Summer work as a light entrepreneur – threat or opportunity?

What is a light entrepreneur?

Finnish legislation does not explicitly recognise the idea of light entrepreneurship. The law treats a light entrepreneur (kevytyrittäjä in Finnish) as a sole trader, meaning someone who runs a business. This activity is described as light because the trader purchases the key business functions of bookkeeping, invoicing and customer relationship management from a service provider.

Light entrepreneurship also often indicates that the business operation is less formal than in the case of a “traditional” sole trader, and is practised on a smaller scale. This does not mean that the operation is free of business risk.

What is the difference between a light entrepreneur and an employee?

The biggest and most significant difference between a light entrepreneur and an employee is the same as between any self-employed person and an employee. An employee works in a relationship of employment, enjoying all of the guaranteed statutory rights of an employee. The statutory duties of an employer include ensuring that the employee is paid, arranging insurance coverage, and attending to health and safety at work. Light entrepreneurs, by contrast, are self-employed and not covered by labour legislation. For example, this means that they enjoy no benefits under collective bargaining agreements.

Entrepreneurs, whether light or not, are formally on an equal footing with the party who provides their work, and enjoy no special protection against such setbacks as arbitrary dismissal or special rights such as sick pay. A light entrepreneur is an independent trader responsible for invoicing, and for discharging special obligations, such as arranging private pension insurance and paying value added tax (VAT). Entrepreneurs are wholly and personally liable for these and other obligations, and are also liable for the costs of obtaining and maintaining their own tools and other work supplies.

Can a young person work as a light entrepreneur?

There is no age limit for self-employment, so in theory a young person may work as a light entrepreneur. Any young person considering self-employment should nevertheless take special care, as a minor is not yet fully legally competent. This means that a parent or guardian must consent to the self-employment of a young person, and must countersign formal business assignments and other key documents. A person over 15 years of age may nevertheless conclude, terminate or rescind an employment contract independently.

It is particularly important to ensure that any work commissioned from a young person does not harm their development. The Young Workers’ Act and the Ministry of Social Affairs and Health Decree on the List of Examples of Light Work Suitable for Young Workers set out the basic standards for determining what kind of work is suitable for a young person. A party providing work is also well-advised to comply with these statutory requirements, just in case the legal relationship is later found to be employment after all and not a business assignment.

It is also worth noting that traditional summer jobs are not usually suitable for assigning to a light entrepreneur, as such arrangements may ultimately be held to constitute evasion of employer obligations. Alarm bells should already be ringing if the work is done for only one beneficiary under the direction of the party providing the work, and the worker has no say in such aspects as the price for which the work is sold.

Is it possible to be a light entrepreneur, even if the work resembles traditional employment?

Finnish labour law defines an employee as someone who works in person on behalf of a party providing the work, under the latter’s direction and supervision, and in return for wages or some other compensation. This law does not even allow the worker and the party providing the work to agree voluntarily that their relationship is not employment if the concrete circumstances indicate that the worker is serving as an employee. This means that a light entrepreneur may eventually be deemed an employee by law, even if the parties have signed an explicit business assignment agreement.

The deciding factor is often whether the work was done under the direction and supervision of the party who provided the work. We should note that this does not require any concrete exercise of the right to direct and supervise the work: if the party providing the work is in a position to determine what, where and when a light entrepreneur must discharge the duties of work, then this is often enough to show that this party had the right to direct and supervise the worker.

The ability of a party providing the work to supervise the work may also mean that a light entrepreneur was really an employee. This ultimately comes down to the comprehensive discretion of a court of law concerning whether the diagnostic features of employment exist in a specific case, having due regard to any factors that may indicate self-employment.

Traditional summer work done under a supervising employer is not usually suitable for self-employment, as it lacks such features as business risk, which is a key feature of all forms of entrepreneurship.

Mere flexibility of working hours or the ability to choose work shifts do not automatically make an employee a light entrepreneur. We should note in particular that people who work on zero-hours contracts, or who are called into work as and when required, are not light entrepreneurs but employees.

What are the responsibilities of a self-employed trader?

While the compensation promised for working as a light entrepreneur may seem attractive, it is essential to consider the mandatory contributions and taxes that a self-employed person must pay.

These include a pension contribution (YEL), which is important in terms of future pension security. YEL insurance is nevertheless only mandatory if annual self-employed income reaches EUR 8,575.45 (in 2023). No pension accrues from working unless this contribution has been paid. Besides managing invoicing for light entrepreneurs, the UKKO.fi service arranges YEL insurance through the Varma employment pension company, meaning that light entrepreneurs authorise UKKO.fi to take out YEL insurance on their behalf. UKKO.fi then collects YEL contributions from the remuneration paid to these light entrepreneurs.

VAT, on the other hand, is related to the sale of services, with the light entrepreneur remaining liable for collecting and reporting it. There is nevertheless no requirement for a self-employed person to register VAT liability while the business operation remains minimal (with annual turnover not exceeding EUR 15,000).

Light entrepreneurs are also liable for their own insurance. Work-related injuries and mishaps can be costly when you have not arranged accident or liability insurance. You should also be aware that the Tort Liability Act requires employers to compensate for loss or damage caused by their employees. Anyone assigning work to an independent entrepreneur whose status is equivalent to that of an employee is also deemed an employer by law for the purposes of this Act. This nevertheless only applies to damage caused to third parties, and it may require a civil lawsuit to settle.

Light entrepreneurs are not entitled to occupational health care, nor are they insured against accidents or other liabilities. A party providing work also has no obligation to oversee the safety of a light entrepreneur that corresponds to the duty of an employer to supervise the occupational safety of an employee.

Is it worthwhile taking a summer job as a light entrepreneur?

Light entrepreneurs and employees differ significantly in status: employees have guaranteed rights under labour legislation and collective agreements, whereas light entrepreneurs are self-employed traders with full personal liability. This means that it is wise to carefully consider the risks of self-employment if you are offered summer work in the form of an assignment for a light entrepreneur, such as the lack of sick leave pay, job security and reliable pension accrual.

Workers under 18 years of age should especially consider the law on young workers and ensure that light entrepreneurship does not result in failure to discharge employer obligations or impairment of the rights of a young person in the world of work.