When companies compare different ways of engaging talent in Finland, Employer of Record arrangements and light entrepreneurship may sometimes appear similar from a cost or administration perspective.

Legally, however, they are not the same.

In Finland, the status of a working relationship is not decided by the title used in a contract or by the name of the service provider. It is determined by the actual nature of the work arrangement. If the legal characteristics of an employment relationship are met, the work must be treated as employment, and Finnish employment legislation applies.

The Finnish Occupational Safety and Health Administration explains this clearly in its guidance on the characteristics of an employment relationship: the parties cannot freely agree whether a relationship is employment or not.

If the characteristics of employment are met, it is an employment relationship.

What defines an employment relationship in Finland?

Under the Finnish Employment Contracts Act, an employment relationship generally exists when a person personally performs work for an employer, under the employer’s direction and supervision, in return for pay or other remuneration.

In unclear situations, the assessment is based on the overall facts of the arrangement, including the terms of the work, the working conditions, the parties’ intention and the actual status of the parties. Direction and supervision remain central indicators, but Finnish law requires an overall assessment of all relevant circumstances.

The Occupational Safety and Health Administration lists the key characteristics of an employment relationship as:

• an agreement
• a personal duty to work
• work performed on behalf of another party
• compensation for the work
• direction and supervision of the work

This is an important point for companies hiring in Finland. If the person is, in practice, working like an employee, the arrangement should be structured as employment.

What is light entrepreneurship?

Light entrepreneurship, or kevytyrittäjyys, is a recognised way for individuals to provide services independently, often by using an invoicing service instead of setting up their own company.

Light entrepreneurship (“kevytyrittäjyys”) is a commonly used commercial term rather than a separate legal status under Finnish law. Depending on the circumstances, a person operating through an invoicing service may legally be considered either an entrepreneur or an employee. The individual typically uses an invoicing service to invoice the customer, while remaining responsible for agreeing the terms of the work with the customer.

This can be a suitable model when the person genuinely operates independently: for example, when they decide how the work is performed, carry entrepreneurial risk, offer their services to multiple customers, and are not working under the direction and supervision of one employer.

However, light entrepreneurship is not intended to replace employment in situations where the actual working relationship meets the legal criteria of employment.

Why the distinction matters

The distinction is not just technical. It affects the obligations of the company and the rights of the individual performing the work.

The Finnish Ministry of Economic Affairs and Employment explains that Finnish labour legislation applies to employees working for an employer under the employer’s direction and supervision, and not to entrepreneurs. You can read more in the Ministry’s guidance on employment contracts and employment relationships.

When a relationship is employment, Finnish employment legislation and statutory employer obligations apply. This may include obligations relating to pay, working time, annual holiday, sick pay, occupational safety, occupational healthcare, social security contributions and applicable insurance arrangements.

If an employment relationship is incorrectly treated as entrepreneurship, employer obligations may not be fulfilled in the manner required by Finnish law. This can create risks for both the company and the individual.

Even where the parties describe the arrangement as self-employment, Finnish authorities or courts may later determine that an employment relationship existed if the statutory criteria are met.

How an EOR employment model differs

An Employer of Record model is different from a contractor or entrepreneurial model.

Through WorkSphere’s EOR service in Finland, individuals are employed under an employment contract where the engagement constitutes an employment relationship under Finnish law. This means the employee is covered by the relevant Finnish employment framework, and the employer’s total cost includes applicable statutory employer contributions and obligations.

In other words, the purpose of the EOR model is not to avoid employer responsibilities. It is designed to ensure that employer obligations are fulfilled in accordance with Finnish law.

This gives international companies a compliant way to hire in Finland without establishing their own local entity, while ensuring that the employment relationship is structured according to Finnish requirements.

Why cost comparisons can be misleading

When comparing cost calculations or net salary estimates from different service providers, it is important to check whether the comparison is based on the same legal model.

An EOR employment relationship is not directly comparable with light entrepreneurship, freelance work or contractor arrangements. A higher estimated net amount in one model may simply reflect that the calculation is based on a different legal structure, where responsibilities, contributions, insurance and employment protections are handled differently.

For a meaningful comparison, companies should ask:

• Is the individual legally employed, or treated as self-employed?
• Who carries the employer obligations?
• Are statutory employer obligations, including employer social insurance contributions included?
• Is the person covered by the Finnish employment and social security framework as required?
• Does the actual working arrangement match the legal model being used?

Looking only at the estimated net salary can therefore give an incomplete picture.