Finland: Company tax breaks to support training
In early 2014, a law was passed enabling companies in Finland with 20 employees or more to make tax deductions when offering employees a personnel and training plan. The law was passed after tripartite discussions between the social partners and the Finnish government.
The need for legislation to support professional development among Finnish workers was an important topic in framework negotiations between the social partners in 2011. The social partners agreed on a recommendation that all employers should offer their employees three days of professional training and education each year.
In 2013, the Minister of Labour stated that professional development for workers was important for several reasons (in Finnish). Firstly, the challenges of the rapidly changing labour market had given rise to the need for a flexible and knowledgeable workforce; in such a labour market, special competencies, knowledge of languages, cooperation and problem-solving skills are of key importance for continued success. Secondly, professional development is necessary to increase productivity and to secure employment.
Subsequently, the recommendation of the social partners was ratified in 2013, and made law in 2014 when the government presented a funding plan for developing employees' professional skills.
Details of legislation
The legislation on financially supported vocational skills development aims to promote workers’ professional development and knowledge through structured training plans that are in line with their professional tasks and needs.
Under the legislation, all employers who employ 20 people or more must provide employees with individually tailored training (in Finnish) for three days a year.
As an incentive, employers may claim the cost of this training as a tax deductible. The law does not define how the training should be organised. This can be done through external training providers or by redistributing existing internal knowledge through lectures, seminars, courses, conferences and coaching, or in the form of language or information technology classes.
Requirements of training plans
In order to make tax deductions, companies have to create individual professional development plan (in Finnish) as the basis for customised training. Training plans must be made for the whole staff, both full-time and part-time employees.
The training plans must include:
- a description of the staff structure and forecasts for the development of the structure;
- guiding principles for the use of different employment contracts;
- evaluations of employees’ skills;
- changes in task requirements;
- reasons for changes in task requirements;
- the training goals.
The training goals should include development goals and expected future skill requirements. These goals are intended to ensure that companies anticipate their future needs and act in time to provide for them.
Rules for tax deductions
An employer may claim education costs against tax if the training lasts continuously for at least one hour and during this time employees are paid their normal wages. The training must be part of an employee development and training plan. An employer can claim for three days of training per employee, where each day includes at least six hours of education or training (in Finnish). Half of the wage costs spent on the training can be claimed against tax.
Employers may also deduct the cost of training that is required for work within a specific sector. Such training can, for example, include safety education for construction workers, or transport permit classes for truck drivers. However, Finnish labour law also states that employers must provide their employees with sufficient training to fulfil their work tasks. Therefore, entry-level, basic training about the company is not deductible under the new law.
An employer who has not made a training plan is not eligible to make deductions. However, all employees still have the right to negotiate and discuss their professional development (in Finnish) with their managers.
Opinions of social partners
As the legislation was based on tripartite negotiations, the social partners have been very positive towards the law, but their positions differ slightly.
According to the central employers’ organisation, the Confederation of Finnish Industries (EK), productivity and work–life balance in Finland must radically improve in the next few years to ensure that changes in competitiveness and demographics do not lead to recession.
The trade union confederation for academics, Akava, has expressed its unhappiness with the tax regulations relating to the law. Akava was initially in favour of stricter regulation on deductions and is opposed to the provision of deductions for training required to complete any new or old work tasks. Meanwhile, the trade union confederation STTK has voiced its disappointment that the legislation does not cover all employees, but only those in companies employing at least 20 people.
Meanwhile, the Central Organisation of Finnish Trade Unions (SAK) has argued that high work life quality and health levels in companies can be measured through their managers’ willingness to improve productivity by developing their employers’ skills and knowledge.