Personnel funds

A personnel fund means a fund owned and controlled by the personnel, with the purpose of managing the performance bonus or profit bonus items and other assets in accordance with the Act on Personnel Funds, such as the supplement to a personnel fund contribution, paid into the fund by the undertaking. The fund is always related to the undertaking/group in whose service the personnel work.

Personnel funds facilitate the rewarding of an organisation’s entire personnel for goals achieved. In addition, they help to enhance the productivity and competitiveness of a company, government agency or municipality. They also improve interactive co-operation between the employer and personnel of a company, a government agency or a municipality, as well as the personnel’s opportunities for economic participation.

Prerequisites for establishing a personnel fund

A personnel fund can be established when:

  • the undertaking or its profit unit regularly employs at least 10 people as parties to an employment relationship; and
  • the undertaking’s net sales or comparable revenue at the moment of the fund’s establishment equal at least EUR 200,000. 
  • A personnel fund can also be established in a government-owned enterprise, government agency and institution or its profit unit, municipality and federation of municipalities or its profit unit and the Social Insurance Institution of Finland (Kela) and a university subject to the Universities Act.

Personnel establishes

The undertaking's personnel may establish the personnel fund after the undertaking has made a decision on the adoption of the bonus system governing the fund.

The adoption of the bonus system and establishing the personnel fund is subject to the co-operation negotiations procedure. The undertaking decides on the adoption of the bonus system and the personnel decides on establishing the personnel fund. Employees of the company or agency become members of the personnel fund being established automatically based on their employment status.

Fund units

A fund bonus, a personnel fund contribution, may consist of a performance and profit bonus. The accruing principles of personnel fund contributions must be decided for each year prior to the start of the year. A member may withdraw their personnel fund contribution as cash, if the company's performance or profit bonus structure allows it. The performance and profit contributions received by the personnel fund are distributed as personal fund shares.

Some of the personal fund shares (max. 15%) can be withdrawn annually, if so allowed in the rules of the fund. All person fund shares can be withdrawn within four months of the next valuation date following the end of employment.

Decision-making authority for the personnel fund is exercised by a shareholder meeting or by representatives appointed by the members of the fund. The personnel fund must have a board which consists of a minimum of three members.

Co-operation ombudsman supervises

Legal compliance of personnel fund operations is supervised by the cooperation ombudsman. The co-operation ombudsman also maintains records on personnel funds.

Dissolving a personnel fund is always possible by decision of the members of the fund. A fund must always be dissolved when it no longer fulfils the requirements set by law.

Personnel fun contributions are treated as a tax-deductible expense for the company. It does not include any benefit or other costs associated with wages. Personnel funds are regulated as entirely free of tax for both income and wealth taxation purposes. On the contributions received by the members of the personnel fund, 80 % are subject to income tax at the time they are received and they are subject to prepayment of tax. The balance is tax-free income.