If your company is looking to expand its business in Finland or recruit talent for remote work, you may decide to hire an international contractor. These contractors can be either locals or ex-pats. There are different considerations for each to make sure that your contractor is compliant with Finnish regulations.
How do you engage an international contractor in Finland?
The first step to engaging a contractor in Finland is to set up a mutually agreed contract. This will include terms on payment, timing, services and currency. You will also have to arrive at the method of payment for their services. This could be a wire transfer or a third-party payment platform.
The good news for your company is that contractors can be easily hired in Finland as self-employed, and no agency or secondment arrangement is necessary. Even so, you do have two choices on how to engage a contractor in Finland, either directly or through an umbrella company.
The self-employment route is straightforward for the contractor and only requires a simple form to be filled out for registration. There is no social security registration for stays of up to four months. After that, EU citizens can opt to remain on their home country program. The contractor takes care of their own invoicing and payment structure, as well as any tax payments due in Finland.
Non-EU citizens or contractors planning a longer stay may want to use an umbrella company for social security and tax withholding. The umbrella company will simply remit your company’s payment to the contractor after project completion or time sheets have been confirmed. In this way, the contractor is still essentially self-employed. However, they don’t have the burden of administering their statutory payments in Finland.
Stays of longer than six months will make your contractor a non-resident taxpayer, and liable for tax on ‘trade income’. As such, it is worthwhile to make sure that your contractor is making those tax payments.
How are Employees and Contractors Classified in Finland?
The nature of the working relationship will determine classification in Finland. Despite the relaxed registration rules for self-employed contractors, there are still criteria to meet to make sure they are not re-classified as your employee. Authorities in Finland are concerned about misclassified workers. Those that are part of the ‘black economy’, where no statutory or tax payments are being made.
As in most countries, the employee/contractor classification test will revolve around ‘control’ of the worker. This includes directing their time, work methods and deliverables. If it appears the worker is under the control of your company, they might be viewed as an employee, which would trigger a range of payments and obligations. The more the contractor conducts themselves as an independent business, the less risk of misclassification.
Immigration and Work Permits for Contractors in Finland
Your contractors in Finland that are EU nationals do not need a work permit of any kind in Finland. Non-EU contractors will need to have a valid sponsored work permit. This is where an umbrella company can also also be helpful as a local sponsoring entity.
Working Culture in Finland
As a company hiring contractors in Finland, it is helpful to understand something of the Finnish work culture, especially if you are hiring locals. Finns respect honest, direct communication, although they are very informal when doing business.
They also expect punctuality and reliability when collaborating on projects, or otherwise working with other members of your company. Fortunately, they speak English well so language will not be a barrier for most companies looking for an international contractor in Finland.