Insuring an employee moving abroad from Finland

Are you posting an employee to work abroad? As an employer, you must arrange your employee’s pension cover also when your employee works outside Finland’s borders. By doing this, you ensure that your employee will accrue pension also while working abroad.

Insure your employee moving abroad

If you post your employee from Finland to a foreign country, arrange his or her pension and social security well ahead of time, regardless of whether the move is temporary or permanent. First find out which country’s legislation you must follow and arrange the pension cover accordingly.

To which country is your employee moving?

EU countries: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

EEA countries: Norway, Iceland and Liechtenstein.

Social security agreement countries: Australia, Canada, Chile, China, India, Israel, Korea, the Province of Quebec and the USA.

If you hire an employee in an EU or EEA country or Switzerland, you should usually take out insurance for him or her in the country of employment.

The EU countries are: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

The EEA countries are Norway, Iceland and Liechtenstein.

The EU regulation contains special provisions on insurance concerning, among other things: 

  • posted employees whose posting abroad lasts no more than 24 months 
  • employees working in several countries 
  • flight or cabin crew members 
  • civil servants 

Regulation 883/2004 and implementing regulation 987/2009 are applied to employees and self-employed persons moving in EU and EEA countries and Switzerland.

Posted worker

When you post your employee to work abroad temporarily, he or she is usually a so-called posted worker.

Your employee meets the criteria of a posted worker when he or she goes to work in an EU or EEA country or Switzerland and if 
 

  • his or her posting abroad lasts no more than 24 months, or, with an exemption, no more than five years.
  • he or she has been covered by the Finnish social security system, based on work or residence, for at least one month before starting to work abroad
  • his or her employment relationship with your company, i.e. a Finnish employer, remains in force during the posting
  • you can also hire an employee directly for a posting abroad, in which case he or she does not have to be employed by you before the posting. 

Apply to the Finnish Centre for Pensions for a social security certificate, i.e. an A1 certificate, for your posted employee. The certificate indicates that your employee is covered by the Finnish pension and social security system. It also indicates the duration of the insurance in Finland. Apply for the certificate well ahead of time before your employee is posted abroad. Also apply for it when he or she goes on a business trip abroad, even for a few days.

If the decision is positive, the Finnish Centre for Pensions will send the A1 certificate to the employer and the employee. In addition, the Finnish Centre for Pensions will inform the employee’s pension insurance company, Kela and the employment country’s authority of the certificate. Based on the certificate, Kela will issue a separate decision on his or her entitlement to residence-based social security and, if necessary, a European Health Insurance Card.

The easiest way to apply for an A1 certificate is to do so in the Finnish Centre for Pensions’ electronic application service.

As the final step, sign an agreement on the posting with your employee. Also state in the agreement the salary for insurance purposes, i.e. the earnings based on which your employee will accrue earnings-related pension during his or her posting. Report the salary for insurance purposes to the Incomes Register.

Example: You represent a Finnish employer and your employee is covered by Finnish social security. You post him or her to work in Estonia for a year. In order for him or her to continue to be covered by Finnish social security, apply to the Finnish Centre for Pensions for an A1 certificate. Make an agreement on the posting with your employee, specifying the salary for insurance purposes. Report the salary for insurance purposes to the Incomes Register.

Working in several EU or EEA countries or in Switzerland 

Your employee is only covered by one country’s social security system at a time, even if he or she works in several EU or EEA countries. If he or she works in several EU or EEA countries or in Switzerland, he or she must report this to the authorities of his country of residence; in Finland, to the Finnish Centre for Pensions. The country of residence determines the applicable legislation. In that case, the A1 certificate is issued by the country whose legislation is applied based on the country of residence.

Take out pension insurance for your employee based on his or her country of residence if he or she carries out a substantial part of his or her activities in his or her country of residence. A substantial part means that 25 per cent of the activity is carried out in the country of residence. Your employee’s working hours or pay or both will also be taken into account when determining the substantial part of the activity.

Arrange your employee’s pension cover based on your company’s country of domicile if your employee does not carry out a substantial part of the activities in his or country of residence and if the employee only has one employer, or if all of the employers are domiciled in the same country. If there are several employers and they are domiciled in your employee’s country of residence and in one other country, take out social insurance in the foreign employer’s country of domicile.

If your employee works, in addition to his or her country of residence, in several countries for different employers, he or she should be insured in the country of residence.

The figure below helps you determine which country’s legislation you should follow to arrange your employee’s pension cover.

Finland has concluded a bilateral social security agreement with a number of non-EU countries. If you hire an employee in a country with which Finland has a social security agreement, you should usually insure him or her in accordance with the legislation of the country of employment.

The contents of the agreements vary, as does the duration of the social security certificates. The benefits granted to your employee will not necessarily be as extensive as they would be in an EU or EEA country or Switzerland.

Finland has a social security agreement with Australia, Canada, Chile, China, India, Israel, Korea, the Province of Quebec and the USA.  

When you post your employee to a social security agreement country, your employee is a posted worker if

  • your employee’s work abroad is temporary 
  • your employee is covered by Finnish social security at the time of posting 
  • you usually carry out your activities as an employer in Finland 
  • your employee works for you or an employer connected to you. 

If your employee is a posted worker, apply to the Finnish Centre for Pensions for a social security certificate for him or her. The certificate indicates which country’s social security legislation will be applied to your employee and for how long.  

Apply for a social security certificate in the Finnish Centre for Pensions’ electronic service (etk.fi).

When you are a Finnish employer and you post your employee to work in a country with which Finland does not have a social security agreement, your employee will be covered by Finnish social security for as long as he or she works for you, i.e. the employer that has posted him or her. You can take care of his or her pension cover by taking out employees’ pension insurance, i.e. TyEL insurance, for him or her. Take out the insurance regardless of the employee’s citizenship.

Insure your employee according to TyEL, if  

  • you are a Finnish employer 
  • you have posted your employee from Finland 
  • your employee is covered by Finnish social security based on residence or work when the posting starts.  

Your posted employee does not necessarily have to be employed by you at the time of posting; you can hire him or her directly for the posting. Nevertheless, the employee needs to remain closely connected to you throughout the posting period.

If you post your employee to a non-agreement country, you might need to insure him or her also based on the employment country’s legislation. If necessary, request a ’To whom it may concern’ statement from Ilmarinen, stating that the employee is covered by the Finnish social security system. The statement allows you to avoid double pension insurance contributions in some countries; this could happen if you were required to take out pension insurance for your employee in two countries.

If you post your employee to a non-agreement country, you must report the start and end date of the posting as well as any changes to these to Kela. The posted employee must also submit a similar report for him- or herself and his or her possible family members so that they remain covered by Finnish social security while posted in the foreign country. Kela will decide whether the employee is entitled to Kela’s benefits and to Finnish social security while he or she is posted.

You can find more information for employers on employment abroad on Kela’s website (Kela.fi).

Example: You post your employee with a family to Singapore for three years. You and your employee need to contact Kela about being covered by the Finnish social security system. As an employer, you need to find out about the statutory social insurance contributions of the country of employment. You can also request a ‘To whom it may concern’ statement from Ilmarinen, if your employee has TyEL insurance with Ilmarinen. The statement may exempt you from pension insurance contributions in the employment country. Agree with your employee on the salary for insurance purposes and write it down in the posting agreement. Report the salary for insurance purposes to the Incomes Register.

Salary for insurance purposes

You will pay your TyEL contributions based on the salary for insurance purposes during the posting. Similarly, your employee will then accrue pension based on the salary for insurance purposes and not his or her actual earnings.

The salary for insurance purposes is the salary your employee would receive for the same job in Finland. The salary for insurance purposes is always based on the pay level in the home country and the actual amount of salary does not affect it.

Agree with your employee on the salary for insurance purposes before signing a posting agreement. Always agree on it in writing and write it down at least in the posting agreement. When agreeing on the salary for insurance purposes, take into account the following:

  • the salary for insurance purposes means a salary that your employee would earn for similar work in Finland.The salary for insurance purposes can be smaller or larger than the actual salary paid. 
  • The employer and employee cannot agree freely on the amount of the salary for insurance purposes. 
  • The amount of the salary paid in the employment country is not relevant. 
  • In the salary for insurance purposes, take into account the fringe benefits your employee would receive for similar work in Finland.
  • Include bonuses in the salary for insurance purposes at the very beginning if they were used in Finland for the same work. 
  • Also take into account in the salary for insurance purposes if the employee’s working hours abroad are longer than the normal working hours in Finland or if the work abroad requires special knowledge or skills.  
  • It is good to always agree on the salary for insurance purposes in writing and to mention its amount in the posting agreement, for example.
  • Under TyEL, the salary for insurance purposes applies to the insured work regardless of the country in which it is carried out. 

You do not need to determine a salary for insurance purposes for short periods of posting abroad that last less than six months, if

  • your employee will perform similar work abroad as in Finland at the time of departure  
  • your employee’s salary will continue to be paid from Finland
  • no separate salary has been agreed on for the duration of the employee’s posting.  

Your employee’s pension contribution will be determined based on the salary for insurance purposes, not the salary that has been paid to him or her. Deduct the employee’s share of the contribution also if you have taken out voluntary TyEL insurance for him or her.

Voluntary TyEL insurance

When transferring to the country of employment, your employee’s pension cover may weaken. As a Finnish employer, you can supplement it by taking out voluntary TyEL insurance. You can take it out if your employee is covered by Finnish social security when his or her employment relationship begins.

You can take out voluntary TyEL insurance in the following situations:

  • You post your employee to a Finnish company’s foreign affiliated or associated undertaking, even if the employment relationship with the Finnish employer will not remain in force.  
  • Your posted employee transfers, while abroad, into the employment of the same company’s affiliated or associated undertaking (localisation) or to the employment of another Finnish company or its affiliated or associated undertaking.  
  • You hire your employee directly from abroad into the employment of a Finnish company or its affiliated or associated undertaking (locally employed personnel).  
  • The employee’s connection to the Finnish social security system must continue without interruption before taking out voluntary TyEL insurance.
  • You can also take out voluntary TyEL insurance retroactively, at most six months after the fact. 

The voluntary TyEL insurance contribution is based on the salary for insurance purposes, which is also the basis for your employee’s pension accrual. The contribution is determined in the same way for voluntary TyEL insurance as for mandatory TyEL insurance. Deduct the employee’s share of the contribution from the employee’s pay as usual and pay us the total contribution. Report the salary for insurance purposes to the Incomes Register.

If you wish to take out voluntary TyEL insurance for your employee working abroad, call Ilmarinen’s sales service at +358 10 284 2385.

Are you unsure about something?

If you have questions about insuring work abroad, our specialists will gladly assist you. Contact us by sending a secure message through the employer’s online service.

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