Employing someone to work for a household

When you pay wages to a worker, you become liable to the obligations of an employer. You must take care of withholding, the employer's health insurance contributions, mandatory pension insurance and accident and occupational disease insurance. You must file tax returns on employer contributions for the months when you pay out wages, and also file the Employer Payroll Report once a year.

When a household has employed someone to work for it, the obligations depend on the size of the pay. The euro amounts below are thresholds that apply specifically to each payer. They concern both individual taxpayers and estates of deceased individuals.

Paying wages €1,500 a year or less

If you pay max. €1,500 a year (gross income) to the worker, you are liable to take care of the following:

  • Withhold the worker's share of unemployment insurance premiums from their pay.
  • Withhold the worker's share of pension insurance from their pay.
  • You don't have to withhold tax on the pay unless your worker asks you to do so.
  • Similarly, you don't have to pay the employer's health insurance contribution (previously called 'social security contribution').

If you pay one or more individuals more than €1,200 in total during the calendar year,

  • you must buy them accident and occupational disease insurance
  • you must pay unemployment insurance contributions to the Unemployment Insurance Fund (please note that as an employer, you must always withhold the worker's share of this contribution even if you pay them less than €1,200).

Tax returns to file

to the Finnish Tax Administration:

  • tax returns on employer's contributions for the months of wage payments
  • an Employer Payroll Report if the pay is at least €200 a year

You must additionally file notices to the pension insurance company, the Unemployment Insurance Fund and the accident insurance company as appropriate.  

  • For more information on the contributions to required insurance contracts, see: Kotitaloustyönantajan maksut ja ennakonpidätys vuonna 2017.

Visit the websites of insurance companies to find further information. The contributions are subject to various thresholds relating to the worker's age and to the amounts paid.

Paying more than €1,500 a year

If you pay a worker a higher gross income than €1,500 a year, you are liable to take care of the following:

  • Withhold tax on the pay.
  • Withhold the worker's share of unemployment insurance premiums from their pay.
  • Withhold the worker's share of pension insurance from their pay.

The following employer's contributions and payments are also required:

  • Paying pension contributions (including the employer's and the worker's shares) to the pension insurance company
  • Paying on the tax you withheld, along with the employer's health contribution, to the Tax Administration  
  • Paying the premiums for accident and occupational disease insurance to the insurance company
  • Paying unemployment insurance (including the employer's and the worker's shares) to Unemployment Insurance Fund.

Tax returns to file

to the Finnish Tax Administration:

  • tax returns on employer's contributions for the months of wage payments
  • the Employer Payroll Report.

You must additionally file notices to the pension insurance company, the Unemployment Insurance Fund and the accident insurance company as appropriate.  

Payroll accounting and reporting with the Palkka.fi e-Service

Household employers can use www.palkka.fi when paying wages (this e-Service works in Finnish and Swedish only). It offers a payroll functionality that includes all the employer's contributions in its calculation. It sends the required tax returns and notices to the Tax Administration, to pension insurers and to the Unemployment Insurance Fund. It can help you take care of all the employer's obligations described above.

Palkka.fi also enables you to submit an application for a tax credit for domestic expenses. The creditable expenses are transferred to your Pre-completed tax return automatically. Palkka.fi also lets you print out a payslip for your worker. It will keep the data on file for 11 years.

Palkka.fi  

Employer's contributions paid to the Tax Administration in MyTax

If you are not a user of Palkka.fi, you can file and pay the withholdings and the employer’s health insurance contributions in MyTax (tax.fi/mytax).

The required annual information return on wages is submitted on the Employer Payroll Report (Form 7801e). You can send it online or as a paper-printed form.

If you use Palkka.fi for calculating the wages you paid, it has sent the returns to the authorities automatically. Do not repeat the information by re-sending it.

Changes in the planned wage payments during the year

It may be that you expected to pay a certain sum to your worker but the real sum is different. If you had estimated that €1,500 per year would not be exceeded, no withholding and employer's health insurance contributions have been required during the year. However, if the amount goes over the threshold of €1,500 you must start withholding tax on the wages starting at the time when this happens. There is no need to withhold tax afterwards on the wages you had paid earlier. However, the employer's health insurance contribution must be paid on the payroll sum total for the year.

Example: If the 1,500-euro threshold is exceeded in October and the total wage equals €2,000 a year, you must withhold tax on €500.  However, €2,000 is subject to employer's health insurance contribution. You must carry out withholding on the amounts you pay in November and December, and then pay the health insurance on the sum total.  The mandatory insurance contributions for pension, accident, and occupational diseases have been required for the entire period when you have been paying wages.

Rules on the calculation of net pay

The amount agreed by the employer and the worker (the gross income) is adjusted by subtracting the worker-paid payments from it. If paying more than €1,500 a year, net pay is calculated as follows:

gross income 
– withholding
– pension contr. (worker's share) 
– unemployment insurance contr. (worker's share)
= net pay.

In addition to paying wages, the employer must:

  • Pay the employer's health contribution (previously 'social security contribution')
  • Pay the pension contribution (employer's share)
  • Pay the premiums for accident and occupational disease insurance
  • Pay the unemployment insurance contribution
  • Pay a group life insurance premium.

Information on the amounts to pay (Employers’ and employees’ pension and insurance contribution rates (%) in 2018)

Note: If tax credit for domestic expenses is applicable to the work done, your credit will be 20% of the pay and the entire employer's contributions.

Withholding as instructed on the worker's tax card

If the pay to a worker exceeds €1,500 a year, the employer must withhold tax on it. If the pay is max €1,500, a household employer does not have to withhold tax unless the worker asks for it. However, tax withholding is recommended in order to help the worker to avoid back taxes.

The worker must give their tax card to the employer. The worker's personal withholding rate is printed on it. The original tax card should be given to the main employer, although a photocopy may be shown if the work is a side occupation. If the work is a side occupation, the worker does not have to give the card to the employer. It is enough if the employer takes note of the worker's personal data, withholding rates, and other similar facts displayed on it.

If the worker does not present a tax card, the employer must withhold tax at the rate of 60%.

Handing a pay slip to the worker

Household employers must produce a document serving as a pay slip. No restrictions or requirements are in force as to its format, however, the following facts should be displayed:

  • employer's name, personal identity code, address and telephone
  • worker's name, personal identity code and address
  • amount of gross wages and the amount withheld on it
  • pay date
  • pension and unemployment insurance contributions withheld from the worker
  • amount of the health insurance contribution

The pay slip should be handed out even if no amounts had been withheld or if only a part of the pay were subject to withholding.

Keep the records for 6 years

As an employer, the household is expected to keep notes and records to report the following:

  • worker's name and personal identity code
  • pay date
  • amount paid as wages, and the value of any fringe benefits
  • amount paid as coverage of out-of-pocket expenses
  • pay period.

Notes, records, invoices and receipts must be kept for 6 years after the end of the payroll year.

Joint pool of household employers

Several households may become the joint employer of a day care provider, cleaner or other household employee.   For pools of this type among households we recommend that agreement be reached on who will take care of payroll withholding, payments of contributions and other employer obligations. The person agreed to take charge of this must use his or her own personal identity code when filing and paying taxes on behalf of the pool.

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