Employer costs in Finland 2026 — what does an employee really cost?
Statutory on-costs come to about 19.9% of gross pay in 2026. A salary of 3,000 euros a month therefore costs an employer roughly 3,597 euros a month, and about 48,555 euros over a year once holiday pay is counted — a multiplier of 1.35.
The same salary looks completely different from the other side. Of that 3,000 euros gross, someone in Helsinki keeps about 2,440. The employer pays 3,597, the employee receives 2,440, and 1,157 euros sits in between — close to a third of the whole cost. That gap is the tax wedge, and it is what this article is really about.
- 19.89%
- total on-costs
- 17.10%
- TyEL, employer share
- 1.20
- multiplier without holiday pay
- 1.35
- multiplier with holiday pay
What the on-costs consist of
| Contribution | Share of pay | Notes |
|---|---|---|
| TyEL, earnings-related pension | 17.10% | average employer share |
| Health insurance contribution | 1.91% | the same for everyone |
| Unemployment insurance | 0.31% or 1.23% | stepped by total payroll |
| Accident insurance | about 0.51% | by sector risk, 0.05–5.00% |
| Group life insurance | 0.06% | only where a collective agreement requires it |
| Total | 19.89% | small employer, office work |
Two of these are not fixed. The unemployment contribution is stepped: a small employer pays 0.31% and a large one 1.23%, with the boundary at roughly 2.5 million euros of annual payroll. Accident insurance depends on the sector, and the range is wide — about half a per cent for office work, several times that in construction. A one-person office and a building firm are not looking at the same number.
Total cost by salary level
| Gross salary | On-costs | Total / month |
|---|---|---|
| €2,000 | €397.80 | €2,397.80 |
| €2,500 | €497.25 | €2,997.25 |
| €3,000 | €596.70 | €3,596.70 |
| €3,500 | €696.15 | €4,196.15 |
| €4,000 | €795.60 | €4,795.60 |
| €5,000 | €994.50 | €5,994.50 |
The tax wedge: what disappears on the way
On-costs are only one half. The employee also has their own contributions withheld — TyEL 7.30%, unemployment insurance 0.89%, the sickness allowance contribution 0.88% and the health care contribution 1.10% — and income tax on top of those.
| Stage | EUR / month |
|---|---|
| Total cost to the employer | €3,596.70 |
| Gross salary | €3,000.00 |
| Net to the employee (Helsinki) | about €2,440 |
| Tax wedge | about €1,157 |
The wedge is therefore about 32% of what the employer pays. It is worth holding in mind during a pay negotiation, in both directions: a hundred euros more gross costs the employer about 120 and leaves the employee with about 60–70 in hand, depending on their tax rate. The same hundred euros reads as three different numbers depending on which side of the table you sit.
The employee’s own TyEL contribution changed in 2026
The employee’s own pension contribution is 7.30% in 2026 at every age. A higher rate used to apply to those aged 53–62, but it ended at the close of 2025. If you are comparing a payslip with last year and the employee falls in that band, the difference shows up in net pay — upwards.
What on-costs do not include
- Holiday pay and the holiday bonus are wages, not on-costs — but they raise the payroll that on-costs are calculated from.
- Occupational health care is compulsory, but its price is a separate cost rather than a percentage of pay. Kela reimburses part of it.
- Collective agreement supplements such as shift and overtime pay are wages, and they increase on-costs.
- Tools, software licences and a workstation are company costs, not pay-linked contributions.
- Group life insurance is only charged where the sector’s collective agreement requires it — not everywhere does.
For anyone weighing up a first hire, the practical rule is simple: multiply the intended gross salary by 1.35 and see whether the cash flow holds. If it does, hiring is realistic. If it does not, a light entrepreneur or a subcontractor may be a more sensible first step — but then make sure it is not in substance an employment relationship, because the hallmarks decide that, not the title on the contract.
What a first hire actually requires
Beyond the contributions, hiring brings obligations whose neglect costs more than the payments themselves. Pay details must be reported to the Incomes Register within five calendar days of the payment date, and being late can bring a negligence fee. TyEL insurance must be taken out before the first payday rather than after, and the same goes for accident insurance.
An occupational health care contract has to be made as soon as the first employee starts. Preventive occupational health care is statutory, medical care voluntary, and Kela reimburses part of both. The cost is typically a few hundred euros per employee per year — not a percentage of pay, so it does not show in the on-cost multiplier at all.
Calculators for this topic
FAQ
How much are employer on-costs in 2026?
About 19.9% of gross pay: TyEL 17.10%, health insurance 1.91%, unemployment insurance 0.31% for a small employer, accident insurance around 0.51% and group life insurance 0.06%.
What is the total cost of an employee?
Gross salary times roughly 1.2 per month. A 3,000-euro salary costs about 3,597 euros a month. Over a year, with holiday pay, the multiplier is closer to 1.35 — about 48,555 euros.
What is the TyEL rate in 2026?
The average employer share is 17.10%. The employee has a further 7.30% withheld, and in 2026 that is the same at every age — the higher rate for those aged 53–62 ended at the close of 2025.
What is the tax wedge?
The gap between the employer’s total cost and the employee’s net pay. On a 3,000-euro salary it is about 1,157 euros a month, roughly 32% of the total cost.
Why does unemployment insurance have two rates?
It is stepped by payroll size: a small employer pays 0.31% and a large one 1.23%. The boundary sits at roughly 2.5 million euros of annual payroll.
Are on-costs the same in every sector?
Not quite. Accident insurance depends on sector risk and ranges from 0.05% to 5%, so construction carries clearly higher on-costs than office work. The other contributions are the same.