Wages must be paid on the last day of each pay period, unless otherwise agreed in the employment contract or collective agreement. Collective agreements in several sectors contain provisions about pay periods and wage payment days.
What is a pay period?
A pay period is usually two weeks or a month. Under the Employment Contracts Act, if time-based pay is determined on the basis of a period shorter than a week (e.g. hourly pay or daily pay), wages must be paid at least twice a month. The salary of a salaried employee must be paid once a month. If an employee’s pay is determined per week, the pay period is a month.
In performance-based work such as contract work, the pay period may principally be no longer than two weeks. If performance-based pay is common practice in the sector, the collective agreement for the sector will have more detailed provisions concerning the payment of performance-based pay.
If an employee’s compensation consists wholly or mainly of a share of profits or commissions, the pay period must not be longer than a month.
Only in exceptional cases may a pay period be longer than a month; for instance in a case where an employee is paid a fixed salary and commissions or a share in profits beyond that. The pay period for the latter items may be longer than the one-month pay period. However, even then the pay period may not be longer than 12 months.
Exceptional due dates for wages
The due date for wage payment will be brought forward to the previous weekday if the due date is:
- a Sunday,
- a church holiday,
- Independence Day or May Day,
- Christmas Eve or Midsummer Eve, or
- an ordinary Saturday.
How must wages be paid?
Wages must be paid into a bank account designated by the employee. Wages must be available to the employee on the due date. The employer is liable for the costs incurred through payment of wages.
Wages may be paid in cash only for compelling reasons, for instance if the employee does not have a bank account or the employer does not have the employee’s bank details. The employer must obtain a receipt signed by the employee or some other means of verifying payment if wages are paid in cash.
The employer must issue a pay slip to employees in connection with every wage payment. Pay slips are important documents for employees when applying for various social security benefits such as unemployment security. The pay slip must detail what the employee has earned in the relevant pay period. The pay slip must show the amount of pay and how it was determined so that its correctness may be verified.
Grounds for determining wages include:
- working hours during the pay period and hourly pay, and
- the amount of increments such as evening work or night work increments and the number of working hours entitling to them.
The Finnish standardisation committee has published a standard concerning the content of payslips, which may be used as a reference.
The standard stipulates that a pay slip must include:
- the employee’s name, occupation and date of birth,
- the employer’s name and location of the unit,
- start date of the employment relationship and, if relevant, the end date,
- cumulative pay subject to withholding tax for the previous calendar year, the current calendar year and the most recent pay period,
- the pay period,
- tax withheld for the most recent pay period,
- increments paid for shift work and period-based work for the most recent pay period, and
- holiday pay and annual holiday compensation paid in connection with wage payment.
Payment of wages when an employment relationship is terminated
The termination of an employment relationship also terminates its pay period. Regardless of what the pay period was during the employment relationship, the employee’s receivables fall due on the day on which the employment relationship ends.
If, however, employer and employee have agreed in the course of the employment relationship on payment of wages on a date beyond the termination of the employment relationship, or if a pay period specified in a collective agreement applies to the employment relationship, such a provision shall apply even when the employment relationship is terminated. In such a case, the employee’s wages will fall due on the agreed date after the end of the employment relationship.
Allowing time for calculating the employee’s final settlement is necessary for instance when not all factors affecting the calculating of wages are known to the employer on the day when the employment relationship ends.