Is it an assignment- or an employment relationship?

Work invoiced through the invoicing service must be performed under a commission relationship. Work performed in an employment relationship cannot be invoiced through the invoicing service.

Both parties, meaning the light entrepreneur and the client, should understand what distinguishes a commission relationship from an employment relationship. An employment relationship must not be disguised as a commission relationship.

You can agree on a commissioned assignment verbally, in writing or electronically, but we always recommend making a written commission agreement. A written agreement helps show what work has been agreed on, under what terms the work will be performed and what each party’s responsibilities are.

A carefully prepared written agreement minimises possible disagreements and shows each party’s responsibilities and roles. 

As a rule, an employment relationship is formed when a few key conditions are met. The difference between a commission relationship and an employment relationship is assessed by, among others, the Finnish Centre for Pensions.

Please note that a commission relationship is not suitable for all industries or all types of work. An employment relationship must not be disguised as a commission relationship.

Key characteristics of a commission relationship:

•  the person performing the work acts independently
• the person performing the work can influence how, where and when the work is done
• the client does not direct and supervise the work in the same way as an employer directs an employee’s work
• the person performing the work mainly uses their own tools, supplies and materials
• the person performing the work carries entrepreneurial responsibility and financial risk
• the person performing the work can also work for other clients
• the parties have agreed on a commission, not an employment relationship.

All of the above characteristics do not need to be met at the same time. What matters is that the entrepreneur works for profit on their own account and with enough independence that they are not subject to the employer’s right to direct and supervise work in the way meant in an employment relationship. In other words, the overall picture is essential.

When can work look like an employment relationship?

The Finnish Tax Administration assesses the difference between a commission relationship and an employment relationship as a whole. A commission agreement, an invoice or the fact that a person operates in an entrepreneurial manner does not alone determine the matter. What also matters is how the work is actually performed and what the terms of the work are.

Work may indicate an employment relationship, for example, when:

• the party commissioning the work determines what work is done and where, when and how it is done
• the person performing the work must do the work personally and cannot use a substitute or subcontractor
• the person performing the work is available to the party commissioning the work in the same way as an employee
• the person performing the work cannot influence their working hours or the way the work is performed
• the work is performed on the party commissioning the work’s premises according to their instructions
• the party commissioning the work provides the essential tools, machinery, equipment, supplies or materials needed for the work
• the person performing the work does not carry their own financial risk
• the person performing the work is not responsible for the end result of the work, errors, warranties or damages in an entrepreneurial manner
• the compensation and other terms resemble employment terms, such as pay based on working hours, overtime compensation, sick pay, holiday pay or other benefits typical of employees
• the terms for ending the agreement resemble the notice terms of an employment relationship
• the person performing the work’s possibility to work for other clients is restricted in a way typical of an employment relationship.

If several aspects of the invoiced work resemble an employment relationship, the work may not be suitable for invoicing through the UKKO Light Entrepreneur service.

According to the Finnish Tax Administration’s guidelines, factors considered in the overall assessment include, for example, the content of the agreement, whether the work is performed personally or independently, tools, the time and place of work, how compensation is determined, reimbursement of expenses, responsibilities and termination terms.

Read more about the Finnish Tax Administration’s guidance on the differences between commission relationships and employment relationships in Finnish here.

Tools, supplies and materials

A commission relationship usually means that the person performing the work uses their own tools, supplies and materials. However, this is not an absolute rule.

In some situations, using the client’s equipment may be justified because of the nature of the work, safety or information security. For example, software development may need to be carried out on the client’s devices for information security reasons.

The significance of tools is assessed especially based on what kind of tools are involved.

Ordinary and low-value tools

Ordinary and low-value tools, such as a phone, laptop or internet connection, do not usually determine on their own whether the relationship is a commission relationship or an employment relationship.

In many expert roles, these may be the only tools needed for the work.

Expensive machines and equipment or machines and equipment essential to the activity

The situation is different if the work requires special machines or equipment intended for a specific activity, or machines or equipment that are valuable.

In certain industries, working under a commission relationship may require that the person performing the work:

• owns the machine, equipment or vehicle needed for the work
• controls it under a rental agreement or leasing agreement
• or pays the client fair compensation for using the client’s machines or equipment.

If the person does not own or control, under a rental agreement, the machines or equipment needed for the activity and also does not pay fair compensation for using the client’s equipment, the Finnish Tax Administration states that the relationship cannot be a commission relationship.

If the work mainly uses the client’s essential machines, equipment or materials without separate compensation, the work may not be suitable for invoicing through the UKKO Light Entrepreneur service.

If you are unsure

If you are not sure whether the relationship is a commission relationship or an employment relationship, assess the overall situation before starting the work.

In particular, ask:

• Can I influence how, when and where the work is done?
• Do I use my own tools, or do I pay fair compensation for the client’s essential equipment?
• Do I carry entrepreneurial responsibility for the end result of the work?
• Can I also work for other clients?
• Is this a single assignment, or ongoing work under the direction and supervision of an employer?
• Does the overall situation resemble a gig, project or service provision more than paid employment?

If the work in practice resembles ordinary paid employment, it should not be invoiced through the UKKO Light Entrepreneur service.

What is UKKO.fi’s role?

In accordance with its terms of use, UKKO.fi manages payment transactions based on the agreement between the user and the client by paying the user, in line with the Finnish Tax Administration’s guidelines, the client’s payment based on the invoice created by the user. 

No employment relationship under the Employment Contracts Act is formed between UKKO.fi and the user.