rate of 33.25% doesn’t reflect the full picture. Municipal tax is levied on top of state tax at a flat rate set by each municipality, ranging from 4.70% to 10.90% depending on where the employee lives. Combined, the effective top rate on income above €52,100 can reach approximately 52%.
Employee deductions you withhold
As the employer, you withhold and remit three things from employee gross pay:
- TyEL employee pension contribution: 7.30%
- Unemployment insurance employee share: 0.89%
- Income tax (including the employee health insurance component of approximately 1.71%): per the employee’s personal tax card
Foreign expert tax regime
Finland offers a flat 25% tax rate for qualifying foreign experts who relocate to work in Finland. This replaces the standard progressive state tax plus municipal tax, and applies for up to 84 months from the start of Finnish employment.
To qualify, the individual must be a foreign national, must not have been a Finnish tax resident during the five years before the work begins, must earn a salary of at least €5,800 per month, and must hold specialist knowledge that justifies the role. The flat rate was reduced from 32% to 25%, making it a meaningful incentive for recruiting senior international talent.
If you’re hiring specialists who would qualify, the regime is worth factoring into your compensation discussions early.
Minimum wage and collective agreements
Finland doesn’t have a statutory national minimum wage. Instead, wages in most sectors are set by collective agreements, known as TES (työehtosopimus). These agreements are often universally binding, meaning they apply to all employers in the sector regardless of whether the employer itself is a union member.
Typical minimum wage rates under sector agreements range from approximately €11 to €14 per hour, though the figure varies by sector, role level, and agreement. Before you hire, you’ll need to identify which collective agreement covers your employees’ work and apply the applicable rates and terms.
Using an EOR to hire in finland
Managing Finnish payroll, pension insurance, tax withholding, and collective agreement compliance from abroad is a significant administrative undertaking. Many foreign companies choose to hire through an EOR rather than set up a local entity, particularly for initial hires or small teams.
An EOR becomes the legal employer in Finland, handles all registrations, runs payroll, withholds the correct amounts, remits contributions to Vero and the pension insurer, and ensures compliance with the applicable collective agreement. You direct the work; the EOR handles the compliance layer. For companies evaluating options, reviewing available EOR services is a practical starting point.
FAQ
What is the total employer social contribution rate in Finland?
For most employers, the total employer-side on-cost is approximately 19–20% of gross wages. This covers the employer share of TyEL pension contributions (around 17.10%), the health insurance contribution (1.91%), unemployment insurance on the lower payroll band (0.31%), and accident insurance (approximately 0.70%). The exact figure depends on your payroll size and the industry risk classification for accident insurance.
Do I need to register in Finland before my first hire?
Yes. You must register with the Finnish Tax Administration (Vero) as a withholding employer and arrange pension insurance through a TyEL-approved pension insurance company before employment begins. Registrations can’t be backdated, so it’s important to start the process well before your intended start date.
Does Finland have a national minimum wage?
No. Finland doesn’t have a statutory national minimum wage. Minimum pay is set by sector-level collective agreements (TES), which are often universally binding in their sector. Typical minimums under these agreements range from around €11 to €14 per hour, varying by sector and role. You’ll need to identify the applicable collective agreement for your employees’ work before setting salaries.
What is the foreign expert tax regime and who qualifies?
Qualifying foreign specialists can pay a flat 25% income tax rate instead of the standard progressive rates, for up to 84 months. To qualify, the person must be a foreign national who hasn’t been a Finnish tax resident in the prior five years, must earn at least €5,800 per month, and must hold specialist expertise relevant to their role. The 25% rate covers state income tax and replaces municipal tax, making total tax significantly lower than the standard progressive rate for higher earners.
