Employers and contractor’s obligations

Regional State Administrative Agency | Finnish Centre for Pensions | Finnish Workers’ Compensation Centre | Employment Fund | Centre for Economic Development, Transport and the Environment

The Regional State Administrative Agency monitors the employment of foreign nationals in Finland

Source: The OSH Division at the Regional State Administrative Agency of Southern Finland

The Regional State Administrative Agency conducted 943 immigration control operations in the region of Uusimaa. The operations focused on verifying that foreign employees had the right to work and that their employment contracts complied with the minimum terms and conditions laid down in the Finnish law.

Some 40% of the operations in Southern Finland were conducted in the hotel and catering sector, 24% in construction industry companies and 14% in cleaning industry companies. The rest of the operations were conducted in a range of different sectors.

Immigration control operations by sector in 2017

In 2017, immigration control operations were conducted as unannounced visits and as regular pre-announced company visits.  Most of the visits were made to different companies, and only 8% of the operations were targeted at sites that had been inspected previously the same year.

The operations uncovered large numbers of foreign employees with no right to work

During the immigration control operations in Southern Finland, in which foreign employees’ right to work was examined, approximately every seventh workplace had at least one foreign employee with no right to work in their current role in Finland. More than 160 foreign employees with no right to work were encountered during the operations. In many cases, however, there was only one foreign employee at the workplace who had no right to work.

Operations where foreign employees with no right to work have been encountered; by sector 

Two-thirds of the workplaces with foreign employees with no right to work were located in Southern Finland. In 2017, 55% of all immigration control operations were carried out in Southern Finland, which partly explains the high number of observations.

Foreign employees with no right to work can be found in all sectors

More than every sixth operations in the construction sector brought to light at least one foreign employee with no right to work. In other sectors, foreign employees with not right to work were encountered on every tenth visit that focused on verifying employees’ work permits. In 2017, more than 20 foreign employees were encountered in Southern Finland who had no permit whatsoever to work or stay in Finland at the time of inspection. This figure is clearly higher than in previous years.

Surprisingly, the regular company visits during 2017 revealed more foreign employees without work permits than unannounced operations. The unannounced operations are conducted without notifying the employer, while most of the company visits are pre-announced. Despite this finding, unannounced visits will be made in the future, as they provide useful comparative data for the supervision of employees’ right to work and the minimum terms of conditions.

The number of foreign employees with no right to work has remained the same in relative terms as in the previous years. Based on statistics, workplaces in Southern Finland that were previously subject to immigration control operations still employ a relatively high number of foreign employees with no right to work. Operations have been targeted to an increasing degree at workplaces where the employers have previously not complied with employment legislation and have failed to verify employees’ right to work. Targeting operations at problem areas partly explains the high incidence of foreign employees without the right to work. The high incidence also indicates that the operations have been correctly targeted.

Non-compliance with minimum terms and conditions for foreign employees

The second key issue that the immigration control operations in Southern Finland focus on is the supervision of compliance with minimum terms and conditions in employment. The purpose of the supervision is to establish whether an employer complies with the laws of Finland with regard to their employees – and particularly regarding wages. In 2017, attention was also paid to whether employers observed the principle of non-discrimination. 

There was a high incidence of non-compliance with minimum terms and conditions for foreign employees in Southern Finland. There were particular problems in complying with the provisions of the collective bargaining agreement on wages. The highest incidence of non-compliance was in the catering industry, where 60% of the operations revealed problems in the payment of wages in accordance with the collective bargaining agreement.

Operations that revealed non-compliance with the collective bargaining agreement; by sector 

The most significant non-compliances with collective bargaining agreement were to do with the level of basic wages and various supplements. There are differences between sectors, however. For example, in the construction industry, the basic wages paid to foreign workers would exceed the minimum level set in the collective bargaining agreement more often than in the catering and cleaning industries. However, widespread non-compliance was detected in all of the above sectors in paying various supplements. Any failures to comply with the collective bargaining agreement in companies that were members of an employers’ federation were notified with said federations. 

The operations revealed non-compliance with the non-discrimination principle, again, in all of the sectors subject to control operations. Every tenth immigration control operation focusing on the issue revealed non-compliance with the principle. In terms of percentages, there was approximately an equal amount of non-compliance in all of the above sectors.

The ongoing challenge in immigration control operations is in verifying employees’ actual working hours. Many of the 2017 operations revealed that the employers did not keep a register of the working hours of their employees, as required by the Working Hours Act. In this situation, it is difficult for the inspector to establish whether or not the minimum terms and conditions are met in the case of a foreign employee. Failures to keep a register of the working hours of the employees, as required by the Working Hours Act, were the most common in catering, construction and cleaning industry companies; the working hour registers were in order only on one in three operations, in which the issues were addressed. Compared to 2016, the situation has deteriorated. However, more operations were made unannounced in 2017 than in 2016, which affects the results.

The supervision of the minimum terms and conditions proved successful in the 2017 immigration control operations. The good result is indicated by the high number of administrative hearings, decisions and police reports filed.

The minimum employment terms and conditions for posted employees are not honoured

The immigration control within AVI Southern Finland carried out more visits in 2017 than in 2016 to foreign undertakings posting employees in Finland. In 2016, 35 visits were made to establish the position of a posted employee, while the same figure in 2017 was 65. Most of the visits were made in the construction sector.

There were several problems in the minimum terms and conditions governing the employment relationships of posted employees; for example, the wages complied with legal requirements in only 40% of the operations targeted at posting undertakings. In the construction industry, every third operation uncovered Finnish companies who failed to fully comply with the collective bargaining agreement, while in two out of three operations supervising foreign construction firms posting workers in Finland, problems in the wages were detected.

The proportion of visits where shortcomings in the wages of posted employees were detected; by sector


According to the new law, a negligence fee may be imposed on an undertaking posting a worker in Finland, if the undertaking violates the law. There have been several cases in which the negligence of the undertaking posting a worker has led to the consideration of a negligence fee – the fees are yet to be decided.

New phenomena in the field of immigration control in 2017

In 2017, the inspectors came across workplaces more often than before where they were informed that the person working on the site was not in an employment relationship with the employer. However, the inspector will usually find in these situations that the criteria of an employment relationship are met for the person in question.  Two-thirds of these cases take place in the catering industry. Some of these findings are the result of the increased number of unannounced visits. The more extensive right of occupational safety and health authorities to information by law has proved helpful when resolving situations such as these. It is, for example, possible to utilise information provided by another authority to verify whether an employee has at any point been paid wages by the employer from which tax has been withheld and declared to the Tax Administration.

Visits where guidelines on the characteristics of employment have been issued; by sector

Several foreign asylum seekers were found in connection with immigration control operations to be working in Southern Finland. In 2017, more than 200 asylum seekers were found to be working at approximately 100 workplaces. Figures for previous years are not available, but it is likely that the number of asylum seekers encountered during the 2017 operations was higher than before.

In 2017, visits to foreign companies in the construction sector uncovered several cases where the foreign company had recruited at least some of its foreign employees directly from Finland, which means that these employees cannot be treated as posted employees. Fourteen such construction industry companies were visited, which employed at least 90 non-posted workers. The legislation on posted workers and the related obligations are not applicable to these companies, which makes supervising their conduct more challenging. 

Collaboration with other authorities is useful in immigration control operations

The immigration control within AVI Southern Finland conducted a number of joint visits with another authority during 2017, mostly with the police. The police were involved in 280 visits. Joint visits were made in all sectors. Of the joint visits made with the police, more than one half were targeted at restaurants; these visits were unannounced. From the immigration control perspective, the presence of the police on visits is very helpful because it gives the inspector better opportunities to observe and intervene with any shortcomings discovered during a visit.

The most significant challenge in collaboration with the police is the lack of national coordination between the Occupational Safety and Health Administration and the National Police Board, and this has affected the choice of sites to be visited and timings.

Collaboration was also close with the Border Guard (109 visits), alcohol inspectors of AVI Southern Finland (71 visits) and Customs (68 visits). Most of the visits were made in the catering sector and, especially during the intensive monitoring week of the police, they were made jointly with several authorities. Some joint visits were made with the Tax Administration (38 visits) and the Finnish Pension Centre (17 visits), mainly to construction sites.

The Contractor’s Obligations and Liability Act protects against the grey economy

Source: The OSH Division at the Regional State Administrative Agency of Southern Finland

The task of contractor’s obligations and liability inspectors is to monitor compliance with the Act on the Contractor's Obligations and Liability when Work is Contracted Out (1233/2006) in all of Finland. The goal of monitoring compliance with the Contractor’s Obligations and Liability Act is to prevent the adverse effects of the grey economy and unhealthy competition on companies. The monitoring projects carried out in 2017 targeted the construction sector, industry, logistics and the service sectors as well as the “other” category, which included public administration targets, among others.

Construction sector

The contractor’s obligations and liability inspection project for the construction sector carried out a total of 893 inspections in 2017, of which 12 are still in progress. Of all the inspections, 335 were carried out in cooperation with a construction industry inspector, an inspector specialising in the employment of foreign nationals, or both. The inspections investigated a total of 3,065 contracts for subcontracting or temporary agency work. In a total of 310 inspections, things were in order. Operating instructions to correct an unlawful situation were given in 1,209 instances. Negligence fee processes have been initiated as a result of 72 inspections so far. Of the inspections resulting in a negligence fee process, 7% involved either a suspicion that the contractor had concluded a contract even though the contractor must have been aware that the other contracting party was not intending to fulfil their statutory payment obligations as a contracting party and employer or a suspicion that a contract had been concluded with a party that had been disqualified from engaging in business operations.

Regional distribution of inspections based on the location of the target of monitoring

One focus area in the construction sector was single-family house construction sites, where the observed deficiencies stood out on the whole. A total of 70 inspections of single-family house construction sites were carried out, of which nearly 16% resulted in the initiation of a negligence fee process.  Considerable deficiencies were observed at single-family house construction sites at twice the rate of other types of construction sites.


In the industry inspection project, inspections were carried out according to the project plan on a wide range of targets in technology, the chemical industry, forestry and other industry. Based on the results of the inspections, a negligence fee process was initiated for 20 contractors. Some of the industry inspections and negligence fee processes are still in progress.

Regional distribution of inspections based on the location of the target of monitoring

The inspections revealed that certain industry sector companies acting as contractors have insufficient knowledge of the Contractor’s Obligations and Liability Act and its obligations. Awareness of the obligations varied significantly within the same industry sector regardless of the size of the company. For some companies, the Contractor’s Obligations and Liability Act is a fixed part of the normal procurement process, but there are also many companies that are not familiar with the Act. Of the inspections carried out, 83% involved giving the contractor one or several operating instructions.


Monitoring of compliance with the Contractor’s Obligations and Liability Act in the transport and logistics sectors in 2017 focused particularly on public sector organisations as transport service contractors, as well as warehousing and wholesale companies and forest industry transports. A total of 30 inspections were carried out for public administration, in which the contractor was usually a municipality. A total of 39 inspections were carried out at warehousing and wholesale companies, while 18 were carried out for forest industry transports. In addition, inspections were carried out at companies specialising road transport, waterway transport and warehousing as well as postal and courier services.

A negligence fee process was initiated as a result of 15 of the inspections. So far, one public administration contractor and three forest industry transport contractors have been required to pay a negligence fee. Moreover, in two cases, a decision was made not to require the contractor to pay a negligence fee. Seven inspections are still in progress.

Regional distribution of inspections based on the location of the target of monitoring

The large number of operating instructions given demonstrates that companies in the logistics sector are not very familiar with the Contractor’s Obligations and Liability Act, although the situation has improved since the first years after the entry into force of the Act. Concerning individual accounts, operating instructions were most commonly given about accounts dealing with collective agreements and occupational healthcare. In addition to these, operating instructions were given about storing the accounts obtained and verifying the position of the employer.

Service sector

Service sector inspections were targeted mainly at accommodation, food, property management, cleaning and retail service companies in Finland. The inspection targets were selected to ensure that the inspections would have as much of an impact as possible. In selecting the targets, a special focus was placed on ensuring that the inspection of the obligations of the Contractor’s Obligations and Liability Act were carried out as effectively as possible, and that information about the obligations set by the Act would be disseminated as widely as possible.

A total of 358 inspections were carried out, of which 2 are still in progress. Compliance with the contractor’s obligation to check as laid down in the Contractor’s Obligations and Liability Act was checked for more than 1,200 contracts. A negligence fee process was initiated as a result of 38 of the inspections.

Regional distribution of inspections based on the location of the target of monitoring

The results show relatively weak compliance with the Contractor’s Obligations and Liability Act in the service sector. A total of 570 operating instructions were given in inspections over the course of the year. The amount of operating instructions given has increased significantly over the past two years. This observation is worrying because there has not been a crackdown on the enforcement of the obligations nor has there been a corresponding increase in the number of inspections. The most common reasons for giving operating instructions were that the contractor had not complied with its obligation to check before concluding the contract, or that the contractor had not stored the accounts it had obtained.


In 2017, the contractor’s obligations and liability inspectors carried out a total of 1,909 inspections. Contractors have been heard on neglecting their obligation to check in 144 cases, and negligence fees have been prescribed totalling EUR 174,600. In 2017, a total of 2,807 operating instructions were given in the contractor’s obligations and liability inspections that have already been completed. The most common operating instructions concerned obtaining clarifications before concluding an agreement, the content of clarifications of contractor’s obligations in the case of foreign contracting parties, storing clarifications and the validity period of clarifications.

Information on hearings and negligence fee decisions by project, situation as of 27 February 2018

Of all cases that led to a negligence fee, the insufficient clarifications most commonly concerned tax payment and retirement insurance. A growing number of negligence cases concern foreign contracting partners and deficiencies in verifying the retirement and life insurance of foreign contracting partners.

The observations concerning contractor’s obligations and liability in 2017 are similar to those from the previous year 2016. In the construction sector, long-term monitoring, legislative changes in the sector and cooperation with interest groups can be seen in the form of positive change in the results of monitoring of contractor’s obligations and liability. Major contractors in the construction sector generally show excellent compliance with the Contractor’s Obligations and Liability Act, and problem areas can be found deeper in the contracting chain or at single-family house construction sites. Awareness of the Contractor’s Obligations and Liability Act in the construction sector is clearly at a higher level than in other sectors.

Contractors in sectors other than construction continue to have weak familiarity with the provisions of the Act. This is demonstrated by the clear increase in the relative number of operating instructions given as a result of inspections in all other sectors. Over the course of 2017, the contractor’s obligations and liability inspectors have thought about how to influence this phenomenon, particularly through communication-based means.

Accuracy of earnings-related pension insurance at a good level

Source: Finnish Centre for Pensions (ETK)

As a rule, employers meet their pension insurance obligation well. The results of supervision of pension insurance have been fairly constant in the 2010s. Each year, wages worth a total of around 113 million euros have been missing from insurance plans.This account for around 0.2 per cent of the annual total insurable wage sum under the Employees Pensions Act.

Uninsured wages

Supervision of insurance under the Employees Pensions Act (TyEL)

Every year, the Finnish Centre for Pensions investigates the pension insurance activities of around 8,000 employers. Around 2,000 of them have neglected their insurance obligation in some way. Thanks to the supervision, wage earners get the pensions they are entitled to and pension providers can collect the correct amounts in pension insurance contributions.

Total supervised employers/Employers who have neglected their insurance obligation / Insufficiently insured wage earners

Supervision of insurance under the Self-employed Persons’ Pensions Act (YEL)

Every year, the Tax Administration provides the Finnish Centre for Pensions with the tax data on around 185,000 self-employed persons and shareholders of business partnerships/consortiums for supervisory purposes. The tax data are compared with the data on the self-employed persons insured under YEL. The self-employed persons who exceed the supervision threshold of the Finnish Centre for Pensions are investigated in more detail. The figures describing  how the self-employed persons meet their obligation to take out insurance have been stable for a long time. Neglects in insurance under YEL are also revealed in connection with the supervision of employers and through inquiries coming from the Social Insurance Institution of Finland (Kela).

Annual supervision has made it possible to ensure that the self-employed persons meet their obligation to take out YEL insurance, and the number of cases where pension insurance is neglected is small. However, some self-employed persons fail to report a YEL income that meets the actual value of their work input. If the reported work income is too low, it affects not only in the pension of the self-employed person but also their other social security.

Supervision of insurance under YEL

Employers generally take good care of their workers´ compensation insurance obligations

Source: Finnish Workers´ Compensation Center

Employers are obliged to take out three types of statutory social insurance. One of them is workers´ compensation insurance. The employer must take out an insurance policy if the wages and salaries paid a calender year exceed 1,200 euros.

Workers´ Compensation Center (TVK) began monitoring that employers meet their insurance obligations when the Workers’ Compensation Act came into force on 1 January 2016. Mass monitoring by TVK covers all employers in Finland.

No conclusions can be drawn from the change in the number of employers neglecting their insurance obligations in 2016–2017 (Figure 1). The trend can be assessed once monitoring has been carried out over several years.

The following observations have been made regarding employers that have neglected their insurance obligations:

  • Employers are unaware of their insurance obligations.
  • About 40% of the cases examined were stated cases of negligence.
  • Employers that neglect their insurance obligations include not only Finnish companies, but also foreign companies and household employers.


Unemployment insurance contributions finance unemployment security

Source: Unemployment Insurance Fund

Both employers and employees have a statutory obligation to pay unemployment insurance contributions. Employers pay the employer’s component and withhold the wage earner’s component from employees in connection with each payment of wages. The employer handles the remittance of unemployment insurance contributions to the Unemployment Insurance Fund (TVR), whose major task is to finance unemployment benefits.

Monitoring of unemployment insurance contributions is primarily retroactive and covers all employers that must pay contributions. The Unemployment Insurance Fund began the monitoring of insurance contributions in November 2015, when it initiated the monitoring of insurance information for 2013. Monitoring in the earlier years was performed in cooperation with accident insurance institutions, as they collected unemployment insurance contributions until 2012.

Depiction of the monitoring process (using 2013 insurance information)

In 2013, a total of around 170,000 employers were subject to payment obligations. About 5,000 of them were selected for manual processing on the basis of assessed risk. In the case of the insurance information for 2013, 2,700 employers were processed manually. Of these employers, 750 were heard.

Employers heard annually and annual financial consequences

Each year, TVR handles about 1,000 cases in which the employer is heard. About half of these cases lead to financial consequences. Information for 2015 has been excluded, as the transfer of monitoring to TVR was under preparation during that year.

Pay security payments correlate strongly with economic trends

Source: The Ministry of Economic Affairs and Employment

The pay security system ensures the payment of employee claims arising from an employment relationship in the event of employer insolvency. One of the reasons for rejecting a pay security claim is misuse, and sometimes these cases involve participants in the shadow economy. The statistics on claims paid as pay security indicate a strong correlation with economic trends. In 2017, 6.9% of all rejected applications were rejected on the grounds of misuse. 

The employer defaulting on statutory contributions or notifications is not an impediment for paying out pay security; in fact, they may be an indication of the employer’s insolvency, which is one of the requirements for the payment of pay security. In legal practice, however, pay security payments may be withheld, if there is evidence that the employee has been in agreement with the employer about receiving compensation for work as non-declared wages.

Pay security paid to employees and the employers’ repayments to the State 2010–2017

Claims payable as pay security pass to the State. Only approximately one quarter of the pay security payments are recovered from insolvent employers. A majority of this amount is paid by bankruptcy estates as administrative expenses.

Breakdown by grounds for the rejection of pay security applications in 2017


In 2017, 789 applications were rejected on the grounds of misuse, with the total sum of receivables applied for with these applications reaching EUR 1,563,762.