Employers and contractor’s obligations
Regional State Administrative Agency | Finnish Centre for Pensions | Finnish Workers’ Compensation Centre | Employment Fund
Supervision of the use of foreign labour in 2024
Source: Regional State Administrative Agency, Occupational Safety and Health Divisions
In 2024, the Occupational Safety and Health Divisions carried out 1,928 inspections in companies operating in Finland that employ foreign workers. The inspections targeted companies registered in Finland as well as foreign companies (Figure 1 and Figure 2). Inspections were carried out to supervise the minimum terms of employment and the right to work. The aim of supervision is to guarantee an equal and fair labour market for all and an even playing field for companies.
The number of joint inspections with various public authorities increased by just over 250 inspections compared to 2023. The most joint inspections were carried out with the police. Joint supervision was also carried out with the Tax Administration, fire safety inspectors and the border authority.
Employee or entrepreneur?
The phenomenon of disguising an employment relationship as entrepreneurship has become more common and is especially prevalent in construction, but it has also been found in the cleaning sector, car repair shops, car washes and seasonal work. The occupational safety and health authority only supervises work carried out in an employment relationship, so in these cases, the inspector first assesses whether an employment relationship has been established.
In 2024, this type assessment was carried out in 44 inspections for 185 workers. For 168 of these workers, it was concluded that it was an employment relationship and not entrepreneurship. Foreign employees are at higher risk of ending up in a situation where their employment relationship is disguised as an assignment – meaning entrepreneurship – for example because of poor language skills. In this case, the individual is excluded from the protection provided by labour legislation, not only in terms of pay, but also in terms of insurance and the Occupational Safety and Health Act. Based on observations made in supervision, bogus and forced self-employment has become part of labour exploitation.
Preliminary investigation reports and negligence fees
In 2024, the occupational safety and health authority submitted 24 reports of work discrimination and extortionate work discrimination to the police based on observations made in the supervision of the use of foreign labour. A total of 14 reports of extortion were filed. Nine statements on cases of human trafficking were issued to the police or the prosecutor.
A total of 213 preliminary investigation reports were submitted to the police under the Aliens Act on employers who had used unauthorised foreign labour. There has been a decreasing trend in the number of reports in recent years, as Ukrainian nationals have had the right to work freely on the basis of temporary protection.
The occupational safety and health authority can impose a negligence fee on a posting company for certain non-compliances. In 2024, there were 63 inspections, which identified grounds for a negligence fee. Inspections proposing the imposition of a fee and the decisions on negligence fees made based on them do not necessarily fall on the same year. There were 69 decisions on imposing a negligence fee, totalling EUR 322,350.
Genuine posting
In the supervision of 2024, the occupational safety and health authority had 12 cases where they examined in more detail whether workers were genuinely posted workers in accordance with the Act on Posting Workers. In seven cases, the inspector concluded that the situation did not constitute posting, and in four cases the situation was found to be posting. In one case, the inspector found that the company had both posted workers and employees who had been hired directly to Finland.
When employees are not posted workers, Finnish labour legislation becomes fully applicable. Whether employees are posted workers has an impact on taxation and the organisation of social security for the employees. The objective of identifying genuine posting is to prevent abuse, and this is something that the Member States of the European Union have focused on more and more. Circumventing the legislation on posting has an impact on the conditions of fair and healthy competition. The aim is to only have posted workers who genuinely meet the criteria of the relevant EU Directives.
The Act on the Contractor’s Obligations and Liability when Work is Contracted Out combats the grey economy
Source: The Division of Health and Safety of the Regional State Administrative Agency for Southern Finland
The Division of Health and Safety of the Regional State Administrative Agency for Southern Finland is responsible for supervising compliance with the Act on the Contractor’s Obligations and Liability when Work is Contracted Out (1233/2006, “the Contractor’s Liability Act”) in the whole of Finland. The purpose of the Contractor’s Liability Act is to promote even-handed competition between companies and compliance with terms of employment. The Act provides contractors with tools to ensure that their subcontractors and partners providing temporary agency workers fulfil their statutory obligations, including regarding the payment of taxes and taking out pension insurance for employees.
Compliance with the contractor’s obligation to provide information is supervised with inspections
In 2024, a total of 1,289 contractor liability inspections were carried out, of which 34 were still in progress on 3 March 2025. The contractor liability inspections served to supervise the compliance of roughly 4,800 contractual partners with the obligation to provide information in agreements on the use of temporary agency workers or work based on subcontracting (Figure 1).
Data utilization was important in contractor liability supervision and collaboration between authorities. In 2024, supervision was targeted based on risks and phenomena rather than business sectors as usual. Information available to the authorities was broadly used in the selection of targets for supervision and in individual cases. Contract and employee information in the construction sector and compliance reports conducted by the Finnish Tax Administration’s Grey Economy Information Unit were in particularly extensive use, which the occupational safety and health authority obtains from the Finnish Tax Administration. The use of public-sector information has enabled supervising to be targeted more accurately at subcontracting agreements and agreements on the use of leased employees, in which the companies carrying out work have flaws in the fulfilment of their statutory obligations.
In 2024, follow-up inspections were carried out in companies where deficiencies in compliance with the obligation to check had been found in previous inspections. The project assessed what impact the obligations issued during previous inspections has had on compliance with the Contractor’s Liability Act and whether contractors have made changes in their operations as a result of the previous inspections. In those project inspections where modifications were confirmed, the majority (76%) of contractors had implemented the changes after previously issued obligations. During the project, it was discovered that contractors had provided training for their personnel, prepared agreement templates, deployed electronic services and information systems, and adopted practices stricter than the minimum requirements set out in the Contractor’s Liability Act. Then again, the results show that there is a significant need for follow-up inspections. In just over one in five follow-up inspections where the checking obligation could be enforced, the contractor was found to have complied with their checking obligation correctly.
Summary of 2024 supervising results
Of the inspections carried out, the contractor’s obligation to provide information had been complied with in the scope required by legislation in 380 inspections, Of these, four in five cases were concerned with the construction sector. The high figure in the construction sector can partly be explained by the follow-up project, but also by worksite inspections carried out at the level of main contractors. Even though awareness of the contractor’s liabilities is higher in the construction sector than in other sectors, supervising results show that there are still flaws in compliance with minimum legal requirements, especially in long subcontracting chains.
When the occupational safety and health authority observes an unlawful situation, it issues written advices and may impose a negligence penalty on the contractor. Slightly under 2,000 written advices were issued. The highest number of written advices per inspection were issued to foreign contractors. The next largest number of written advice was issued through inspections based on risk-based selection of subjects. (Figure 2).
The use of public-sector information was reflected in inspections resulting in further measures. The imposition of a negligence fee has been considered in just under one hundred audits; four in five inspections involved using data received from other authorities based on the data access right as comparison data. Imposing a negligence fee was most often considered in the case of foreign contractors (Figure 3).
A negligence fee may be imposed if the contractor has:
1. neglected its obligation to provide information;
An increased negligence fee may be imposed if the contractor has:
2. made an agreement on work specified in the Contractor’s Liability Act with a self-employed individual who has been subject to a ban on business operations pursuant to the Trading Prohibition Act (1059/1985) or with a company whose co-partner, board member, CEO or other comparable person has been subject to a ban on business operations; or
3. made an agreement of the type specified in the Contractor’s Liability Act even though the contractor must have known that the partner does not intend to comply with statutory obligations and payments as the contracting party and employer.
In most cases, the negligence fee was considered on the grounds of the obligation to provide information being neglected. In individual cases, a negligence fee was considered in individual cases on the grounds that the contractor must have been aware that the other party to the agreement did not intend to fulfil its statutory payment obligations as the contracting party and employer. In every case, one or more foreign companies acted as the contracting party. These types of cases often have indications of underpayment and underpricing.
It was also observed in supervisory activities that, in subcontracting chains, the number of foreign self-employed individuals has continued to increase even further. Supervision cannot always provide full certainty to determine whether the question is of appropriate self-employment or “bogus self-employment”. Bogus self-employment enables employer obligations to be evaded, and the person may not always know that they are a self-employed individual. In the worst case, these situations may be linked to labour trafficking or involve other milder forms of discrimination.
Accuracy of earnings-related pension insurance has remained at a good level
Source: Finnish Centre for Pensions (ETK)
One of the statutory tasks of the Finnish Centre for Pensions is to supervise earnings-related pension insurance. It supervises insurance taken out under the Employees Pensions Act and the Self-Employed Persons’ Pensions Act. Ensuring that employers and the self-employed have equal responsibilities with respect to the insurance obligation promotes equal competition between companies and prevents the shadow economy. Supervising insurance also helps pension providers administer the insurance and collect pension contributions, which helps secure the funding base of the earnings-related pension scheme. With its supervision, the Finnish Centre for Pensions (ETK) also secures pension provision for employees and self-employed persons as required by law.
Supervision of employers’ earnings-related pension insurance obligation
Employers generally meet their pension insurance obligations well, but supervision by the Finnish Centre for Pensions reveals deficiencies in pension insurance in almost all sectors. The results indicate that the sum of earnings missing from the insurance contributions decreased in 2020–2024 compared to previous years (Figure 1). Since 2019, employers have reported earnings payments to the Incomes Register whereas, before that, they were reported to several different parties, including pension insurance providers. The change of reporting method has most likely reduced the number of mistakes and therefore decreased the sum of earnings missing from insurance contributions.
Figure 2 presents numbers relating to the supervision of how well employers meet their earnings-related pension insurance obligation. In 2024, the Finnish Centre for Pensions took a closer look at how 3,691 employers met their insurance obligation. Around 268 employers (affecting about 1,540 workers) showed shortcomings in meeting their insurance obligation.
Supervision of self-employed persons’ earnings-related pension insurance obligation
As shown in Figure 3, about 3,989 self-employed persons were placed under enhanced supervision and 1 852 new insurance policies were taken out in 2024. The number of YEL insurance policies taken out in connection with supervision increased in 2024. New insurance includes the policies that self-employed persons took out voluntarily during supervision, and the policies that ETK took out on behalf of self-employed persons, i.e. “compulsory insurance”. For those who received a supervisory notice, there is no information available on the number of people who took out insurance after receiving the notice.
The increase is explained by the extension of YEL supervision to the shareholders of limited liability companies and by the increase in the number of individual users of invoicing service companies among those subject to supervision. The Self-employed Persons' Pensions Act (YEL) has been amended to give the Finnish Pension Centre the right to obtain information on the shareholders of a limited liability company when supervising the insurance obligation. Broad-based supervision now applies to all major groups of self-employed persons.
Supervision of Finnish Workers’ Compensation Centre 2024
Source: Finnish Workers´ Compensation Center (TVK)
Employers are obliged to provide workers` compensation insurance to their employees. The employer is obliged to provide workers` compensation insurance when earnings from work paid to all employees exceed EUR 1,500 in a single calendar year.
The supervisory obligation of the Finnish Workers´ Compensation Center (TVK) is based on the Workers’ Compensation Act. Mass monitoring by TVK covers all employers in Finland.
TVK’s supervision has become more effective and current since 2020 due to being able to use the data in the Incomes Register. Negligence can be addressed quickly after being observed. The number of employers who have neglected the insurance obligation has decreased slightly compared to the previous year. This was due to a shortage of supervisory personnel in 2024, which meant that not all cases of negligence were addressed. Negligence is often based on unawareness of insurance obligations and the grounds for these obligations: for instance, the difference between an employment relationship and self-employment as well as the earnings and age limits for the insurance obligation.
The employers who have neglected their insurance obligation are a heterogeneous group comprising not only Finnish companies but also foreign companies and household employers.The companies were divided across different sectors, had often operated for several years, and were mostly in the under EUR 400,000 turnover categories. Uninsured wages totalled roughly EUR 35.7 million in 2024.
The Employment Fund monitors the accuracy of earnings payment data submitted to the Incomes Register
Source: Employment Fund
The Employment Fund imposes and collects statutory unemployment insurance contributions, as well as monitors the fulfilment of obligations related to employers’ unemployment insurance contributions. The Incomes Register’s earnings payment data has been used as the basis of determining unemployment insurance contributions since 1 January 2019.
The Employment Fund focuses on ensuring the accuracy of earnings payment data in the Incomes Register. In its monitoring activities, it investigates any incorrect or otherwise irregular earnings payment data. In addition to the data submitted to the Incomes Register, the control activities utilise information sourced from other authorities, such as the Finnish Tax Administration’s tax audit data.
The Employment Fund consults employers in investigating the accuracy of earnings payment data. If an error is identified in the Incomes Register’s earnings payment data, the employer in question will be requested to correct the data in the Incomes Register. Errors typically come from errors in payroll systems or the lack of knowledge of payment obligations. In the end, the Employment Fund can impose unemployment insurance contributions by assessing the information obtained through monitoring activities if the employer does not correct the data in the Incomes Register despite requests.
As a result of the deployment of the Incomes Register, the number of monitoring cases and the amount of additional charges imposed due to monitoring have decreased significantly. It is possible that the deployment of the Incomes Register has somewhat reduced situations where the wage amount reported as the basis of unemployment insurance contributions is too low.
The Incomes Register has also made monitoring a more real-time activity. The Employment Fund can already investigate the accuracy of earnings payment data a few months after the payment of wages, also making it easier to identify the situation with employers. This also prevents any recurring errors more effectively.