Legislative Amendments Intended to Temporarily Lower Employment-Related Expenses

Authors: Minna Wirtamo (AssociateTrainee) and Marta Kauppinen (Senior Associate)

As a continuation to our last employment blog post, new legislation introducing amendments to the Employees Pensions Act (395/2006, as amended) was adopted on 7 April 2020.

The new legislative amendments are intended to ease the position of employers operating in the private sector in the sudden state of change caused by coronavirus by temporarily lowering employment-related expenses.

Reduction of the Employer’s TyEL Contribution

The so-called employer’s TyEL contribution (i.e. the statutory pension contribution payable by the employer) will be temporarily reduced by 2.6 percentage points as of 1 May 2020. The basic TyEL contribution for 2020 is thereby reduced from 25.3% to 22.7%. The reduction will be applied until 31 December 2020.

The employer’s TyEL contributions will be increased during the years 2022–2025 until the impact of the temporary reduction is fully compensated.

The amount of the employee’s statutory pension contribution remains unchanged.

Postponement of TyEL Contribution Payments

In addition, based on a decision of the Finnish Ministry of Social Affairs and Health, dated 19 March 2020, TyEL contribution payments based on salaries payable between February 2020 and May 2020 can be postponed by a maximum of three months.

Postponement can be applied by requesting an extension to the payment period from the employer’s own mutual pension insurance company. An interest of 2% will be later charged on the granted extension period by the mutual pension insurance company.

We will follow up shortly with a new blog post on another set of legislative amendments relating to unemployment coverage for employees and other government measures in order to strengthen employees’ livelihood.