Salary Side Costs – What Exactly Are They?

Side costs

Remember all the times you’ve made a contract with new employer and negotiated salary?

I bet the employer never mentioned all the costs your salary will produce to him or her.

These costs are called employer contributions and although you might be a self-employed light entrepreneur, these costs are something you should probably know about. If you’ve only worked as an employee, you may not be familiar with all the costs that employers take care of upon each salary payment.

In Finland, employer has obligations to make certain contributions, which include:

  • withholding tax at source (according to the rate on employee’s tax card)
  • insurance payments (health, accident etc.)
  • pension payments

These are all payments that your employer (or you, if you’re an entrepreneur) make whenever paying salary. The amount of these contributions may vary for example depending on employees age, however, the average is usually around 20%.

In reality, the side costs of each salary are higher. In Finland, employees are also entitled to annual holiday. This means that whenever company hires an employee they’re entitled for work input of 11 months, although paying salary for 12 months. In addition, there might be a holiday bonus paid, even though this is based on a collective agreement and is not mandatory. You can find out more from here.

The actual side costs of each salary are, therefore, around 40-45%. If a company hires an employer with a salary of 2000€/month, the actual costs for employer are around 2800€ each month (an estimate). From the Federation of Finnish Enterprises you can find a calculator, with which you can get an estimate based on your own salary as an employee.

SIde costs

The amounts above do not include sick leave days, which are also a reality of employment and a cost for employer. Arranging health care services for employees is also employer cost. The actual expenses of employees are 1,7-2 times the amount of employee’s monthly salary.

When planning on recruiting, it makes sense to calculate whether multiplying the monthly salary of potential employee by two makes a sum that you are able to pay. takes care of all the side costs

When you work as a self-employed professional and invoice trough, you know that takes care of all the necessary side costs when it comes to your salary. This means that neither you or your potential employer’s don’t need to worry about them.

All insurance payments, as well as pension payments (when necessary) are deducted from the invoice you have made as a light entrepreneur. This is why the amount that you get to your own bank account isn’t the same as the amount you originally invoice.

If the total amount of your invoice is, for example, 1000€ it means that the amount you’ll receive as income to your own bank account is usually somewhere around 600-800€. By using our salary calculator, you can get an estimate on how much salary you’ll get from an invoiced sum, after all the contributions mentioned above have been deducted.

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Saara Teirivaara

Saara Teirivaara

Saara produces words, images and pretty much anything else one might need in the world of marketing. This social media Picasso is especially fond of Instagram, all things visual, warm weather and white sneakers.

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