Finland employment law for foreign companies: what to get right first
Finnish employment law has a reputation for being complicated. It isn’t, particularly. It is layered – and foreign employers usually get caught out by the second layer, not the first.
We see this from the inside. Barona has employed people in Finland since 1999, and more than one in five of our own employees is not a Finnish citizen. Below is what a foreign company needs to know before hiring its first people here, in the order it will affect you – and where an employer of record (EOR) takes the work off your hands.
The short version
- There is no statutory minimum wage. Pay floors come from sector collective agreements, and these bind you even if you have joined nothing.
- Contracts can be oral, but written information on key terms is due within seven days of the start of work.
- Working time is capped at 8 hours a day and 40 a week as a rule, overtime needs consent every time, and you must keep records.
- Dismissal needs a proper reason. The threshold was lowered on 1 January 2026, but warnings and prohibited grounds still apply.
- You have three main routes in: post your own employees, set up a Finnish entity, or hire through an employer of record. There is a comparison table further down.
Two layers, not one
Layer one is statute. The Employment Contracts Act is the backbone, alongside the Working Hours Act, the Annual Holidays Act, the Occupational Safety and Health Act, the Non-Discrimination Act and the Co-operation Act.
Layer two is the collective agreement – työehtosopimus, or TES – and this is the one that surprises people. Sector agreements set minimum pay, working time arrangements, sick pay, holiday bonuses and much else, and they often give the employee more than the law does.
Miss layer two and you can underpay someone while being fully compliant with the Employment Contracts Act. That is not a defence.
Collective agreements: they bind you even if you joined nothing
A collective agreement binds an employer in one of two ways:
- Normally binding: you are a member of the employers’ organisation that signed it.
- Universally applicable (yleissitova): the agreement binds every employer in its sector, including those that belong to no employers’ organisation. This is the one that matters to a foreign company.
The Employment Contracts Act requires you to observe at least the terms of the universally applicable agreement for your sector, and any contract term that conflicts with it is void. Which agreements are universally applicable is confirmed by an independent board under the Ministry of Social Affairs and Health, and they are published in Finlex.
Coverage is high: a 2024 study for the Ministry of Economic Affairs and Employment put collective agreement coverage at roughly 89 % of all employees.
What this means in practice:
- Your pay floor is in the collective agreement, not in law. Where no agreement applies, pay must not be substantially below what is normal and reasonable for the work.
- Identify the right agreement before you make an offer, not after. Getting this wrong is the most common – and most expensive – foreign-employer mistake in Finland. As a rule, the applicable agreement follows the employer’s main line of business, not the individual job title, which is exactly where newcomers misjudge it.
- Local agreements are possible, with paperwork. Since 2025, non-organised employers can also agree locally within the limits of the collective agreement – but must submit the agreement to the occupational safety and health authority or face a negligence fee of €1,000 to €10,000.
This is the core of what an employer of record does. When Barona acts as your EOR, identifying and applying the right collective agreement is our job – from the pay level in the offer to holiday bonuses and sick pay rules – and we stay on top of it when the agreement is renegotiated.
Employment contracts
A Finnish employment contract can be oral, written or electronic. That is not licence to skip the paperwork: you must give written information on the principal terms of employment if they are not already in a written contract. The first eight items are due within seven days of the start of work, the rest within one month.
Trial period: at most six months, and at most half the length of a fixed-term contract. It can be extended by one month for each 30 days of sick leave or family leave. (You will still see “four months” in older English-language material – that rule ended in 2017.)
Fixed-term contracts normally need a justified reason. Since 1 June 2026, a fixed-term contract of up to one year can be made without one if it is the parties’ first employment relationship, or at least five years have passed since the previous one. Either party may give notice after six months, and before the contract ends the employer must say whether permanent employment is possible.
Working hours and overtime
- Regular hours: under the Working Hours Act, max 8 hours a day and 40 a week. Hours can be averaged over up to 52 weeks, but the eight-hour daily limit stays.
- Total working time: an average of max 48 hours a week over four months, including overtime. A collective agreement can extend the reference period.
- Overtime needs the employee’s consent every time. Daily overtime pays +50 % for the first two hours and +100 % after that; weekly overtime +50 %. Time off in lieu at the same rate is allowed. Sunday work pays +100 %.
- Rest: a break of at least an hour on days over six hours (30 minutes can be agreed), 11 hours’ daily rest and 35 hours’ uninterrupted weekly rest.
- Records: you must keep working time records showing hours worked and what was paid for them. This is one of the first things an inspector asks for.
Collective agreements often add their own rules on top – shift allowances, evening and night pay, different overtime arrangements. Under an EOR model, these are built into payroll from the first pay slip.
Annual holidays and sick pay
The holiday year runs 1 April to 31 March. Under the Annual Holidays Act, how much holiday accrues depends on how long the employment has lasted on 31 March:
| Employment on 31 March | Accrual | Full year |
|---|---|---|
| Less than one year | 2 weekdays per full month | 24 weekdays |
| At least one full year | 2.5 weekdays per full month | 30 weekdays |
A full month is one with at least 14 working days or 35 working hours. Note that Saturdays count as weekdays here, so 30 weekdays is five weeks.
Holiday pay must be paid before the holiday starts. The holiday bonus (lomaraha) is not in the law – it comes from the collective agreement, and most agreements have one. Budget for it.
Sick pay: under the Employment Contracts Act, the employer pays full pay until the end of the ninth weekday after the day the employee fell ill, if the employment has lasted at least a month (50 % if less). Most collective agreements give longer paid sick leave than this.
Ending employment
Under the Employment Contracts Act, an employer can terminate a permanent contract on two grounds only: a proper reason related to the employee, or a substantial and permanent reduction in work for financial or production-related reasons.
Since 1 January 2026, the personal threshold is “proper reason” instead of “proper and weighty reason”, and the law lists what qualifies – for example neglect of work obligations or breaking the law.
What did not change:
- A warning normally comes first, so the employee has a chance to correct course.
- Some grounds are always prohibited, such as illness (unless work ability is substantially and permanently reduced), taking part in industrial action, political or religious views, or using legal remedies.
- On financial grounds, there is no valid reason if the employee could be redeployed or retrained, or if you hire someone new for a similar role.
Statutory notice periods, unless otherwise agreed – and collective agreements often do:
| Length of employment | Employer’s notice | Employee’s notice |
|---|---|---|
| Up to 1 year | 14 days | 14 days |
| Over 1–4 years | 1 month | 14 days |
| Over 4–5 years | 2 months | 14 days |
| Over 5–8 years | 2 months | 1 month |
| Over 8–12 years | 4 months | 1 month |
| Over 12 years | 6 months | 1 month |
Unfounded termination is expensive: compensation is 3 to 24 months’ pay, up to 30 months for a shop steward.
Change negotiations (muutosneuvottelut) under the Co-operation Act apply mainly to companies with at least 50 employees, with lighter obligations for those with 20–49. If you are entering Finland with a small team, they are unlikely to apply yet – but plan for them as you grow.
Employing foreign nationals
Citizens of the Nordic countries, the EU, Liechtenstein and Switzerland need no residence permit to work in Finland. Most others need a residence permit for an employed person.
As the employer, you must:
- check the right to work before signing the contract
- keep the documentation for two years after the employment ends
- notify the Finnish Immigration Service (Migri) within seven days of the start of employment
- tell employee representatives the person’s name and the collective agreement applied.
Employing someone without the right to work can lead to a financial sanction of €1,250 to €37,530, and Migri can refuse to process your work-based permit applications for three to twelve months.
International hiring is where Barona’s EOR and Barona Global work together: as the legal employer, we carry the permit checks and notifications, and Barona Global’s specialists can handle the residence permit process, relocation and settling in.
Posting, own entity or employer of record?
Everything above applies to whoever is the legal employer in Finland. The real decision for a foreign company is who that should be. There are three main routes.
Posting your own employees. If you send existing staff to Finland temporarily, the Act on Posting Workers applies. You must notify the occupational safety and health authority before work begins (building work always requires notification), have a representative in Finland for postings over ten working days, and apply Finnish minimum terms: pay under the universally applicable collective agreement, working hours, annual leave and occupational safety. After 12 months, more Finnish terms apply. Negligence fees run €1,000 to €10,000.
Setting up a Finnish entity. A subsidiary or branch makes you a Finnish employer in your own right. It is the natural end state for a large, permanent operation, but it means registration, local payroll, statutory insurance, accounting and someone who knows all of the above.
Using an employer of record. The EOR is the legal employer in Finland: it signs the employment contract, runs payroll, applies the right collective agreement and handles the statutory duties. You direct the person’s day-to-day work. No entity is needed.
| Posting | Own Finnish entity | Employer of record | |
|---|---|---|---|
| Best for | Temporary assignments for your existing employees | Large, long-term operations with local management | Hiring locally without an entity: a first hire, a small team, testing the market |
| Legal employer | Your foreign company | Your Finnish entity | The EOR |
| Who you can employ | Your own staff, temporarily | Anyone | Anyone you choose to hire |
| Collective agreement | You identify and apply minimum terms | You identify and apply it in full | The EOR identifies and applies it |
| Payroll and employer contributions | Depends on social security status; Finnish tax may apply | You run Finnish payroll | The EOR runs Finnish payroll |
| Notifications and records | Posting notification, representative in Finland, records on site | All employer obligations | Handled by the EOR |
| Time to start | Fast, if the posting rules are met | Typically weeks to months | Fast – no entity to set up |
| Exit | Ends with the assignment | Winding down an entity | End the arrangement; staff can transfer to your entity later |
Posting suits short, defined projects. An own entity suits a business already sure of its scale in Finland. For everything in between – especially the first one to ten hires – an EOR is usually the fastest and lowest-risk way in. Many companies start with an EOR and move employees to their own entity once the operation is established.
One honest caveat: an EOR solves the employment side, not every tax question. Whether your company’s own activities in Finland create a taxable presence is worth checking with a tax advisor, whichever route you choose.
Recent changes
Last reviewed: October 2026
| Change | In force |
|---|---|
| Local agreements opened to non-organised employers | 1 Jan 2025 |
| Co-operation Act reform – main threshold raised to 50 employees, minimum negotiation periods halved | 1 Jul 2025 |
| Personal dismissal threshold: “proper and weighty reason” → “proper reason” | 1 Jan 2026 |
| Fixed-term contracts up to 1 year without a justified reason (first employment); lay-off notice 14 → 7 days; re-employment obligation limited to employers with 50+ employees | 1 Jun 2026 |
How Barona helps as your employer of record in Finland
None of the above is unmanageable. It is simply a lot to get exactly right for two or five people in a new market. As your employer of record in Finland, Barona becomes the legal employer of the people you choose, and we take care of:
- identifying and applying the right collective agreement
- Finnish-compliant employment contracts and the written terms of employment
- payroll, holiday pay, holiday bonuses and sick pay
- working time records and statutory insurance
- permit checks and Migri notifications for international hires – with Barona Global for permits and relocation
- a lawful process if the employment has to end.
You decide who to hire and lead their work. We make sure the employment holds up under Finnish law.
Frequently asked questions
Hire in Finland without setting up an entity
With Barona as your employer of record, the right collective agreement, payroll and statutory duties are taken care of from the first hire. You choose the people and lead their work.