Employment agreement and salary

The employment agreement is one of the most important agreements that you will sign and salary payment is one of the most important obligations of the employer. Factors affecting the employment agreement and salary payment will be reviewed in this section.

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    The employment agreement is one of the most important agreements that you will sign!

    The employment agreement must always be concluded in writing.

    The employment agreement is valid until further notice, unless there are justified reasons to sign a fixed-term agreement. A fixed-term employment agreement is terminated on its expiry date. It impossible to terminate a fixed-term employment agreement during the validity of the agreement, unless the termination possibility is expressly agreed in the employment agreement.

    The basic information of the employer and employee, which are used to identify the person, as well as information on the employment relationship and work are entered in the employment agreement.

    Did you know this about the employment agreement?

    No specific form is required to be used in employment agreements. An employment agreement may be concluded either in writing, orally or electronically. However, it is recommended to prepare the agreement always in writing.

    The employment agreement may be signed for a fixed term or until further notice. Signing a fixed-term agreement must be based on justified reasons. This justified reasons can be, for example, substitution, seasonal nature of the work or traineeship.

    However, concluding a fixed-term employment agreement does not require a justified reason if the the person to be hired has been, according to TE office’s statement, an unemployed job seeker for the last 12 months without interruptions. The maximum duration of a fixed-term employment agreement is one year.

    Minimum conditions for the employment relationship are determined based on the legislations (e.g. the Employment Contracts Act, Working Hours Act, and Annual Holidays Act) and the collective agreements. An employer belonging to the employers’ union must comply with the collective agreement signed by the employer union. A non-organised employer is obliged to comply with the general collective agreement, if the sector has one. Before signing the employment agreement, you should check whether the main sector of your company has a general collective agreement from Finlex.


    Salary payment is one of the most important obligations of the employer.

    Usually the employees schedule their own payments based on the company’s salary payment, so there is no room for delays or errors in the payroll calculation and salary payment. Errors and delays related to salaries are sure to reduce the work motivation of the employees.

    In payroll calculation, it is essential to have knowledge, for example, of the collective agreement, sector-specific regulations and practices as well as the determination of annual holidays. There are so many rules and requirements that learning and adhering them requires you to constantly monitor them, which is challenging even for a professional. Authorities do not give the employers an easy time. A good example of the requirements is the Incomes Register that entered into force in at the beginning of 2009 in which all the paid salaries, pensions and benefits must be reported within five days of their payment. Delays and negligence in employer reports cause easily extra costs in the form of overdue payments and other sanctions imposed by the authorities.

    The good news for a new entrepreneur is that the payroll calculation can be outsourced to a financial administration service provider, such as an accounting company. In fact, payroll calculation is one of the core tasks of accounting companies, in addition to the accounting. In an outsourced payroll administration service, the accounting company takes care of the payroll calculation, salary payment and required settlements of accounts concerning your employees. The accounting company usually also sends the payroll specifications to the employees and takes care of the statutory notifications to the authorities as well as pension and insurance companies. Delivering the salary and employee information based on which the salary is paid and organising the working hours monitoring fall within the employer’s responsibilities. The accounting company can often provide an easy-to-use cloud services for this purpose.

    One key to success is to concentrate on your own expertise and strengthening it.When you start hiring employees and ponder the payroll, consider whether the payroll management skills are a prerequisite for the success of your company or if your time should be used for other purposes.

    In payroll calculation, you should pay attention to, for example, working time increases, Sunday work and overtime increases, additional work and night work compensation and annual holiday and sick leave pay, in addition to the regular salary payment.

    The salary must be paid to the banking institution appointed by the employee. The salary must be available to the employee on the due date. If the salary is due on Sunday, Independence Day or May Day, Christmas or Midsummer’s Eve or Saturday, the due date is the preceding day.