Wages are paid for the work performed. The payment can be based on time (hourly or monthly wages) or on the performance and outcome of work. The pay and the basis for its calculation must be included in the work contract.
The minimum wages in many lines of work are defined in the collective labour agreements of each sector, according to the duties and the degree of difficulty. The pay must not be less than that, but it can certainly be more. The employer can, for example, agree with the employee on a personal bonus that is determined by skills, competence and the work performance. In addition, the employer can provide other work benefits such as lunch vouchers, sport and cultural vouchers or an employer-subsidized commuter ticket.
Do read about the collective labour agreement and the wages in the sector already before you sign a work contract and agree on the pay. It is important to make sure that you get a fair pay. Your trade union will help you to define the pay if needed.
Wages paid for the work performed
The pay is raised according to the collective labour agreements, but the employer can also raise your salary more than what was agreed in the agreement. However, the pay cannot be reduced without your consent. If there is no collective labour agreement in your line of work, and nothing else has been agreed on the pay, you must get what is considered customary and reasonable in the sector.
Wages are paid at least once a month, and twice per month to workers paid by the hour. This is called a pay period. Pay period and pay day, i.e. the day when the employee can withdraw the pay from their account, should be included in the work contract. The wages must be paid to the bank account given by the employee.
If the pay day is Sunday, public holiday or a regular Saturday, the due date is the previous working day.
The employee must get a receipt for the paid wages showing taxes and statutory payments such as unemployment insurance contribution and employment pension contribution, in addition to the pay. The pay slip should always be studied carefully and any potential errors reported to the employer immediately. If the pay day is Sunday, public holiday or a regular Saturday, the due date is the previous working day.
Other compensation received for work
Wages can contain various allowances. Depending on the time when the work was performed, there may be evening allowance, night duty allowance, Saturday premium pay, Sunday pay or holiday compensation in addition to the wages. For example, work performed on Sunday is paid with a 100% increase.
The payable allowances and their amounts are usually agreed in the collective labour agreements in each sector. At the beginning of your employment, you should check what the possible allowances are, if the work is performed for instance in the evenings or at weekends.
Overtime compensation is 50% for the first two hours and 100% for the following hours. The employer and employee can also agree that the extra work or overtime compensation is exchanged to free time.
Work can also be paid for in fees, such as writer’s fee, meeting fee or lecture fee. The word fee is used variedly both in employment and as an entrepreneur and its significance has not been established. Fees can also be paid to those in employment, but in that case, despite their title, they are considered wages, for which also the pension and other insurance contributions, in addition to taxes, must be paid. It is essential to pay attention to the conditions of work, if it is an employment relationship or not.
The compensation paid for work can also be non-wage compensation. When agreeing on work, you should pay attention to how they propose to pay the compensation for the work done. From the employee’s perspective this matter is relevant, because you must pay pensions and the employer’s social security payment from wages but not from non-wage compensation.
From the taxation point of view, pay and non-wage compensation are treated differently, too. Non-wage compensation is not taxed as wages but as operating or professional income or as personal earnings. Non-wage compensation is therefore usually paid for work performed as an entrepreneur. Entrepreneurs pay e.g. taxes and pensions from the compensation they get and also consider other work expenses in the amount of the compensation.
The compensation for work can also be compensation for the use. Compensation for the use (royalty) refers to the compensation paid for copyright or its utilisation. Compensation for the use is paid for work in the creative industry and it is a compensation paid for utilising a piece of work under copyright. It is not intended to compensate for the wages payable for performed work.
The payment of wages generates a pay slip that shows the amount of pay and the grounds for its calculation. In addition it shows possible allowances (e.g. compensation for extra and overwork), paid tax-free compensations, employment benefits and taxes i.e. withholding tax, pension and social security contributions as well as possible other payments withheld from the pay. Always check that all the required payments are included in your pay slip. If the pay slip does not have taxes, pension and social security contributions itemised, the employer may have neglected those payments. In colloquial language this is called black economy that should not be supported by doing unreported work.
The pay slip can also be submitted electronically (web pay slip). Many workplaces have given up paper pay slips altogether. You can usually find the electronic pay slip in your online bank.
Deductions from the pay
Withholding tax refers to an income tax that is directly withheld from the pay. To pay the withholding tax the employer will need your tax deduction card. The amount of tax will change according to the income — check your tax rate on your tax card or on the tax authorities’ website. (You will need internet banking personal identity codes to log into the site.)
The unemployment insurance premium is withheld from the pay of every employee between the ages of 17 and 64 in connection to the wage payment. In addition to the unemployment insurance contributions from the employer and wage-earners, the unemployment benefits are financed by a government-paid share, and income protection is financed by the membership fees for unemployment funds. In addition to unemployment security, the unemployment insurance premiums are used to finance the adult education allowance and partly pension benefits, too.
The unemployment insurance premium as well as the employment pension contribution must be recorded in the pay slip. It is always recommended to check your pay slip for pay and contributions. It is not worth supporting the black economy by doing unreported work!
In Finland, the employment pension is primarily funded by employment pension insurance premiums that are withheld in connection with every wage payment. The employment pension contributions are paid by employers and employees in both private and public sectors. The employment pension premium is a type of an insurance premium, insuring us in case everything does not go as planned.
It is always recommended to check your pay slip for pay and employment pension contributions. Let’s not support the black economy with unreported work, since it will not accrue pensions.
The employment may include so-called fringe benefits that the employer pays in another form than wages. Such benefits include lunch benefits, telephone benefits, employer-subsidized commuter tickets, sport and cultural vouchers or car benefits. The tax administration annually confirms the taxable value of these fringe benefits and they are taxed accordingly. However, relatively few employees, in managerial positions, are entitled to these fringe benefits connected to employment.
You can pay your trade union fee either yourself at your trade union or alternatively ask your employer to withhold it directly from your pay by filling in an agreement for collection. The trade union fees are tax-deductible. Find out more about the collection agreement on your trade union website.