Payment liability for unemployment insurance contributions

If you hire a renovation worker or household help at home and make a contract of employment with the employee, you will become an employer. As an employer, you are also obliged to take care of unemployment insurance contributions.

If you purchase the service from a company or entrepreneur, you are not liable to pay unemployment insurance contributions.

If you hire a childminder at home, you are an employer and you are obliged to take care of unemployment insurance contributions. Even if the wages consist entirely or partly of a home care allowance from Kela, your obligations as an employer include paying unemployment insurance contributions from the portion paid by Kela. If the childminder is under 18 or has turned 65 years old, no unemployment insurance contributions are deducted nor paid from their wages. If the salary paid during the calendar year does not exceed EUR 1500, the employer is not liable for unemployment insurance contributions but the employee’s payment should be deducted from employees who are liable to pay, and the employer can retain the deducted payment.

If you set up a childcare or cleaning collective with other households, you must also take care of the unemployment insurance contributions.

If only one contract of employment has been made with the childminder/cleaner, one member of the collective should submit the reports and payments in his/hers own name. In this case, the group is a single employer, and its members are jointly liable for the payments.

The parties who order the work are jointly and severally employers of the employee if:

• they have jointly concluded a single contract of employment with the employee,
• the management and supervision of the employee cannot be specified for each individual orderer and
• the characteristics of an employment relationship are met with respect to every orderer.

If each member of your collective concludes a separate employment contract with the employee, you are each individually responsible for the unemployment insurance contributions and other obligations.

The Act on Unemployment Security defines a part-owner of a company as a person who works for a company or corporate body in which

• they hold at least 50% ownership or 50% of the voting rights or other controlling power or
• their family member holds at least 50% ownership or 50% of the voting rights or other controlling power or
• the person, together with their family member(s), holds at least 50% ownership or 50% of the voting rights or other controlling power.

Private entrepreneur is not liable to pay unemployment insurance contributions. A person is a private entrepreneur or a farmer if he meets Insurance Terms and Conditions mentioned in Self- Employed Persons’ Pensions Act section 3 or Sections 3 to 5 of the Farmers' Pensions Act.

If a person is not a private entrepreneur or a farmer he may meet the definition of a part-owner. A part-owner of a company is a person who works for a company or corporate body in which

• they hold at least 15% ownership or 15% of the voting rights or other controlling power or
• the person’s family member(s), or the person together with their family member(s), hold at least 30% ownership or 30% of the voting rights or other controlling power.

In addition to a limited company, the company or corporate body may be, for example, a partnership, a limited partnership, a co-operative, a housing company, or a private entrepreneur.

Key terms 

Senior management position: Managing Director, Chairman of the Board, Member of the Board, or holds a similar position.A deputy member of the Board holds a senior position only if they participate in Board meetings so often that, in practice, they are considered to have decision-making power similar to that of any actual member of the Board.

Family member: spouse and cohabitant and relatives living in the same household who are direct ascendants or descendants (ie. children, parents and grandparents)

Type of company		Payment liability for unemployment insurance contributions
Private entrepreneur	The entrepreneur him-/herself	No payment liability
	Entrepreneur’s spouse	No payment liability
	Other family member living in the same household who receives wages and is in an employment relationship	Employee
Partnership	Partner*	No payment liability
	Partner’s family member	Employee
Limited partnership	General partner	No payment liability
	Partner’s family member	Employee
	Silent partner, who is not a family member of a general partner	Employee
	Silent partner, who is a family member of a general partner	Employee
Co-operative	A maximum of 6 members with an equal number of votes	Part-owner
	More than 6 members with an equal number of votes**	Employee
Undistributed estate	Party to an estate***	A person simply becoming a party to an estate does not cause any changes in the position of the person in the company or organisation
	When a share in the estate is created, the party to the estate starts to use the controlling power of an entrepreneur	No payment liability

* Entrepreneur as referred to in section 3 of the Self-Employed Persons’ Pensions Act and sections 3–5 of the Farmers’ Pensions Act.

Type of company		Payment liability for unemployment insurance contributions
Private entrepreneur	The entrepreneur him-/herself	No payment liability
	Entrepreneur’s spouse	No payment liability
	Other family member living in the same household who receives wages and is in an employment relationship	Employee
Partnership	Partner*	No payment liability
	Partner’s family member	Employee
Limited partnership	General partner	No payment liability
	Partner’s family member	Employee
	Silent partner, who is not a family member of a general partner	Employee
	Silent partner, who is a family member of a general partner	Employee
Co-operative	A maximum of 6 members with an equal number of votes	Part-owner
	More than 6 members with an equal number of votes**	Employee
Undistributed estate	Party to an estate***	A person simply becoming a party to an estate does not cause any changes in the position of the person in the company or organisation
	When a share in the estate is created, the party to the estate starts to use the controlling power of an entrepreneur	No payment liability

 

* A person who meets the conditions specified in Section 3 of the Self-Employed Person’s Pension Act (YEL) or Sections 3-5 of the Farmer’s Pensions Act (MYEL) is an entrepreneur or a farmer and is not liable to pay unemployment insurance contributions.

** Unless the rules of the co-operative include other provisions regarding the number of votes.

*** The principle is that a share in an undistributed estate does not change the position of a person in a company or organisation, unless there are special grounds for assessing the situation in a different way. However, the situation must be reassessed after the distribution of the estate at the latest if the person’s position changes.

Please note: The tables above do not cover all special circumstances, so please also read the more detailed instructions concerning payment liability and part-ownership. You can also call our customer service team.

Key terms 

Senior management position: Managing Director, Chairman of the Board, Member of the Board, or holds a similar position.A deputy member of the Board holds a senior position only if they participate in Board meetings so often that, in practice, they are considered to have decision-making power similar to that of any actual member of the Board.

Family member: spouse and cohabitant and relatives living in the same household who are direct ascendants or descendants (ie. children, parents and grandparents)

Ownership/number of votes		Senior position
		Yes	No
Alone	less than 15 %	employee	employee
	15-30 %	part-owner	employee
	over 30 %	no payment liability because the person is an entrepreneur*	employee
	50 %	no payment liability because the person is an entrepreneur*	part-owner
	over 50 %	no payment liability because the person is an entrepreneur*	part-owner
Together with family member (the person also owns shares)	less than 30 %	employee	employee
	from 30 % to less than 50 %	part-owner	employee
	50 %	part-owner	part-owner
	over 50 %	no payment liability because the person is an entrepreneur*	part-owner
Family member’s own shares  (but the person does not)	less than 30 %	employee	employee
	from 30 % to less than 50 %	part-owner	employee
	50 % or more	part-owner	part-owner

*) The current YEL (self-employed person’s pension insurance) came into force on 1 January 2011, containing transitional provisions, on the basis of which anyone owning 50% or less may be covered by the Employees’ Pension Act (TyEL) until the end of 2013 and may therefore be a part-owner.

 

Type of company		Unemployment insurance contribution
Private entrepreneur	The entrepreneur him/herself	no payment liability
	Entrepreneur’s spouse	no payment liability
	Other family member living in the same household who receives wages and is in an employment relationship	part-owner
Partnership	Partner*	no payment liability
	Partner’s family member**	part-owner
Limited partnership	General partner*	no payment liability
	Partner's family member**	part-owner
	Silent partner, who is not a family member of a general partner	employee
	Silent partner, who is a family member of a general partner**	part-owner

*) From 1 January 2016, the definition of entrepreneur in the Act on Unemployment Security will change so that it is no longer tied to the obligation to take out YEL or MYEL insurance. A person who meets the conditions specified in Section 3 of the Self-Employed Persons’ Pensions Act (YEL) or Sections 3–5 of the Farmers’ Pensions Act (MYEL) is an entrepreneur or a farmer and is not liable to pay unemployment insurance contributions.

 **) If the controlling power of a partnership's partner, or limited partnership's general partner, has been limited by the articles of association, this has an effect on whether a family member living in the same household is considered a part-owner.

In principle, your employees will be insured in Finland and unemployment insurance contributions will be paid in accordance with Finnish legislation.

The exceptions to this are employees posted from EU and EEA countries, Switzerland or countries with which Finland has signed a social security agreement, as well as people who work in two or more EU or EEA countries. Note that not all bilateral social security agreements necessarily have provisions on unemployment insurance contributions.

Furthermore, under certain conditions, a foreign employer will not be liable to pay unemployment insurance contributions for short-term work performed by a person residing in Finland.

Employees posted to Finland from EU or EEA countries
Employees posted to Finland for a temporary work assignment from an EU/EEA country or Switzerland are usually insured in the country from which they are posted. An employee posted for a temporary work assignment in the EU area can be covered by social security in the posting country for 24 months. In such a case, an A1 certificate for a posted employee is required.
A posted employee can remain covered by the posting country’s social security by special permission for a period longer than 24 months if the duration of the work in another EU country does not exceed five years.

Brexit’s impact on the applicable law
The United Kingdom’s withdrawal from the EU took effect on 1 February 2020. A transition period until 31 December 2020 was agreed on the withdrawal agreement. Persons, who have been in a cross-border situation between the EU and the United Kingdom before 1 January 2021, are still subject to the rules of applicable law under the EU Social Security Regulation.
From 1.1.2021 onwards, the EU-UK Trade and Cooperation Agreement will apply to workers moving between the EU and the United Kingdom. Under the terms of the agreement, a posted worker may under certain conditions, be covered by social security in his country of departure for a maximum of 24 months.

Employees of public bodies
Employees and officials, as well as persons regarded as officials working for a public body and posted to Finland from an EU or EEA country, Switzerland or the United Kingdom, are covered by social security, without a time limit, in the employer’s home country. No unemployment insurance contributions are paid for them in Finland.

Finland’s binding social security agreements
If a bilateral social security agreement that is binding on Finland includes provisions on unemployment insurance, payment liability is decided on the basis of the said provisions. An employee, who was posted under the provisions of the social security agreement, can under certain obligations, be subject to the legislation of the country of posting. In that case, the unemployment insurance contributions are paid to the country of origin.

Provisions concerning the unemployment insurance contributions are between the social security agreements of Finland and China, Finland and South Korea and Finland and Japan.

Countries with no agreement refers to countries other than the EU or EEA countries, Switzerland, and those countries with which Finland has an agreement on social security that includes provisions on unemployment insurance. The principal rule regarding the insurance obligation for employees from countries with no agreement on social security is to insure the employees in the country in which they work. Employees from a country with no agreement must be insured in Finland for the work they do in Finland, regardless of the duration of the work, the country of residence, or the employer’s nationality.

Posted employee
An employee from a country without an agreement may also be a posted employee.

Payment liability for employees from countries without an agreement
Unemployment insurance contributions will not be paid for the work performed in Finland by employees from countries with which Finland has no social security agreement, if
• the work is a transportation job that the employee performs mostly outside Finland, or
• the employee is in Finland for a meeting or performance, or
• the employee is on a different short-time visit for a purpose related to the employee’s work abroad.
An additional requirement in the foregoing cases is that the employer is not domiciled in Finland and the employee does not live in Finland.

Seasonal workers from third countries
Seasonal workers from third countries who are subject to the Seasonal Work Act are not covered by the liability to pay unemployment insurance contributions (the Act took effect at the beginning of 2018).

The Seasonal Work Act (Act on the Prerequisites for the Immigration and Residence of Citizens of Third Countries for the Purpose of Working as Seasonal Workers) applies to seasonal workers from third countries. Citizens of third countries are citizens other than European Union citizens and citizens of Iceland, Liechtenstein, Norway and Switzerland, which are considered equivalent to European Union citizens.

Seasonal workers reside in the country legally or temporarily for the purpose of working. Seasonal workers are not permanently resident in Finland. Instead, they visit Finland to work for a season for one or more consecutive years.
The Seasonal Work Act only applies to employees in an employment relationship.
For more information on the Seasonal Work Act and the application of the Act, see the Finnish Immigration Service’s website.

The principal rule on insurance is that an employee is insured in the country where the work is done, according to that country’s legislation. However, exceptions to the principal rule apply, for example, to posted employees and persons who work in several countries at the same time.

When an employee is posted to work abroad, the obligation to insure is affected by the following:
• The duration of the work assignment
• Whether the country where the work is done is an EU or EEA country
• Whether the country where the work is done has signed a social security agreement with Finland
• Whether the employee is covered by Finnish social security based on residence

Employees leaving Finland to work in EU or EEA countries, Switzerland and countries with a social security agreement
When an employee leaves Finland to work in an EU or EEA country or Switzerland, as a rule, the employee is insured in accordance with the laws of the country of employment.

An exception to this are posted employees, who can still be insured in the country of departure, namely in Finland. In such a case, unemployment insurance contributions are also paid to Finland. A posted employee must have an A1 certificate granted by the Finnish Centre for Pensions. A posted employee can be covered by social security in the posting country for 24 months.

Note: With special permission, an employee posted for a work assignment can remain covered by social security in the posting country at most for five years. In Finland, matters involving special permission are managed by the Finnish Centre for Pensions.

Brexit’s impact on the applicable law
The United Kingdom’s withdrawal from the EU took effect on 1 February 2020. A transition period until 31 December 2020 was agreed on the withdrawal agreement. Persons, who have been in a cross-border situation between the EU and the United Kingdom before 1 January 2021, are still subject to the rules of applicable law under the EU Social Security Regulation.

From 1.1.2021 onwards, the EU-UK Trade and Cooperation Agreement will apply to workers moving between the EU and the United Kingdom. Under the terms of the agreement, a posted worker may under certain conditions, be covered by social security in his country of departure for a maximum of 24 months.

The Finnish Center for Pensions grants a certificate on the application of the Finnish legislation to an employee posted from Finland to the United Kingdom.

Employees of public bodies
Posted employees and officials, as well as persons in corresponding positions, working for a public body, are covered, with no time limit, by social security in the employer’s home country when working in the EU or EEA, Switzerland or the United Kingdom.

Finland’s binding social security agreements
If a bilateral social security agreement that is binding on Finland includes provisions on unemployment insurance, payment liability is decided on the basis of said provisions. An employee, who was posted under the provisions of the social security agreement, can under certain obligations, be subject to the legislation of the country of posting. In that case, the unemployment insurance contributions are paid to the country of departure.

Provisions concerning the unemployment insurance contributions are between the social security agreements of Finland and China, Finland and South Korea and Finland and Japan.

Employees working in a country that has not signed a social security agreement
An employee posted to work temporarily in a country that has not signed a social security agreement is obligated to have unemployment insurance.

Employees working in two or more EU or EEA countries
As regards employees who work within two or more EU or EEA countries, the legislation of the employee’s country of residence or the employer’s domicile applies. The employee is only covered by social security in one country at a time. The employee is liable to pay unemployment insurance contributions in the country in which they are covered by social security.
The legislation of the country of residence is applied if the employee carries out a substantial part of their activities in the country of residence. A substantial part means at least 25% of all work.
If the employee does not carry out a significant part of their work in the country of residence and has:
• only one employer, or the domiciles of all the employers are in the same member state - the legislation of the employer’s/employers’ domicile is applied
• several employers whose domiciles are in the person’s country of residence and in one other member state
• the legislation of the foreign employer’s domicile is applied
• several employers whose domiciles are in at least two member states other than the employee’s country of residence --> the legislation of the employee’s country of residence is applied

All persons working in two or more countries must have an A1 certificate. In Finland, the A1 certificate is granted by the Finnish Centre for Pensions.

• Time-rate pay
• Accommodation benefit
• Car benefit
• Bonus pay
• Complementary wage/salary paid during benefit period
• Emergency work compensation
• Evening work compensation
• Evening shift allowance
• Treatment fee for municipal veterinarian
• Saturday pay
• Extra work premium
• Holiday bonus
• Other compensation
• Working condition compensation
• Commission
• Telephone benefit
• Meal benefit
• Dividend or profit surplus based on work effort (salary) (as of 1 January 2021)
• Wages paid by substitute payer: employer pays for employer's social insurance contributions (earnings-related pension, health, unemployment, and accident and occupational disease insurance)
• Wages paid by substitute payer: employer pays for employer's social insurance contributions (earnings-related pension, health, unemployment, and accident and occupational disease insurance)
• Sunday work compensation
• Performance bonus
• Monetary compensation from a working time bank
• Compensation for accrued time off
• Supplementary daily allowance paid by employer-specific health insurance fund
• Employer-subsidised commuter ticket, tax-exempt share
• Employee stock option with a subscription price lower than market price at the time of issue
• Contract pay
• Wages for insurance purposes
• Stand-by compensation
• Weekly rest compensation
• Annual holiday compensation
• Private day care allowance municipal supplement
• Private day care allowance (wages)
• Overtime compensation
• Night work allowance
• Night shift compensation

• Interest benefit for a housing loan
• Meal allowance
• Share of reserve and surplus drawn from personnel fund (taxable 80%)
• Notice period compensation
• Kilometre allowance (tax-exempt)
• Compensation for use, capital income
• Reimbursement collected for other fringe benefits
• Other taxable income deemed earned income
• Waiting time compensation
• Kinship carer's fee
• Reimbursement of private caretaker's expenses
• Private caretaker's fee
• Reimbursement of family day care provider's expenses
• Daily allowance
• Capital income payment
• Wages paid by substitute payer: employer pays for employer's earnings-related pension insurance contribution
• Wages paid by substitute payer, employer pays for accident and occupational disease insurance contribution
• Wages paid by substitute payer, employer pays for employer's health insurance contribution
• Reimbursement of costs, paid to conciliator
• Non-wage compensation for work
• Pension paid by employer
• Dividends/profit surplus (wages) based on work effort (non-wage)
• Employer-subsidised commuter ticket, tax-exempt share
• Wages paid from athletes' special fund
• Wages transferred to athletes' special fund
• Damages in conjunction with termination and lay-off
• Voluntary compensation in conjunction with termination of employment
• Voluntary individual pension insurance premium
• Taxable reimbursement of expenses
• Deduction before withholding
• Private day care allowance (non-wage)
• Kilometre allowance paid by non-profit organisation
• Daily allowance paid by non-profit organisation
• Employee stock option

If the type of income is one of the following, read the Incomes Register instructions

• Initiative fee
• Compensation for membership of a governing body
• Monetary gift for employees
• Kilometre allowance (taxable)
• Meeting fee
• Lecture fee
• Compensation for acting in a position of trust
• Other taxable benefit for employees
• Other fringe benefit
• Stock options and grants
• Compensation for employee invention
• Partial pay during sick leave
• Benefit arising from synthetic option
• Share issue for employees
• Profit-sharing bonus

• waiting-period pay (compensation for the delayed payment of wages in connection with termination of an employment relationship)
• compensation for unfair dismissal
• notice-period pay to an employee who has resigned or has been dismissed during a lay-off period
• compensation paid in connection with cancellation of the employment contract (similar to a golden handshake)
• non-statutory compensation for termination of the employment contract
• redundancy payment

• tax-free daily allowance paid for a business trip or other tax-free compensation of expenses incurred from performance of work
• reimbursement of removal expenses (as of 1 January 2021 insofar as it is tax-free)
• reimbursement of special costs incurred by work performed abroad 
• reimbursement of costs incurred for work equipment, work gear, and other immediate work-related expenses

• personnel benefits received from the employer (for example, the interest benefit from loans and free healthcare services)
• an additional daily allowance paid by the sickness fund (a benefit paid by the sickness fund provided by the workplace after the fund member’s right to sick pay or supplementary sickness allowance under the collective agreement has expired)
• a tangible gift or an employee anniversary gift from the employer 
• royalties, compensation based on intellectual property rights, and compensation for employee inventions
• a share of the profits of a limited-liability company paid to the entire personnel or a cash profit bonus
• payments from the personnel fund 
• a benefit arising from the employment relation-based right to subscribe to the company's shares for a lower price, if this benefit is available to the majority of the company's personnel
• employee stock options and equivalent equity-related pay arrangements based on performance
• a profit share or dividend allocated to a shareholder of a limited-liability company (unless it is a dividend based on work effort)

During a posted work assignment abroad, the unemployment insurance contribution is based on the agreed salary for insurance purposes for work performed abroad. This salary may differ from the actual salary paid to the employee. The salary for insurance purposes agreed by the employer and the employee may be larger or smaller than the monetary salary actually paid by the employer.

For work performed abroad, earnings (i.e. salary for insurance purposes) are regarded as comprising the salary that would be paid for corresponding work performed in Finland. If corresponding work does not exist in Finland, earnings are regarded as comprising the salary that is otherwise considered suitable for the work in question.

If the employee only receives fringe benefits and no monetary salary as compensation for his/hers work, the unemployment insurance contribution is based on the taxable value of the fringe benefits. Although the employer can´t deduct the unemployment insurance contribution because no monetary salary is paid, the employer is nonetheless responsible for paying the unemployment insurance contributions for the employer and the employee to the Employment Fund. The employer is also responsible for the unemployment insurance contribution when no monetary salary is left after deducting tax.

If an employee has not been paid a sufficient salary to deduct the employee's unemployment insurance contribution, the employer may deduct the employee's unemployment insurance contribution from subsequent salary payments within a two-year period.

Remuneration paid to board members of companies, organisations and other legal entities is not subject to an unemployment insurance contribution liability unless the recipient of the remuneration is in an employment or public-service relationship with the party paying the remuneration. If the remuneration paid for the duties is not intended to be remuneration for work but for the time spent attending to these duties, the relationship is not regarded as an employment relationship and the elected officer is not liable to pay unemployment insurance contributions.

Examples of such elected officials include the members of municipal councils, boards and committees, members of interest groups, association and company boards, supervisory boards, and boards of directors. Board members may be in an employment relationship with the employer, in which case their salary and remuneration are covered by the unemployment insurance contribution liability as usual.

If the pay of a practising veterinarian consists of a basic salary paid by the municipality, compensation for on-call duty and practice income, their unemployment insurance contributions are based on the total sum of the salary paid by the municipality and income confirmed as the basis of a pension.

The employer is also liable to pay unemployment insurance contributions in situations in which a portion of the salary is paid by someone other than the employer.

For example, a child-minder is in an employment relationship with the child’s parents, but the salary may be partly or fully paid as a private day-care allowance or as a similar allowance by the Social Insurance Institution of Finland (Kela). In this case, the unemployment insurance contribution is paid for the combined amount of the allowance and salary. As employers, the child’s parents are liable to pay unemployment insurance contributions, even if no other salaries are paid in addition to the Kela subsidy.

Kela or other payers do not deduct the contribution on the employer’s behalf from the share they pay.