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Finland-Korea social security agreement entered into force on 1 February 2017

Executive summary

On 9 September 2015, a social security agreement was signed between Finland and the Republic of Korea (“Korea”). The Agreement entered into force on 1 February 2017 and allows for Certificates of Coverage for assignments between the two countries for five years with the possibility of extensions in exceptional circumstances.

Employers should review any current and pending assignments between the two countries to identify which ones may take advantage of the agreement.

Key features

International assignees can remain socially insured in the home country and be exempted from certain social security contributions in the host country. However, the new Agreement will not cover all social security branches.

Benefits covered

The scope of the Agreement includes:

  • Finland: Earnings-related pension scheme and unemployment insurance contributions.
  • Korea: Pension system and unemployment insurance contributions.

With respect to the unemployment insurance, the scope of the Agreement includes only unemployment insurance contributions. Unemployment insurance contributions are not payable in the host country if a certificate of coverage is issued. However, unemployment benefits, unlike pension benefits, cannot be exported from one country to another.

The Agreement allows individuals to apply for pension benefits with the authorities of one contracting country while staying in the other contracting country.

Benefits not covered by the Agreement include accident insurance and health care, so the applicable insurances in Finland or Korea may still be due, even if the assignee has a certificate of coverage in the home country.

Certificates of coverage

Once the Agreement comes into force, Finnish and Korean employers will be able to obtain a certificate of coverage for a period of up to five years for current and future assignments in Finland or Korea. A certificate of coverage will ensure that employees can continue to be covered under the home country social security system and be exempted from host country pension and unemployment insurance contributions. Furthermore, family members will also be covered unless they are themselves employed.

In exceptional circumstances, the authorities in the two countries can agree on a certificate of coverage for a period exceeding five years.

Transitional rules

For employees who have already started their assignment before the Agreement comes into force, a certificate of coverage can be obtained if they meet the requirements. The period of assignment taking place before the agreement comes into force, is not taken into account when calculating the five year posting period.

As soon as the Agreement comes into force, it is recommended to file an application for a certificate of coverage with the competent authorities for pending and new assignments.

For example, under an assignment from Finland to Korea, the application must be filed by the employer with the Finnish social security authorities (Finnish Centre for Pensions). Once the certificate is granted, the company in Korea should share this document with the competent Korean social security authorities.

Next steps

Employers, who currently have employees seconded between Finland and Korea, or who intend to assign employees between these countries, should review how this Agreement might affect current and future assignments:

  • Review the terms of planned assignments to understand the impact of the Agreement on assignment costs.
  • Review the impact the introduction of the Agreement will have on existing secondment policies.
  • Review the terms of planned assignments to ensure they will be eligible for coverage under the Agreement, and the impact this will have on assignment costs.
  • Review current payroll withholding processes and the partial liabilities in the two countries.
  • Consider any communication to employees affected by the Agreement and potential influence on social security benefits they may currently receive from the authorities.

EYG no. 00418-173Gbl

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