We’ve published several blogs about salaries in Finland. This week we add to this series by talking about different types of salary systems in Finland.
In Finland, salaries are based on time (monthly salaries or hourly wages), piecework rates, or commission. Most commonly salaries in Finland are tied to fixed monthly or hourly rates. In addition to these, employers may supplement these with different types of monetary rewards tied to results or profits.
For the majority of employees in Finland, salaries are based on the salary system of the collective agreement in use in their field. In recent years, salary systems used in Finland have increased in variety. Here we’ll take a closer look at the most common ones.
Salary systems based on the demands of the job and skills of the employee
Salaries in Finland used to be based on job titles, education, years on the job, employment history, and even on gender.
Starting from the end of the 1980s, salary systems that are partly based on job requirements and partly on individual job performance have become increasingly common. The idea was that, for example, job titles tell very little about the actual demands of the job. Similarly, years on the job may tell very little about how well the employee performs on the job.
Under this system, compensation was based on what type of skills, know-how, and experience the job in question required. The idea was that the higher the requirements of the job the higher the salary should be. The personal performance component, in turn, related to how well the individual employee handled those tasks. Those who perform better get paid better.
The first field to adopt such a salary system was the metal industry. There, jobs belonged to one of nine categories based on a point system. The manager, in turn, evaluated the job performance on the basis of a preapproved system. From there, these types of salary system spread to other fields.
In many fields, however, the point system has been replaced with verbal descriptions of demand levels. Often these are supplemented by examples of tasks or expected skills associated with each demand level. An example of this is the salary system in use in Finnish universities (see their collective agreement p. 94).
Often collective agreements stipulate that companies have to use a specific salary system, but some collective agreements allow for the possibility of company-specific systems. Although even then the collective agreement gives at least some directions and guidelines for building such a system. Examples of such are collective agreements in the technology industry (see here).
Coming to work at a Finnish university? Get to know your employee rights and responsibilities on our online course “Working in Finnish Universities“.
Salary systems based almost only on the demands of the job
A salary system that is based on the requirements of the job doesn’t always include a salary component that is be based on the individual job performance of the employee.
Instead, collective agreements can stipulate that salaries may include such components. These can relate to performance, skills, or other criteria specific to the individual employee in question. Such individual criteria can be, for example, certain skill sets or additional years on the job.
Such salary systems are in use, for example, in the health care sector or the education sector.
Other common salary systems
There are also fields in which salaries are not based on the job demand levels but mostly on the job description. Additional criteria influencing the salary of the employee may be years on the job, education, and location of the job. Such a salary system is, for example, in the commercial sector, and the hospitality industry.
Other common salary systems in Finland are commission-based salary systems and piecework rates.
Commissions are common, for example, in sales jobs where a part of the salary can be based on the sales volumes of the employee. This comes on top of a fixed salary. Based on a survey conducted by the Union of Sales and Marketing Professionals, 21 % of their members had such a salary combination in 2017.
Piecework rates are common in, for example, the construction industry. There the collective agreement describes the extent and content of the piecework and sets rates for that work.
Piecework contracts are also common in agriculture, for example, in harvesting work.
Working conditions and wages of forest berry pickers end up in the news practically every fall. These jobs employ a lot of foreign workers and sometimes unscrupulous companies exploit them. Unfortunately, foreign forest berry pickers are often not covered by the collective agreement of the agriculture sector. That’s because they are rarely employed by the companies that buy the berries from them.
However, several companies in the berry processing industry have signed a letter of intent. They concluded it together with the Ministry of Employment and the Economy, and the Ministry of Foreign Affairs. The idea of the letter is to set guidelines somewhat similar to those in collective agreements although they are not binding. The letter (in Finnish) includes provisions, for example, about minimum earnings levels.
How common are these different types of systems?
The Statistics Finland survey of Finnish working conditions we mentioned already in one of our previous blog posts, tells us of the prevalence of some of these salary systems in Finland.
Their data show that salary systems based on the job demand levels have increased in popularity since the beginning of the 21st century. In 2003, the salary of 38 % of employees in Finland was based on this type of salary system. By 2018, the percentage had grown to 49 %.
This type of salary system is particularly common in the state sector (88 %) and the university sector (84 %). In municipalities and the private sector, such systems were less common (48 % and 46 % respectively).
Interestingly, the share of employees whose salary also included a portion based on individual performance had decreased from 40 % to 34 % since 2008. Again, this was more common in state and university jobs (83 % and 79 % respectively) than in municipal and private-sector jobs (24 % and 34 % respectively).
Some employees in Finland also earn additional bonuses based on company profits or other types of performance measures such as, for example, product quality, productivity, customer satisfaction.
In 2018, 37 % of employees in Finland were fell under such bonus systems. Most commonly such bonuses were paid in the private sector (46 %). Such systems were more common in men’s workplaces than in women’s workplaces (45 % and 29 % respectively).
The same Statistics Finland survey revealed that of all employees 26 % had received a bonus within the previous year. However, of women, only 18 % had received a bonus while 33 % of men had. Men also received larger bonuses than women. For example, in 2018 19 % of male employees had received over 1 000 euros, while only 8 % of the women had.
Learn more about the Finnish working life in our self-guided online courses!
If you want to learn more about, for example, how to find out about the correct salary levels in Finland, and what your rights and responsibilities are as an employee in Finland enroll in our self-guided online course Working in Finland. That is a comprehensive course on the rules and regulations governing the Finnish working life.
We have a similar course for those working or wanting to work in Finnish universities.
Coming to work at a Finnish university? Get to know your employee rights and responsibilities on our online course “Working in Finnish Universities”. Get it from our online store.
Our Mini-course on Finnish employment contracts, in turn, takes you through the terms of Finnish employment contracts quickly but with enough detail that you feel safe signing that dotted line.
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