Original story

Economist Intelligence Unit European Digest 21.4.2006

Finnish Labour Unions, IRS worried over growth

in cash payments to smart cards

(Helsinki)

*The Central Organizations of Finnish Trade Unions (SAK) and the country’s inland revenue service, known as “Verohallitus” have both expressed concerns about wage arrangements for temporary contracts and the spread of direct cash payments to smart cards. *

SAK Chairman Mr Lasse Vihalainen and the recently-appointed new tax supremo, Director-General Toivo Karhu were both among the keynote speakers at a recent jubilee seminar for the Confederation of Finnish Industry and Employers. Whilst two of the other main speakers, the former British PM Tony Blair and the now-retired media mogul Rupert Murdoch, contented themselves with pleasantries for the invited audience, Vihalainen and Karhu must have left the industrialists with much to think about over their dinners. The main issues on the two men’s minds seem to be “smart card” payroll practices and the threat to their existence of the spread of temporary contract work through the labour market.

According to a recent Gallup-Nielsen survey, already more than 10% of the work carried out in Finland is paid for in cash-in-hand deposits to employees’ smart cards. Cash payments like this are particularly prevalent in piecework contracts, for example temporary secretarial jobs or in the building industry, but models adapted to salaried staff on hourly wage contracts are becoming increasingly common, and naturally neither the labour bosses nor the Finnish taxman like the way things are going.

SAK Chairman Vihalainen commented that temporary contracts, piecework, and cash payments have their place for instance for students or performing artists, but he warned that there was likely to be trouble in the workplace if these practices spread much further. “People are looking for stability, and for a clear picture of their future earnings and employment”, he argued.

The National Board of Taxation is also unsettled about the new models of employment and compensation for work done. Last year, said Karhu, there were cases where a single employee was listed as having as many as 2,000 separate written employment contracts. Karhu pointed out that the tax authorities’ computer system is simply not designed to cope with situations like this.

“It is quite impossible to keep track of and control this volume of contracts. The biggest problem we face is work carried out via the datanets, and the payments - all apparently in smartcard cash deposits with no deductions at source - for this. Since we do not have the details of many of these payments, we shall have to develop procedures for the arbitrary assessment of income. There is a precedent for this; we have previously had similar problems with assessing taxidrivers, restaurant doormen, and artists and musicians on their income tax and pension contributions.”

The same survey also examined the problem within the service sector. Many branches have seen the growth of very loose working contracts, in which the employees agree on the tasks to be carried out with the employer, and receive a cash card coded by the employer. The employee can do the work connected with his or her particular skills when he wishes. Employers approve of this form of payment, since they argue that piecework payment and short-term contracts get the job done at peak periods when it is needed, and it also spreads the entrepreneurial responsibility among the employees. They also claim that the down-times in the working day - those extended lunches and half-hour coffee breaks of yesteryear - when wages were still being paid for no productivity, have all but disappeared from many fields with the advent of cash payments.

As elsewhere in Europe, Finnish employers have been feeling the pinch in the wake of the recent EU directives on lowered margins to stimulate competition, and at the same time workers have been clamouring for higher wages.

One of those attending the seminar was Aulis Helle, of the Kesko retailing group, which owns some 2,000 stores and is active in everything from groceries to agricultural and builder’s supplies. He dismissed the complaints of the labour unions and tax authorities: “The work has to be done when it is there to be done”, he said emphatically, “And in our business, the easiest way of smoothing out seasonal peaks is to pay temporary staff on the smartcard system.”

Helle’s comments may not be altogether unconnected with the fact that a 51% share of Kesko was sold last week to WebSales Corp., based in the Cayman Islands, which is one of the world’s largest and oldest net trading houses. Some months ago WebSales rationalized the payroll systems of all its sales and warehousing staff around the world. Now WebSales employees charge up their pay on their smart cards each day at the close of business. The funds are transferred via the Internet from an automated system in the Cayman Islands. The salary automat does not even know the employees by name, but only their wage-bracket and PIN code.

Toteuma-arvio 2026

Toteuma lyhyesti

  • Ilmiön toteuma: 4/5
  • Toteuma viiden vuoden tarkkuudella: kyllä; arviointi-ikkuna on 2001–2011
  • Toteuma väljemmällä aikahorisontilla: kyllä, erittäin vahvasti
  • Ilmiön ydin: palkkoja ja keikkakorvauksia maksetaan suoraan sähköisiin maksuvälineisiin, mikä hämärtää työn, käteisen ja verovalvonnan rajoja.

Palkkakortit, mobiililompakot, alustatyö ja välittömät digitaaliset maksut ovat toteuttaneet ilmiön. Samalla työntekijöiden oikeuksista, maksuista ja verotuksen läpinäkyvyydestä kiistellään.

Johtopäätös: ydin sähköisestä palkasta ja sen valvontaongelmista toteutui olennaisilta osin.