Employment Pension Payments

Employment Pensions in General

The employment pension is a sum determined on the basis of the employee’s earnings and growth percentage which the employee receives on a monthly basis once retired. Employment pensions in the private sector are primarily financed by insurance fees paid by the employers and employees. Part of these payments is used to pay out current pensions and the rest saved for future pension expenses. Employment pension payments come from almost all earnings and they accumulate for employment pension.

It is an employer’s obligation to arrange a pension security for the employees either by insuring the employees or by setting up a pension fund or trust. The most common way is to make a pension insurance agreement with a pension insurance company.

Employees Belonging to the Scope of Employees Pensions Act

Employees Pension Act provides insurance cover to all employees working in the private-sector (excluding sailors) despite their working sector or the duration of their employment relationship. The obligation to insure employees begins at the beginning of the month following employee’s 17 birthday and ends at the end of the month during which the employee turns 68. The obligation involves employees whose monthly income exceeds certain level.

Management of limited liability companies and other organizations fall within the scope of employment pensions although they are not in employment relationships with the company or organization. Senior employees in limited liability companies, who individually or together with family members hold at least half of the company’s share capital or shares carrying at least half of the total voting rights, are not within the scope of employment pensions. In addition, partners of a general partnership or partners of an organization or corporation, who are personally liable for the obligations and commitments of such organization or corporation, are not entitled to employment pension.

Employees who work temporarily abroad as well as sent employees are also insured in Finland according to the rules of the Employees Pension Act with certain conditions.

In uncertain cases the Central Pension Security Centre will solve from the employer’s, employee’s, performer’s or the pension institution’s application whether the Employees Pension Act is applicable to the work.

Insurance amounts

The employment pension insurance payments are collected both from the employer and the employee.

The employer’s employment pension payments depend on how much the employer has paid to the employees insured by the insurance the employer has paid for.

The employer is responsible for the payment of the employee’s pension payments which means that the employer withholds a share from the employee’s payment and pays it for the employee to the insurance company.

Pension Insurance Application

An employee’s pension insurance must be taken out no later than after the first salary payment, and before reporting earnings to the Incomes Register, generally within 5 days of the salary payment. If the application is made late, the insurance fee is usually higher. The pension insurance needs to be taken from a licensed insurance company. The insurance is applied for on an application form for such insurance. The employer is obliged to make available information about the pension institute through which the employees’ statutory pension security has been arranged.

Employee Relationship Notification

The employer shall notify the insurance company of the employees subject to the Employee’s Pension Act at the time the insurance application is made. The notification must include an employee’s name, social security number, the commencement date of the employment relationship and the salary. Also termination of the employment relationships should be notified to the insurance company.

Notifications about the commencement and termination of employment relationships should be made without delay and at least quarterly. The notification is done on the insurance company’s notification form for employment relationships in accordance with the Employee’s Pension Act.

Insurance Contributions

The incurance contribution is based on the salary paid. Earnings-related pension providers receive salary information from the Incomes Register and calculate the contribution accordingly. The payment method can be agreed upon in more detail with your own pension insurance company.

Questions about earnings-related pensions and incurance contributions can be directed to, for example, the Finnish Centre for Pensions and pension insurance companies.