Summary

Finland has a comprehensive social security system that is divided into residence and contributions-based benefits, covering pensions, sickness, unemployment, health and family benefits.

Details

Contributions

The core elements of social security contributions (pension, unemployment insurance, life insurance, sickness and medical) are calculated separately but in total, employer contributions total around 20%, and employee contributions around 10%, both largely uncapped. As such, Finnish contributions are relatively high cost, but generate high benefit entitlements.

Treaties

Finland has social security agreements with all European Economic Area countries and 9 non-EEA countries, including the UK, US, Canada, India and China. These agreements determine which country has the right the levy social security contributions, has the obligation to provide benefits, and prevent social security being levied twice on the same income. Most inbounds expatriates to Finland therefore continue to pay home country social security rather than Finnish contributions. The EU’s Trade and Cooperation agreement with the UK limits home country coverage to 2 years in the case of moves between the UK and Finland. Most other agreements allow for five years of home country coverage. Special rules apply to individuals working in Finland and other EEA countries (plus the UK) on a regular basis. Finland also has a pensions-specific agreement with Australia.

Because of the comparatively high cost of Finnish social security, it is generally more cost effective to obtain a certificate of coverage for individuals moving into Finland, thereby avoiding Finnish contributions.

Individuals assigned into Finland from non-agreement countries are not subject to pension insurance contributions for assignments of up to two years. If the posting lasts for more than two years, the Finnish Centre for Pensions can exempt the foreign employer from taking out insurance under the Employees Pensions Act for a maximum of five years, providing the employee has other pension insurance.

Exemptions

If the employee's salary is taxed under the foreign expert tax regime, the sickness insurance premium (just under 2%) is included in the flat 25% tax rate.

Administration

Residence-based social security benefits are administered by the Social Insurance Institution (Kansaneläkelaitos, or Kela), an autonomous public body under the direct supervision of the Finnish Parliament. Healthcare services are the responsibility of the local authorities. The earnings-related pension insurance for private sector employees is handled by specially authorized pension insurance companies, pension funds and pension foundations. All contributions are managed through payroll withholding, which takes place monthly.

Benefits

 The earnings-related pension accrues at a rate of 1.5% per year of annual gross earnings from the age of 17 (1.7% for those over 53), and the actual payments are calculated the accrued savings and a life expectancy coefficient. The retirement age is generally 65, but increasing, and partial old age pensions can be taken from about 61 years of age. From 1 May 2026 a new general social security benefit will replace the existing labor market subsidy and basic unemployment allowance. Further reforms of social security benefits and income guarantees will be implemented in stages. 

Need more specific advice?Ask an expert