|
Kansainväliset transaktiot
|
|
|
BERGMANN
Asianajotoimisto
|
   |
|
|
|||||
Posting of Employees to Finland |
 |
|
If a company assigns employees to work temporarily in Finland, the employment contract cannot remain unchanged. Finnish law sets a new framework with mandatory provisions that have to be taken into consideration. In addition, the particular situation of the expatriate will have an impact on the employment relationship.
If an employment contract has connections to several countries, the applicable law is usually determined by reference to the place of work unless the applicability of a foreign law has been agreed on. As a rule, the law of the regular workplace continues to be applicable if the employee is temporally posted to another country.
However, according to the Act on Posted Workers, a number of provisions of Finnish labour law are applicable also for temporary assignments in Finland. The purpose of this is to ensure that certain minimum working conditions are observed regardless of the duration of the assignment. This concerns for example stipulations on working hours, night and Sunday work, overtime work compensation, annual holiday and minimum wages.
The particular situation of the posted employee should be made subject to a specific contract. Often the national legislation of the country of origin will even provide for an obligation to lay down the essential conditions for assignments abroad in a written contract if such assignment lasts for a certain period.
There are several alternatives for such an agreement:
•
The existing employment relationship may be suspended for a certain period and replaced by a new agreement that regulates the working conditions for the duration of the assignment abroad. •
Alternatively, the existing contract may be supplemented by an assignment agreement that leaves the original conditions unchanged but makes the necessary adjustments for the period of the assignment. •
Finally, the whole employment contract may be transferred to the Finnish subsidiary, which will result in a change of the employer. In this case, a new employment contract must be drafted and arrangements for the return of the employee to the parent company have to be made. The special requirements relating to the assignment agreement should be taken seriously and the contract should be formulated carefully. Regardless of which option is chosen, at least the following issues should be considered when drafting the contract:
•
Choice of law: In general, it is possible to choose whether Finnish law or the law of the home country shall apply to the employment relationship. Since certain mandatory provisions of Finnish labour law have to be observed in any case, it may be advisable to choose Finnish law for the contract as a whole in order to avoid conflicts. •
Reintegration of the employee: Formulating the relevant provisions may be difficult. The employee has an interest in receiving certain guarantees to be granted the same or better conditions when returning to his or her old workplace. There should also be provisions covering the situation where the assignment ends earlier than anticipated. •
Hierarchical structure: The assignment agreement should contain provisions on who will give instructions to the employee during the assignment and to whom the employee must report. •
Remuneration: Higher costs of living as a result of the stay abroad may justify a pay rise. Benefits in kind have to be adjusted to the Finnish tax provisions. In addition, bonuses for work abroad or the transfer of certain costs to the employer may be appropriate. Posting employees to another country always raises tax issues – with regard to the personal taxation of the employee as well as the corporate taxation of the companies involved.
National tax regulations usually assume that companies belonging to the same group conduct their business relationships as if they were independent from each other (’Arm’s Length Principle’). The purpose of this is to prevent the arbitrary redistribution of profits to countries with lower tax rates.
This principle has to be observed when posting employees abroad. Assignments to an affiliated company have to be made in accordance with market conditions. Eventually, the company that benefits from the employees’ work also has to bear the cost of his or her salary, regardless of where the salary is paid and which entity is to be considered as the employer under the applicable labour laws.
The costs incurred by one company are usually deductible for tax purposes only if they are based on a prior written agreement between the companies involved.
As a result of his or her assignment to Finland, the employee usually has to pay income tax in Finland. However, a tax treaty between Finland and the home country may prevent taxation in Finland if the assignment doesn’t exceed a certain time period (as a rule, 183 days in any twelve-month period commencing or ending in the fiscal year concerned).
There are, however, further requirements for such exemption to be applicable, in particular related to the question who economically speaking is the employer of the expatriate, i.e. where the costs for the salary are tax deductible. The result can to some extent be influenced by contractual arrangement.
Within the European Union and the EEA area, the applicable social security regime in international cases is determined by reference to the relevant EU Directives. These apply to pension, health and unemployment insurance and to the statutory accident insurance.
As a rule, each person is subject to the social security provisions of only one EU member country at any given time. Normally, social security contributions are imposed in the country where a person works, regardless of the place of residence.
In the case of a temporary assignment, this result is usually undesirable for both the employee as the employer. The payment of social security contributions in several countries usually has a negative impact on the amount of the pension premiums accumulated by the employee. At the same time, it increases the administrative burden on the employer.
For that reason, the applicable EU Directives allow employees to remain covered by the social security provisions of their home country when undertaking short assignments abroad:
•
If the employee is posted to Finland for up to 12 months, the provisions in force in his or her home country remain applicable as long as the employment relationship with the posting company continues. This requires, as a rule, that the employee still receives instructions and directions from the posting company and that this company also continues to pay his or her salary. The posted employee or his or her employer should apply for a certificate well in advance of being posted from the competent national institution of the home country, which should state that the employee remains covered by the legislation of that country. If the duration of the work to be done in Finland exceeds 12 months due to unforeseen circumstances, the employee can apply for an extension of up to 12 more months. •
If it is anticipated that the assignment will last for longer than 12 months or the conditions of a temporary posting are otherwise not met, the relevant authorities of both countries can, on request, conclude an agreement of exemption for up to 5 years, according to which the person concerned may remain within the social security system of his or her home country. The decision is left to the authorities’ discretion and can be extended for up to 5 more years. A positive decision usually requires that the assignment abroad is limited in time and that the employee maintains close ties to his or her home country and employer. •
The preconditions of a temporary posting or an agreement of exemption should be taken into consideration when drafting the assignment agreement. •
With regard to posted workers from outside the European Union, the applicable social security legislation must be determined in the first place on the basis of bilateral agreements between the countries involved. |