Wage payment

Wage payment - Alasivu

Wages must be paid into a bank account designated by the employee. The employee must be able to withdraw their wages from their account on the date that the wages fall due. A pay slip must be issued in connection with the wage payment.

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 the period for which wages are paid at a given time. 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 one month.

In performance-based work such as contract work, the pay period may principally be no longer than two weeks. A collective agreement that binds the employer may include more detailed provisions about 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. In practice, this means that wages paid via a financial institution must be available for the employee to withdraw from their account on the day that the wages fall due. A pay day that falls outside the pay period may have been agreed upon in the employment contract or may be specified in a collective agreement that binds the employer. Collective agreements in several sectors contain provisions also about pay periods and pay days. 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.

Pay calculation

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.

Reporting income into the Incomes Register

The employer or another payer of the payment must report details of paid wages into the Incomes Register. If the details cannot be found in the Incomes Register, it is a good idea for the employee to ask their employer or another payer if the details have been reported to the Incomes Register. The employer is also obliged to amend any incorrect information in the Incomes Register. For more information about the Incomes Register, visit the Finnish tax authorities’ Vero.fi service.