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 18 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 (in 2010 51,57 euros).
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. For example in year 2010 the employment pension percentages were the following:
when the payments were less than 1,686,000 euros, the employment pension percentage is 21.8 %
when the payments were from 1,686,000 to 26,976,000 euros, the employment pension percentage is from 21.8 to 22.4 %
when the payments were more than 26,976,000 euros, the employment pension percentage is 22.4 %
In 2010 the employment pension payment was on the average of 22 % and the decreasing customer indemnification was on the average of 0.3 %. When the payment exceeded 1,686,000 euros, the payment was influenced by the disability and unemployment payments of the company itself.
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. In 2010 the employee’s share of the employment pension payment was 4.5 % and from the employees that have turned 53 it was 5.7 %.
Pension Insurance Application
An employee’s pension insurance must be taken out within a month following the first 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.
Payment of Insurance Fees and the Payment Notifications
Insurance fees are made as prepayments during the calendar year. The payments notifications and employment insurance fees to the insurance company can be taken care of as monthly or annual notifications. The insurance fees of annual notifiers fall due in the agreed manner in one or more installments. The final insurance fee is calculated after the end of the calendar year on the basis of the annual declaration.
Monthly notifiers make the prepayments every month on the basis of notified salaries. Most small companies may pay their insurance fees on a monthly basis.
If an employer’s prepayments have been too small, the employer will have to pay a control fee. If the prepayments have been too large, the difference is set off against future fees. Surplus is not refunded during the time the insurance policy is in force.
Annual Notification of the Employment Pension
The final employment pension fee is calculated afterwards at the beginning of the calendar year on the basis of information about earnings included in the annual notification. The notification must be completed by the end of January at the latest.
The annual notification form must contain:
notification of the insured employee’s annual earnings
notification of missing information about the employment relationships
information about potential deviations in working hours
information about potential deviations in salaries
Deviations to working hours and salaries may for instance be caused by study leaves and unpaid nursing leaves.
It is possible to inquire more information on employment pensions and employment pension payments from, e.g. the Central Pension Security Centre as well as from the employment pension companies, such as:
Veritas, a pension insurance company Ltd
Etera, a mutual employment pension insurance company
Ilmarinen, a mutual employment pension insurance company
Tapiola, a mutual employment pension insurance company
Varma, a mutual employment pension insurance company
Eläke-Fennia, a mutual employment pension insurance company
Pensions-Alandia, a pension insurance company Ltd