Guide,
December 11, 2002

1. Grant-funded research

1.1. Working on a grant differs from employment

It is important to make a distinction between carrying on grant-funded scientific, scholarly or artistic work and being employed, where the payment is regarded as salary. A grant is a gratuitous payment that a private community or the general government gives to a person in order to finance studies or artistic, scientific or scholarly work. The payer of the grant cannot gain profit – financially or otherwise – from paying for the grant.

In employment a person commits to working for an employer under the employer's direction and supervision in order to be awarded with salary or other compensation.

Research work can be done both under an employment (or service) contract and with grants. The distinction between research work under an employment contract and working on a grant is not self-evident in many cases. Many aspects should be given thought to when judging if research work is done autonomously or under employment for someone else, such as:

• Has the grant been public, i.e., has it been possible for everyone to apply for it?
• Are there any special conditions for getting the grant?
• Is the grant compensation for work that is done for someone else?
• Is the research conducted on the initiative or under the supervision of the one that pays for the research?
• Is the one who pays for the activity the researcher's employer?

The grant is not regarded a grant, but employment under contract, if:

• the sponsor has defined in detail the subject of the research
• title, rights of use and intellectual property rights are assigned to the sponsor
• the grant includes an obligation to teaching or to other duties.

A grant cannot include tasks against payment; neither can an employment relationship be formed in grant-funded work. Grants that are given for other purposes than for studies, academic research or artistic work are taxable income, regardless of the sponsor. For example, writing study materials cannot be sponsored with grants, so it has to be supported in other ways.

Because an employment relationship cannot be formed in grant-funded work, the insurances and health services that are normally included in an employment contract do not cover people working on a grant.

The people working on a grant are not covered by the other benefits that collective labour and bargaining agreements include, either. The time that is spent while working on a grant is not included in the time that accumulates seniority or working year bonuses. Furthermore, the time that is spent while working on a grant does not accumulate pensions, social security benefits or earnings-related unemployment benefits.

Furthermore, it has to be noted, that there have been changes in the pension security system in Finland since the year 1996. For example, the way the amount of pension is calculated according to one's annual wages will change by the year 2006. After that the amount of pension is calculated from the wages of the last ten full calendar years of employment. The age when full pension is achieved has been increased as well, at least concerning those who have been born after the 31st December 1959. In their case, full pension is not achieved until 40 years of work that is regarded suitable for the accumulation of pension.

Further changes in the pension security system will take place as well: all of the work under employment contract one has done will have an effect on the pension one will enjoy. However, working on a grant is not included in these calculations. People working on grants have to take care of their own retirement plans; it is also sometimes possible that they can include the costs of the retirement plans in the grant applications.

The university does not charge trade organisations' membership fees from grants.

1.2. Grants and taxes

The tax authorities always have the ultimate power to decide whether or not grants are taxable income. Decisions are made case by case. The basic statutes may be found in section 82 of the Finnish Income Tax Act. In order to be exempt from taxation, the grant has to be given for studies, scientific or scholarly research or for artistic work. The grant also has to be public, i.e., it has to be possible for almost everyone to apply for it. If the general government gives the grant, the grant is tax exempt in its entirety. If the grant is given by someone other than the general government, it is taxable, if the amount of money – after expenses have been deducted – is greater than the yearly amount of money given to an artist by the government. (In the year 2001 the limit for tax-exempt grants was 79 990 marks/year. In the year 2002 the limit for tax-exempt grants was 13 459, 68 euros.)

Another major factor that has an effect on whether or not a grant is non-taxable is the grantee's relationship with the sponsor. If the grantee is employed by the sponsor, the compensation is regarded as pay for work, even if the compensation is paid as a grant. Therefore, a grant cannot be compensation for labour: giving a grant cannot involve financial benefits for the one who pays for it.

The one who receives a grant cannot pass on a grant one has received as a grant. A grant may be paid non-taxably only, if all of the receivers of the grant are registered in the application for the grant.

Some guidelines may be found in Finnish from Henkilöverotuksen käsikirja (The Handbook of Personal Taxation), published by the National Board of Taxes (Verohallituksen julkaisu 618/1999).

1.3. Flow of Information

Researchers, teachers or other officials who work for the university are obligated to inform the university of the grants they receive (See the instructions for outside funding given by the Finnish Ministry of Education, especially chapter 3. In Finnish. See http://www.minedu.fi/julkaisut/pdf/yliopistorahoitus.pdf). The different units of the university have to be aware of all the grants and scholarships that their staff has received, regardless of their purpose or value. The departments have to maintain a register of grants that their staff and other people working at the department have received. The registers should show who has given the grant, what the grant's purpose and value is and the period of time the grant is intended for (see Appendix 1). The faculty or the university administration gathers this information from the departments at the end of the year; the information will be stored in the KOTA database that is maintained by the Finnish Ministry of Education and contains data describing university performance by institutions and by fields of study from 1981 onwards.

2. Grants given and managed by the university

2.1. Management of the grants

The grants that are given to researchers or research teams who are employed by the university and use the resources of the university should be deposited on the university account. The university will manage the money within its bookkeeping (for a contract model, see Appendix 2). If the receiver of a grant is using university resources (spaces, facilities, etc.), the receiver of a grant has to negotiate with the department about the rights and duties related to the research project (for a contract model, see Appendix 3). Before sending an application for a grant, the applicant has to get a permission to work on a grant from the university (i.e. the department in most cases). The sponsors may include a share for overhead costs within the grant if they wish to do so. The applicant has to itemise the overhead costs that concern the university in the application so that the sponsors can take the costs into account.

The University of Oulu will charge 15 % to be used to cover overhead costs (spaces, data administration, administration and the department) off from outside funding. However, the university will not charge costs over the amount the sponsors have allocated for the costs.

Small, personal grants that use little or no university resources will not be accounted within the university budget or bookkeeping because of the managements costs they involve. Grants that are non-taxable (that is, grants that do not exceed the limit of taxability, which is 13 459, 68 euros in the year 2002) are considered such grants.

2.2. Grants given by the university

Grants can be given and paid from the university operating expenses, but giving grants has to be done through strictly predefined policies. Operating expenses can be used to fund grants only, if it is appropriate for research reasons: for example, finishing a thesis or a doctoral dissertation or other similar activities may be found appropriate. If the research is done under conditions that are characteristic of working under an employment contract (the work is compensated, the work is similar to the work done under an employment contract, etc.), the only option is to regard the researcher to be employed. In such a case, the compensation paid for the work will be regarded as salary.

Grants that are paid from the university operating expenses will always be announced open for applications. The value of the grant has to be expressed in the announcement. The time given for applications to arrive has to be at least two weeks. The university does not have in use a common form for applying for a grant; the unit that manages the grant decides on the method of applying.

If a person is employed by the university, the funding received from the university is regarded as salary. An absolute prerequisite for working on a grant for a period that the university funds, is that a person has to take a leave of absence from one's ordinary duties for that time. The work duties during the grant period have to be different from the duties under a normal employment contract (excluding research duties). Only if breaking off or reorganising teaching duties that have begun before the leave of absence is excessively inconvenient for the activities of the department, one is allowed to complete them as part-time work. Even in this case the amount of teaching hours should not exceed 48 hours during a grant period that lasts for one academic term.

Decisions related to paying a grant are made according to ways that are defined in the university's standing orders on commercial transactions.

A researcher who is a university employee cannot be an employer and therefore cannot hire staff autonomously.

2.3. The procedure for paying a grant

Grants that are given for academic research or studies are paid through the salary system. Grants are paid in one instalment, except for yearly grants which are paid in two instalments. Only ISEP grants and a few other grants that are paid for expatriates are exceptions to this. The grant is paid according to the salary payment schedule, i.e. either on the 15th or the last day of the month. The applicant should take into account the time that it takes to process an application when writing the application and deciding on the date when the grant should be paid. The original form for paying the grant (for the form, see Appendix 4) should be delivered to the wages clerk of the faculty. People who do not work under a faculty should deliver the form to the personnel services. The grant will be paid directly to a bank account through the payment transaction and bookkeeping systems. A grant may be paid in cash only under exceptional circumstances. The grant may be paid in this manner when the grant is paid abroad or to an expatriate when there is no possibility to use a Finnish bank account (for the form, see appendix 5). Even in this case, one should contact the wages clerk of the unit and deliver the original form for paying the grant there.

The one that gives the grant should of course take care of the fact that money for grants can be paid from the specified account. Furthermore, it should be taken care of that the money reserved for paying for the grant is available on the account on the day the grant is be paid.

The university has to give the tax authorities certain facts when it pays for a grant. This information is gathered through the form for paying grants as well. There is a special form for applying for the exchange student and teacher scholarships, which is available through the International Relations Unit (for the form, see Appendix 6).

A grant cannot be paid until all the information that is required in the form is available, because the information will be saved and sent to the tax authorities automatically when the money is paid. The unit that makes the decision to give a grant is responsible for the validity of the information that is given when the grant is paid. If the university should meet with any debts caused by the grant, the unit that has given the grant will be responsible for them as well.

The receivers of grants will not be given any summary of the grants they have received during a year. Therefore, if the receivers of the grants wish to go through their tax certificates they will have to save each pay slip they get from the grants they have received.

If the grantee receives educational grants from the government, the grantee has to inform the Study Grants Board of all other grants as well.

2.4. The accounts that are used for paying grants

Grants can be paid from the operating expenses on the grounds that have been described above. Grants cannot be paid from the accounts that are used for chargeable service activities or co-financed contract research until the project has been completed, the budget surplus of the total result and leftover assets have been transferred to further projects. This does not apply to the funds for international student and teacher exchange (Erasmus, Leonardo, Nordplus) on the accounts for co-financed agreements. These grants may be paid regardless of the limitations mentioned above. Donations may be used for paying for grants, unless the donator has ring-fenced it. The appropriations from the Academy of Finland may be used for paying for grants, if it is warranted in the decision of the Academy of Finland.

If the grant will be paid through the account for debitable remittances, one has to make sure from the financier if it is possible to pay grants from the appropriations. The valid budget accounts are available on the web pages of the finance services (see http://www.oulu.fi/hallinto/intra/talous/ohjekirja/23talousarviotilit.html).

3. The awards for merit that the university deals out

The university and its units give out some financial awards for merit for distinguished activities every year. The principles for taxability are the same for awards for merit as they are for grants. A prerequisite for the award to be exempt of taxation is that it has been given as recognition for academic or artistic work or for work for the public good (see section 82 of the Finnish Income Tax Act). Awards for merit are given retrospectively, whereas grants and scholarships are usually given in advance. According to the guidelines of the tax authorities and the taxation practices, the awards that one's employer gives out are in most cases related to one's employment. Therefore, they are considered taxable income. That is the reason why the awards for merit the universities and their units give to their personnel are treated as taxable payments, not unlike one's salary.

Appendices (mainly in Finnish). To access files you must be connected to the university´s intranet.

Appendix 1. Grant register

Appendix 2. Transferral of a grant to the university

Appendix 3. Agreement on the use of the resources for spaces and facilities

Appendix 4. The payment of a personal grant (Grant form no. 1)

Appendix 5. The payment of a personal grant to a person who does not have a Finnish account (Grant form no. 2)

Appendix 6. The payment of a personal grant for studying abroad

Updated 16.8.2004  Human Resource Services