”Work harder and I’ll give you a permanent contract so you can get a longer visa” – Many immigrants employed by Finnish start-ups are being treated badly

Finland needs foreign experts to plug a worsening skills gap. At the same time many immigrants employed by Finnish start-ups are being treated badly. HS Visio has details of serious problems in two start-ups. –

14.10.2021 13:52

Linh, a 26-year-old Vietnamese student, graduated from an international business programme in a Finnish university of applied science in spring 2019. Linh needed a job to secure a work permit that would allow her to stay in Finland. So when a Helsinki startup offered her a job with a monthly salary of 500 euros, she accepted it.

Linh worked full-time at the company, but she still had to work at a restaurant to supplement her income. After one month, Linh’s paycheck rose to 1,300 euros monthly, but even this was hundreds of euros less that the lowest wage level defined in the universally binding collective agreement for the sector to which the company belonged.

Linh’s employer was the Helsinki-based startup Rens Original, which manufactures trainers from materials such as recycled plastic and used coffee grounds. Rens Original has raised a million euro’s financing from well-known Finnish investors and has been positively portrayed by media outlets because of its Vietnamese immigrant founders and its environmentally friendly vision.

HS Visio interviewed Linh and nine of the firm’s other former immigrant background employees, who all corroborated accounts of Rens Original’s low wages, termination of employment during the probation period, unpaid overtime work and exploitation of vulnerable foreign workers. HS Visio also obtained documents that confirmed the reports.

According to labour law and occupational safety experts interviewed by HS Visio, Rens Original’s actions raise strong suspicions of employment discrimination or the even more serious offence of extortionate workplace discrimination.

There is a broader phenomenon behind the situation. Some Finnish start-ups treat foreign workers in a way that would hardly be tolerated if they were native Finns. At the same time, there is an ongoing discussion about attracting highly educated specialists to Finland to meet a shortfall of skilled workers.

When HS Visio began to investigate the case, we encountered other firms and organisations in Finland’s startup sector with similar problems. In addition to Rens, we have highlighted another such firm whose former employees we have interviewed.

Although these ventures have modest revenues, we have named them publicly because of their investors’ social standing, their large customers, previous publicity and due to the egregious nature of their actions.

When Rens Original secured 1.25 million euros in financing last December, its investors included luminaries such as Leena Niemistö, a board professional and angel investor, game industry heavyweight and board professional Timo Soininen, former Nokia board chair Risto Siilasmaa, equity investor Courage Ventures, and the Finnish state equity investor Tesi. The earlier investors of the company include Supercell’s CEO Ilkka Paananen.

The Rens shoes are made in Vietnam.

”Finland has a lot of international talent that finds it difficult to land jobs because of the language barrier. They jump at the chance to get work at places like Rens.”

We also received isolated accounts about other startups suspected of unpaid overtime work, severe worker burnout and shortcomings in payroll accounting, problems that are also evident in other firms. Much of the information we obtained involved foreign-background workers employed by start-ups.

According to a recent expert needs assessment, Finland’s technology sector will need 130,000 additional workers in 10 years – that’s about 13,300 each year. The report found that up to 87 percent of businesses are interested in recruiting international talent during the next four years.

The situation is especially hard for people with no Finnish language skills or local networks. When HS Visio interviewed foreigners already resident in Finland, they spoke of the great difficulty finding work here or to even find internship placements required as part of their study programmes. This places them in an extremely vulnerable position, and they are therefore ready to seize any opportunity that arises.

“Recently-graduated Vietnamese like us aren’t bold enough to stand up for ourselves. We keep our heads down and try to show that we are happy to be able to work anywhere that is not a kitchen. Finland has a lot of international talent that finds it difficult to land jobs because of the language barrier. They jump at the chance to get work at places like Rens. They constantly have a large number of applicants,” Linh said.

Linh is an alias. She and other sources we interviewed have declined to use their real names because they fear that speaking out will jeopardise their job prospects. They are also concerned about how their community will react.

“The Vietnamese community is very complex,” one former employee explained.

The founders of Rens are Jesse Tran and Son Chu.

Rens’ actions seem exceptionally flagrant. Rens Original (Ufaktory Oy) is a Helsinki startup established in 2018 by Vietnamese founders Jesse Tran and Son Chu. In 2019, the duo launched their first shoes with a crowdfunding campaign, where the sneakers raised nearly half a million dollars via the US-based platform Kickstarter. The company has had no revenue in Finland and nowadays their shoes are manufactured in Vietnam and sold via Kickstarter campaigns in the United States. The company employs 20 people.

After HS Visio wrote in August about a Kickstarter campaign for the company’s new line and its financing, we began to receive hints that all was not as it seemed in the startup firm. HS Visio has obtained the employment contracts of several former Rens Original workers, as well as their payslips as well as job offers or termination emails. Interviews with 10 of the company’s 22 former workers listed on LinkedIn represent nearly half of their alumni and provide a particularly comprehensive picture of the firm’s operations.

The sources we interviewed confirmed that Rens had a habit of trying to offer at least some of its workers contracts stipulating that the first month would be unpaid. After this period, their wages would typically be 700 euros for a period of three months. However Linh and others initially worked for even less, just 500 euros per month – for several months. Only after this period would the company increase monthly salaries to between 1,200 and 1,600 euros for full-time workers. Generally, former employees held positions in administrative, customer service and sales or social media marketing roles.

Linh’s salary was at first only 500 euros per month.

Just recently Rens still offered to new employee’s 700 euros for a period of three months.

HS Visio interviewed Jesse Tran and Son Chu via a video link, with a legal representative present. On the lawyer’s advice, the startup’s founders declined to respond to several questions. They later offered very general comments to the questions via email.

“That kind of salary [700 euros] is for employees with the junior intern title. But as we grow and if their skills develop, their pay will reflect that,” Tran responded in the call.

“I do recognise that our pay range has been low compared to many larger companies. But as Rens grows our salaries will also rise,” he said in the email.

Tran denies that the company ever had unpaid workers. However, among the employment contracts that HS Visio saw, there were cases where the first month of work was unpaid. Tran noted that he established the firm when he was still a student that the company had grown rapidly in three years.

“We are learning from our mistakes as we grow. We will continue our commitment to create sustainable practices with our employees, partners, products and stakeholders.”

Rens currently has eight job vacancies on The Hub, a platform for jobseekers in the Finnish startup sector. The pay range for those positions is between 1,300 and 3,000 euros. According to Tran, the firm changed its salary policies during spring and summer 2021 and that it had been paying monthly wages of at least 1,300 for all positions, including to interns.

”Sometimes Jesse tried to encourage people by saying ‘work harder and I’ll give you a permanent contract so you can get a longer visa.’ He was aware of Migri’s requirements and really used them.”

Rens Original should have complied with the terms of the universally binding collective agreement negotiated with Trade Union Pro or Pam, the union representing service professionals, said Iris Schiewek, Pro’s contract officer for the industrial sector. Both collective bargaining agreements are universally binding, meaning that everyone operating in the sector must abide by them. In the case of Pro, for example, Rens would be bound by the collective agreement for workers in the textile and fashion industry, which was negotiated between Finnish textile and fashion industry employers and Pro, and which was confirmed as universally binding.

“The question of which collective agreement is involved would require closer examination of the company’s industry. In any case, the basis of universally binding collective agreements is that all workers have the same minimum terms and conditions of work, such as a [recommended] pay scale. It can be exceeded, but they cannot fall short of it,” Schiewek noted.

Remuneration depends on the demands of the role as well as the employee’s competence, training and personal aptitude. The lowest pay level in the previously mentioned collective agreement is 1,749 euros per month. This means for example, that the average sales assistant earns around 2,500 euros monthly, while a financial assistant’s monthly pay packet is about 2,600 euros.

Helsinki univercity’s labour law docent and Doctor of Laws Jaana Paanetoja confirmed the obligation to comply with universally binding collective agreements.

“If a collective agreement has been negotiated as universally binding, non-unionised employers must also comply with it. This duty of compliance cannot be renegotiated in an employment relationship, in other words, employees are protected by the compulsory rules of employment contract law, and they are mandated to receive the minimum wage level defined by the collective agreement. And if they are not paid fully, they [wages] can be claimed from the employer until such time as they lapse,” Paanetoja said.

The legal docent would not comment on the cases or company in question but said that her comments were on a general level.

“This period of unpaid work in particular catches the eye. Companies have rather limited scope to hire unpaid workers without compensation. Employment contract law is predicated on the assumption of compensation: even if it is not agreed, in principle work is assumed to be done for wages or some other form of remuneration. An unpaid internship could be considered mainly in cases where it is regulated by law, for example as part of professional training,” Paanetoja added.

“We have had discussions with our legal advisers to ensure we comply with all laws and agreements. We don’t do anything illegal,” Jesse Tran maintained.

Helsinki University’s labour law docent and Doctor of Laws Jaana Paanetoja.

To survive on a 500-euro monthly pay packet, Linh also worked restaurant shifts at nights and on weekends.

According to the guidelines of the Finnish Immigration Service, Migri, employees must receive an appropriate salary that would allow them to live in Finland for the full duration of their residence permit. If there is no collective agreement governing their field, the worker’s gross monthly salary should be at least 1,252 euros to satisfy the conditions of the Employment Security Act. Rens’ starting pay of 700 euros did not even meet the limit stipulated by the agency.

Although Linh’s gross pay packet later increased to 1,300 euros per month, she was still worried. In a meeting relating to a work permit, a Migri official commented that Linh’s salary was small. So she asked for a salary increase to 1,600 a month, arguing that it was needed to secure her work permit. For Linh, the pay issue was linked to Migri’s work permit criteria. She didn’t know that there was a collective agreement that actually mandated a much higher pay level for her work. First, the company’s CEO gave an oral promise of a pay rise, but he later retracted it.

Eventually, Linh herself decided to terminate the employment agreement four months into his probation period, after which she later found work as a waiter. Last summer, Linh returned to Vietnam when her residence permit expired. So, a young professional who had completed a degree in Finland returned to her home country because she could not find a job corresponding to her education, and which offered reasonable terms and conditions of employment.

According to several of HS Visio’s interviewees, Jesse Tran used the work permit system as leverage with workers. If a new employee was doubtful about the poor starting salary, they would be given promises that it would be raised later to the level required for a work permit.

“Many people also quit shortly after receiving the work permit with the help of a Rens job. Sometimes Jesse tried to encourage people by saying ‘work harder and I’ll give you a permanent contract so you can get a longer visa.’ He was aware of Migri’s requirements and really used them,” one interviewee pointed out.

In addition to Linh, another source also said that they stayed with the firm solely to get a work permit in Finland.

“I had no choice,” the source said.

Jesse Tran denies that his company discriminated against anyone because of their nationality, background or experience.

Labour law Emeritus Professor Seppo Koskinen

According to labour law Emeritus Professor Seppo Koskinen, the Rens case appears to satisfy the criteria for employment discrimination or even the more serious offence of extortionate employment discrimination.

“This clearly suggests at least an assumption of employment discrimination,” Koskinen says of Linh’s case as well as the firm’s broader actions.

According to Chapter 47, Section 3 of Finland’s Criminal Law, an employer cannot place an employee at a disadvantage because of their ethnic origin or nationality, for example. And if the employment discrimination places the worker at a significant disadvantage by exploiting an applicant or employee’s distress, financial or otherwise, their dependent status or their incomprehension or ignorance, the perpetrator must be sentenced for extortionate employment discrimination and fined or imprisoned for a maximum of two years.

Aki Eriksson, a lawyer for the Southwest Finland Regional Administrative Authority, stressed that an employment discrimination offence generally involves three elements: a reason for discrimination, such as nationality, discriminatory action, and a causal relationship between the two. Examples of a discriminatory act include underpaying workers and ongoing unpaid overtime as well as abusing an individual’s ignorance or vulnerable position.

Trade Union Pro’s head of legal services and deputy judge, Patrik Stenholm, confirmed Koskinen’s assessment.

“Based on this information, the status of the company’s foreign-background workers sounds worrying. If an employer places an employee at a significant disadvantage by, for example, exploiting their distress or dependency, this can constitute the hallmark of extortionate employment discrimination. There certainly seem to be signs of some kind of exploitation and possibly other kinds of inappropriate practices,” Stenholm says.

”When people see the work culture and poor management at a company, they look for work elsewhere.”

Many employees don’t last long at Rens Originals. Some are let go just one to three months into the probation period, with new cheap young workers rapidly taking their places. Many leave of their own accord before the end of the six-month probation. Statistically, this is reflected in the fact that on the professional networking platform LinkedIn, 22 people named Rens Original as their full-time employer since 20018, with 18 profiles indicating that their employment periods were less than six months. Six of them were employed for less than three months. The brief careers suggest a systematic approach where the company appears to be run largely by cheap fixed-term labour.

“They have high expectations for workers who are being paid little. It’s very difficult to find people to meet those expectations with those sums. When people see the work culture and poor management at a company, they look for work elsewhere. Usually, the company is not satisfied with the people they recruit, or the workers themselves leave,” one long-term employee said. In his responses, Jesse Tran said that the company has observed common practice regarding the six-month probation period.

“During our growth period we had our share of employee turnover as people advanced in their careers. There have also been unfortunate situations where we have made poor recruiting decisions. We have learned from these experiences and we will continue to develop our onboarding process. We have also hired an HR resource responsible for hiring new employees and handling development areas related to employee wellbeing, such as benefits and work wellbeing surveys,” Tran noted.

All of the sources interviewed said that they have engaged in ongoing unpaid overtime work for the company. Some noted that in addition to a normal work week, they have also regularly worked on Saturdays without any compensation. They add that they had to be available at all times and that they often received messages and job-related requests outside of normal working hours. HS Visio obtained screenshots of messages demanding that the recipients answer Tran’s phone calls on a Saturday.

“It’s difficult for a worker in a very subordinate position to deny overtime work. However the employer also has a duty to an employee from operating in a way that jeopardises their on-the-job safety,” Trade Union Pro’s Patrik Stenholm commented.

Jesse Tran denied the practice of unpaid overtime work at the company. He said the firm has a system of flexible working hours and that overtime is compensated financially or in time off, in accordance with Finnish labour laws. He added that requests for employees to perform duties outside of normal working hours are exceptional. However according to interviewees, it is in practice impossible to take advantage of flexible hours to reclaim overtime hours, because shift rotas are so long and the requirements of the job are so tough.

“To some degree I was aware that I was underpaid, but I’m bad at negotiating on my own behalf.”

Another Finnish startup where several immigrant-background workers have spoken of problems, is Ultrahack (Futuretournaments Oy), an organiser of innovation-focused hackathons or competitions.

Compared to Rens, the alleged irregularities occurring at Ultrahack are clearly less serious and more commonplace, and therefore represent problems that typically occur during a firm’s infancy. HS Visio interviewed several of the firm’s former employees and also gained access to their payslips and other documents.

Some of the firm’s foreign-background workers have been employed as freelances for years, invoicing the company for their services as so-called “light entrepreneurs” through the billing service. In practice, this means that when their relationship with the firm ends, they have no access to unemployment benefits because they are considered business owners.

Sources say that the company has not had proper accounting practices, that staffers have constantly worked overtime for no extra pay, for example piling up 60—75-hour work weeks after putting in extra hours on evenings, weekends and during peak periods, and that permanent employees have not received payslips or vacation allowance calculations.

According to their employment agreements, the company should have complied with the Federation of Professional and Managerial Staff’s collective agreement.

Ultrahack board chair Juhani Kivikangas and CEO Miikka Nevasalo admitted that the company made a mistake by not initially providing employees with payslips. Instead, staffers were encouraged to check their pay information by turning to Finland’s Income Register service.

“This was our mistake and it has been addressed,” Kivikangas says.

According to the board chair, the company has complied with the collective agreement regarding overtime arising from flexible working hours, and employees have been able to take time off in lieu of overtime pay. However company management and sources interviewed are at odds on the questions of payroll accounting and compensatory free time.

“Because we are so small, we are not governed by laws regulating the relationship between employers and employees [Finland’s Act on Cooperation within Undertakings]. Although we have no legal obligation, we naturally want to be a good employer. We do not recognise some of the issues raised at all and at the same time it feels sad that they were not discussed with us,” Kivikangas added.

The situation only began to dawn on some of the company’s immigrant workers when they spoke about vacation with their Finnish colleagues.

“We decided that this was no longer acceptable. We realised that were being taken advantage of because we didn’t know our rights,” one source said.

According to information obtained by HS Visio, occupational health and safety inspectors from the Southern Finland Regional Administrative Authority are aware of the situation at the company and an occupational safety inspection is underway.

Ultrahack organizes hackhathon events where teams of coders and visualists, for example, solve the challenges of partner companies. The picture is from 2017.

Ultrahack’s customers include major players such as Ericsson, Helsingin Sanomat owner Sanoma, business school Hanken, public sector organisation Business Finland, and EIT Digital, an arm of the EU Commission. Typically, these kinds of organisations require their partners to observe ethical principles, including compliance with labour laws, for example.

Before the coronavirus crisis, Ultrahack generated revenues of 746,000 euros. When the pandemic caused the company to take its events online, revenues fell to half a million euros. The company only has six employees on its payroll; the others are external consultants and freelancers. Foreign-background freelancers working for Ultrahack were paid a fixed monthly retainer, from which they were expected to cover costs such as YEL, the statutory pension insurance contribution that self-employed persons are required to pay. They were also generally required to participate in hackathon events that took place on weekends, often without extra compensation.

“To some degree I was aware that I was underpaid, but I’m bad at negotiating on my own behalf. I was in a jam and afraid to lose my job. They should not have taken advantage of that,” one interviewee declared.

Compared to the minimum pay defined in the collective agreement, the fixed monthly compensation was very low, especially considering that it was expected to cover additional statutory expenses. One source said that they only understood the situation when they landed a new job and saw how these matters should have been handled. The new employers immediately showed the collective agreement for the sector. The source had been invoicing Ultrahack through billing service for several years and worked closely on the company’s projects. Ultrahack was their only employer and they worked under the direct guidance of management.

These factors generally support the impression that the case was actually an employment relationship, said to Riku Rajamäki, chief inspector with the Southern Finland Regional Administrative Authority.

“This ’light entrepreneurship’ shows up in inspections, especially when it comes to investigating cases involving foreigners, and they have been found in relation to nearly 20 inspections. In many of these cases, [employers] essentially try to sidestep labour laws by disguising employment relationships as ‘light entrepreneurship’,” Rajamäki explained.

Ultrahack’s management has refuted allegations of avoiding their obligations as employers and unequal treatment of workers.

“The light entrepreneurship model has worked well for us because our operations began on a smaller scale and it has evened out seasonal fluctuations. As our business grew some of our light entrepreneur suppliers were hired as employees,” Kivikangas said. “We have had workers who were finishing up their studies and we have hired foreign-background employees with no experience whatsoever in the field. We have trained them on the job and their pay has risen to match their growing expertise. We are competing for the best workers, so we cannot afford to pay uncompetitive salaries. There has been no singling out of people based on their background,” he added.

“There have been certain discussions and negotiations with Finnish workers, and immigrants have been overlooked,” one interviewee claimed.

“At the time we did not encounter such extreme cases.”

The problems at Rens Original and Ultrahack were the most widespread and serious cases that came to HS Visio’s attention. However, we were contacted by several other sources working for other startup companies and organisations. Start-ups are often a demanding work environment for all employees, not just immigrants. So what’s special about foreign-background workers?

One source working in a marketing sector startup said they had moved to Finland in search of a better life. However their support network was in their home country, including family and friends, and they were not familiar with Finnish labour laws and the system.

“We are in a vulnerable position. Our jobs are secure if the business succeeds so we faithfully give it our all. You give everything, but it doesn’t work the other way. This situation led to my doing a huge amount of overtime work at the expense of my health for years,” the interviewee said.

This source’s employer also previously neglected payroll accounting. They also wanted to shine a light on startup firms’ work culture, which makes it difficult to set boundaries on work and where the pressure is enormous. They said that it is essential for companies to actively inform foreign workers about their rights, rather than leaving then alone to survive.

Another aspect of the problem is the ignorance of foreign workers when it comes to working life in Finland.

“I came to Finland straight to university and after that to work. Nowhere was I offered information about workers’ rights in Finland. Not in school, nor on the job or from officials,” another interviewee said. They were not only referring to labour laws or compliance with collective agreements, but also companies’ ethical and responsible employment practices.

Southern Finland Regional Administrative Authority’s chief inspector Riku Rajamäki said that by and large, technology firms have not been subjected to inspection in relation to occupational safety involving foreign workers, although most such cases occur in southern Finland. However, a few years ago inspections were conducted of IT firms over minimum employment conditions for immigrant workers. At the time the checks centred on cases where a foreign parent company sent workers from abroad to a Finnish subsidiary. That inspection focused on for example, the extent to which housing benefits were taken into account in migrant workers’ salaries.

“At the time we did not encounter such extreme cases,” Rajamäki commented.

However startups generally apply labour laws creatively, according to Southwest Finland Regional Administrative Authority official Aki Eriksson.

“It was common for companies to import practices from other places like Silicon Valley. In public debate it is often framed as the individual freedom of top-level experts to choose how to do their work. But legally, it is not a question of choice. It is about what Finnish laws dictate,” Eriksson added.

Employees working in Finnish startup scene: If you encounter problems, you can report to Occupational safety and health officials. The English speaking phone service is able to give guidance how to act in any problems with work contracts or conditions. It is open from Tuesday to Thursday at 9am to 12. Phone number is: 0295 016 620

Information about the Finnish work laws in English here.

Occupational safety and health

Translation: Denise Wall

Lue lisää: Suomalainen startup maksoi korkeakoulutetulle 500 euroa kuussa. HS Visio paljastaa, miten huonosti Suomessa voidaan työntekijöitä kohdella.

Lue lisää: Rens Originalin pääsijoittaja uskoo yhä yhtiöön – startupin sijoittajina kovat nimet Ilkka Paanasesta Risto Siilasmaahan.

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