Starting a Cooperative in Finland

Cooperative as an Employer

A cooperative is often an employer, too.

1. Cooperative member – entrepreneur or not?

A member of any cooperative can be either a self-employed entrepreneur, i.e. a natural person carrying on a business, or an employee, i.e. a natural person receiving wages or salary.

The demarcation between the two is based on the provisions of the Unemployment Security Act (työttömyysturvalaki), chapter 1, section 6.

According to this section, an entrepreneur is any natural person who is required, because of their principal activity, to take an entrepreneur pension scheme YEL or a farmer pension scheme MYEL.

Entrepreneur is also any person included in an employee pension scheme (TyEL) who is a part-owner of the company and

  • owns alone at least 15 %, or his or her family or they all together own at least 30 % of the company where the part-owner works in a leading position
  • owns alone or his or her family or they all together own at least 50 % of the company where the part-owner works in a leading position

Example 1: You are member of a cooperative with seven members, each having equal share and voting power (less than 15 %). You have employment relationship with the cooperative in which you are working. In consequence, you are not an entrepreneur and not required to take a YEL pension insurance. As an employee, you are entitled to unemployment security, if your employment contract fulfills its conditions.

Example 2: You are member of a cooperative which has three members with equal ownership and equal voting powers amongst the members (> 30 %). You are member of the board of directors. Considering your unemployment security, you are an entrepreneur.*)

Any person who has a paid employment without a contractual work relationship, even if they have no business ID (Y-tunnus) or other activity classifying as factual business activity, is also classified as self-employed. Anybody working through an invoicing service without their own business ID and being paid against their tax card is considered for the unemployment security as a full-time self-employed person, if the work they do takes so much time they could not take a full-time job and the work lasts more than two weeks (Act on unemployment benefits, chapter 2, section 5 ). Such a person exercising full-time business activity has no right to unemployment security.

*) In case you are an entrepreneur and your earnings from it exceed €7,958.99 per year (in 2020), you are obliged to subscribe a YEL insurance, so you are in an entrepreneur pension scheme and, thus, entrepreneur as to the unemployment security. The YEL insurance is also required for the entrepreneurs’ unemployment benefit. More details on YEL insurance, see and on the unemployment security of the entrepreneur, see

Here above we have discussed a member’s belonging to either an employee’s or a self-employed person’s unemployment security scheme. As a consequence, he or she can apply for the membership of any self-employed persons’ or employees’ unemployment fund in order to receive an earnings-related benefit. The entitlement of the cooperative’s worker, member or not, to unemployment benefit depends also on the relationship of the work (contractual job). Next we will discuss some of the distinctive characteristics and conditions of a contractual job relationship, viewed from the cooperative’s and the member’s side.

Employment or light entrepreneurship?

During the last few years, there has been lots of talk about the so-called light entrepreneurship, with no specific definition for it. It can mean that a registered private trader uses a service system enabling them to access payment and bookkeeping services. It is often used to describe self-employed activity with no employment contract nor own business, but the invoicing and the payment of the remuneration are taken care of by a so-called invoicing company. Because of these new forms of work, like the work under invoicing companies, it has been necessary to clarify the status of people working in a cooperative, i.e. as to their entitlement to unemployment benefits.

According to the executive guidance on unemployment security system, published by the Finnish Ministry of Employment and the Economy (TEM/2414/03.01.04/2018), the cooperative is not considered as an employer if it only communicates information about jobs and takes care of the marketing, invoicing and bookkeeping of its members’ work. In these cases the contractual employment relationship can exist only between the company and a person responsible for the marketing, invoicing and bookkeeping.

The work done by a member in a cooperative is considered as an employment relationship if the job applicant has signed a contract with the cooperative. It is also required that the cooperative qualifies as an employer. This means it must offer those services the employee was recruited for under its own name. Usually this means in practice that the work is done for the cooperative’s account and has a contractual relationship with the client.

Hence, the cooperative must be an independent entity with own business. The members work as employees of this entity, not as distinct agents. The cooperative activities are meant to benefit the cooperative and not pass through directly down to its members.


WHAT KIND OF ACTIVITYaccording yo its respective field of businessinvoicing service activities
SERVINGconsumers and community customersprivate traders: self-employed, light entrepreneurs etc.
ON WHOSE ACCOUNT THE CLIENT WORK IS DONEon cooperative’s accounton invoicing company user’s account

Temporary work agency

The cooperative activities can include those of a temporary work agency detaching, as an employer, its own employees with their consent to another company. In these cases, the relationship qualifies as contractual employment of the employee, even though the cooperative working as an employer does not supervise this work, the work is not done at cooperative’s own premises and if the cooperative business is something else than the work done by the employee.

Irrespective of the nature or the line of the business, the cooperative has to draw meticulous agreements with their members, and also with their clients, and take care of the supervision and control of work required by the Employment Contract Act, establishing the existence of the employment relationship.

Ensure the relationship of the cooperative with worker

By definition, a workers’ cooperative functions as an employer, but there can be situations where this is not established or it can be disputed. The form of the employment relationship is significant for the employee working for the cooperative and for the latter, too. If the cooperative presumed to be an employer, it has taken care of the statutory insurance fees for pensions, accidents and social security and financed them partly by paying its contribution deductible from its gross profit. The fulfillment of obligations has also meant work and expenses for the administration.

If in practice, say in case of an accident at work, the insurance company takes the view that it was not an employment relationship, there will be no insurance payout in spite of the statutory insurance. In certain cases, the fees paid for these can be refunded, at least partly, but the insurance coverage is not real in the way it was supposed to be.

Characteristics of an employment relationship:

  • existence of an agreement
  • individual working
  • against remuneration
  • on employer’s account
  • under employer’s supervision and control,200163&folder_id=200163

More details on the real characteristics of an employment relationship are available in the guidance of the Finnish tax administration:–ja-toimeksiantosuhteen-tosiasialliset-tunnusmerkit

To clarify the employer status of a cooperative, it has to align its procedures according to each situation of employment relationships. The practical organization of activities must take into consideration all employer obligations and procedures supporting them, from organizational facts up to supervision and control. The employees must be clearly informed on their responsibilities and obligations under employment relationship and in the organizational procedures.

A cooperative can be a consortium

Companies can incorporate a cooperative, be its members and exchange with it. In this case, its purpose is some kind of marketing or purchasing activity or it can be a consortium offering various activities for its members’ benefit, like an excellence center, or taking care of specific functions for its members, like negotiations and environment relationships etc. (cf. different types of cooperatives). In these cases, the transactions are considered normal billed trade between the cooperative and its member company. It is a business relationship, the member company is doing business autonomously, while respecting the contracts made with the cooperative.

2. Statutory pension and accident insurances

When pricing the work and the services of the cooperative, one must not forget that an employer has to pay many other expenses than the mere salary of the worker. These include the contributions for occupational pension insurance, accident insurance, unemployment insurance and group life insurance, plus the part of the social security contribution paid by the employer.

If the cooperative is in the capacity of employer and the sum of salaries paid during one calendar year exceeds 1 200 euros, it is obliged to underwrite a statutory accident insurance for its workers. This insurance comprises a group life insurance according to the collective agreement of the industry in question. In addition, the Finnish Employment Fund levies an unemployment contribution according to the Incomes Register, if the amount of salaries paid during one year exceeds 1 300 euros.

The employment pension insurance contribution (TyEL) and the unemployment contribution vary according to the salary sum of the undertaking. The accident insurance fee depends on the nature of the work and the sum of salaries. On average, these associated expenses are about 25 % of the gross salary. Before the payment of a worker’s salary, deductions are made for the respective contributions of pension and unemployment insurances.

Statutory insurances, cf. Insurance coverage

3. Employment relationships, annual holiday payment and occupational health care

Worker’s cooperatives usually have employment relationships: the cooperative is an employer, and the member is an employee under contract. The employment relationship can be an ordinary permanent employment or a fixed-term one. Cooperatives can hire agency workers for temporary tasks or take work contracts. This is why the employment relationships are often rather short, which does not rule out short-term jobs repeating continuously.

Regardless of the duration of the work, it is usually under an employment contract relationship. The member supplying the labor, or any other employee and the cooperative have made a contract, but it may not always be written. This means that the cooperative is an employer, required to follow normal duties of the employer in an employment contract. These include records on actual hours worked, health and safety at work and occupational health care. The employee has the rights provided by the law and the collective agreements .

It is advisable to familiarize oneself with the legislation defining the employment relationship and the collective agreements of the line of business in question. The most important obligations of an employer are defined in the following Finnish laws: The Employment Contracts Act (55/2001), the Working Time Act (272/2019), the Collective Agreements Act (436/1946), the Holiday Act (162/2005), the Employees Pensions Act (395/2006) and the Occupational Health Act (1383/2001). The laws and their amendments are available in Finnish here: Finlex pages.

The working conditions to be written down in a written employment contract

The conditions of the employment relationship are defined, as far as not limited by the law and the collective agreements, in the employment contract signed between the employee and the employer. Such a contract can be oral, written or electronic, but it will be safest to write a document certified by signatures of the two parties.

According to the Employment Contracts Act, the employer must always give the employee a written document of the essential conditions of a permanent employment or one that has lasted more than one month, before the end of the first salary period of the employment, if the conditions are not defined in a written contract. In repeating employment relationships of less than one month under the same employer and under the same conditions this document has to be delivered at least one month after the beginning of the first employment relationship. In agency work the document must be delivered, even if the contract was made for less than a month, if the employee specifically asks the agency for it.

The employment contract or written document must mention at least: 

  • The residence or registered office the employer and the employee;
  • The starting day of the work;
  • The grounds for the temporary nature of the contract and the (estimated) expiry date of the contract;
  • at the employer’s initiative, the employment contract can only be temporary for a valid ground mentioned in the contract. This can be the duration of the work, the replacement of an existing employee, seasonal work etc. In case of more than one employment contracts of limited duration, each of them must have a valid ground;
  • Any employment contract without a valid ground is considered a permanent contract;
  • If the contract is of limited duration, neither party can terminate unilaterally before its end, unless there is a specific stipulation in the contract;
  • A long-term unemployed person can be engaged for an employment relationship of limited duration of less than one year without any specific ground;
  • trial period
  • A trial period is valid only, if it is mentioned in the employment contract;
  • The trial period can’t be longer than six months, and in a contract of limited duration, only half of the contract duration, in any case not more than six months;
  • During the trial period each party can terminate the contract without any reason or notice;
  • In no case the ground for termination can be improper or discriminating;
  • The place of work or a document of the grounds on which the employee works in different locations;
  • It is useful to define the place of work as precisely and as comprehensively as possible. It will be reflected on the employer’s right to designate the location of work and the employee’s right to have the travel costs reimbursed.
  • Main duties
  • The definition of the duties has an impact on the possibilities of the employer to modify the description of duties and assign new tasks, and on the other hand, on the employee’s obligation to accept changes.
  • The collective agreement applied
  • If the employer has the membership of a national confederation that has signed a collective agreement, this will be applied;
  • If the employer is not under a collective agreement, the sector of the work done defines the universal agreement generally applicable, if such a collective agreement exists;
  • Many sectors have no universal agreement, in which case normal and reasonable conditions of employment are applied, of course according to the minimum conditions of the law;
  • Salary and its calculation base and periodicity
  • Any salary can’t be less than the minimum defined in the collective agreement;
  • The usual periodicity is maximally one month, and two weeks, if the time wage is based on a period shorter than one week (hourly pay) or a piece rate;
  • The salary or wages is usually paid at the end of the accrual period, unless otherwise agreed;
  • At the end of the employment relationship, the salary or wages and the holiday pay, if applicable, must be paid on the last day or work, unless there is a stipulation in the contract of its payment on the next normal pay day;
  • The working hours; for variable working hours agreed on at the employer’s initiative (on-demand worker), the latter must give an explication on the situations in which and to which intent the employer needs this kind of labor;
    • In case of variable working hours, the minimum number of hours defined in the clause of an on-demand worker (a so-called zero-hours contract) can’t be agreed, at the employer’s initiative, smaller than the actual need is. Supposing the real need is 15 hours a week, the contract may not define between 0 and 40 hours a week, but the minimum working time has to be the exact 15 hours;
  • calculation of the annual leave
  • The Holiday Act contains the minimum provisions, but a collective agreement can define different holiday entitlements;
  • Notice in case of termination and its calculation.
  • The Employment Contracts Act define the general periods of notice, but collective agreements can stipulate longer notices than the law.

If the operation is based on occasional temporary work, the employment contract can be drawn up in the beginning of the employment relationship, adapting the starting day, the period of work, the working hours and the salary or wages according to the operations, e.g. ”the employee will be called on-demand”, ”the duration of the employment will be according to each duty”. The salary will be defined in accordance with the method agreed in the cooperative but within the minimum conditions of the collective agreement.

Collective agreement (työehtosopimus or “TES”)

Every employer is required to apply the universal collective agreement of the sector or the one the entity is bound with because of its membership in a national federation, if such agreements exist. The universal collective agreements are available in Finnish at Finlex site:

The labor inspectorates and the social partners can assist in the choice of the right agreement

Annual leave

In every employment relationship, the employee acquires a holiday entitlement per year or an annual leave payment. The Holiday Act defines the minimum conditions applied

In principle, an employee is entitled to two days of annual holiday for working during one month in his or her first year of employment, and later two and a half day per month. The holiday pay is paid during this holiday.

If the employment contract ends before the holiday, a holiday payment is added to the salary or wages, amounting to between 9 and 11,5 % of the salary, depending on the duration of employment.

More often than not, collective agreements have better clauses for annual holiday and holiday payment, so it pays go know one’s own agreement.

Occupational health care

Every employer with one employee or more is required to have a written contract with a private medical center authorized to provide occupational health care services or with a health center, defining the contents and the operations included in the occupational health care necessary for the job.

Occupational Health Act

The statutory occupational health care usually includes only the inspection of the conditions at the workplace and the establishment of a plan for ensuring the employee’s well-being. The provision of actual health care services for the benefit of the employees is voluntary.. The labor inspectorate controls that the employer has organized and realized the statutory occupational health services.

4. The employer’s checklist

In the beginning of operations

  • Find out on the TE services site if you can receive subsidy for the employment of employees
  • Find out by which collective agreement your cooperative has to be bound. Contact the labor inspectorate from the regional state administrative agencies  or visit the Finlex site.
  • Sign a written work contract with the employee.
  • If the cooperative employs at least two employees for a year or there are at least employees working periodically/randomly during a year, the cooperative has to sign up as an employer paying regular salaries at the Tax administrations’ Employer Register. If you did not file this subscription with the incorporation form, you must do it with the modification form Y4.
  • Don’t forget to subscribe the statutory employment pension insurance (TyEL). In some cases the directors are insured as entrepreneurs (YEL). You also have to subscribe an accident insurance and a group life insurance.
  • Remember that an employer is required to take care of the statutory staff medical service: contract a communal or private medical center.
  • Inform the employee about the staff management registers (law on the protection of privacy in the employment context, 759/2004).

During the operations

5. Unremunerated work and marginal employment in a cooperative

According to the established case-law concerning unemployment benefits (the Board of appeal for unemployment benefits and Finnish insurance court) any work related to business can’t be unremunerated. Because cooperatives are businesses, a work in a cooperative cannot be associated with unremunerated work, but the employment authorities classify it as paid work.

A marginal work in a cooperative will not deprive a person of their right to unemployment benefits (e.g., distribution of ads in the evenings etc.) or reduce the amount of the benefit.

The exempt amount is (November 1, 2020):

  • ,€279, if the benefit is paid every four weeks
  • ,€300, if the benefit is paid every month

The main rule is that each euro exceeding the amount permitted reduces the benefit with 50 eurocents. More details about the amount permitted

If the amount of work done for the cooperative is such that it would inhibits the acceptance of normal full-time paid job, the person is not considered unemployed and has no right to the unemployment benefit. When considering the employment, it is the amount of work, not the amount of pay or remuneration that is decisive.

More information: unemployment funds (,, TE offices (TE-toimistot,, Kela offices (, Ministry of Social Affairs and Health (, Ministry of Employment and the Economy (

How to work as an employer?



The board of directors (and the managing director)

Repetitive duties, as keeping the Incomes Register updated, have to be assigned clearly in the financial management


Work contracts

  • are they written?
  • Are they in accordance with applicable law, e.g. Working times
  • How the place of work is worded?

Insurance cover

  • Are the pension and accident insurances valid?
  • Are the risk classes of jobs correct?

Work monitoring supervision

  • Does every employee have a supervisor?
  • Is monitoring and working time documented and certified by the supervisor?


At least yearly

  • possible changes in work contract matters
  • functioning of the employer’s practices, tools and work distribution
  • Functioning of the whole organization