The agreement does not need to be in a specified form or in writing. An agreement can be concluded on the performance of work in free form and the agreement can apply to any human activity of economic value. An agreement requires that the parties have a mutual understanding of its content.

A silent agreement can also be concluded. In practice, this means that the activeness or passiveness of the contracting parties is regarded as approval of the agreement in certain situations. For example, if there has previously been a written employment contract between the parties and the work continues to be commissioned in a similar manner, a new employment contract has been concluded between the parties, even if one has not been concluded separately.

The agreement on which an employment relationship is based does not need to be designated as an employment contract, but it may be called, for example, a partner or commission agreement. The legal effects of the agreement are determined by the content of the agreement and not by its name.

Personally performed work means that the person performing the work may not, without the consent of the party commissioning the work, appoint a substitute or agree on the work with a third party. In other words, an employee in an employment relationship may not appoint a substitute without consulting the employer.

Provisions on finding a substitute in an employment relationship are laid down in Chapter 1, section 7 of the Employment Contracts Act.

Work performed on behalf of another means that the immediate benefit of the work must be for the benefit of the party commissioning it. The employee benefits from the work they perform in the form of remuneration, but this is not the benefit referred to here. The requirement to work on behalf of another person may not be met, only usually when the employee is in the same wealth category as the employer. This may be the case if the employee owns or otherwise manages the employer company or part of it. In this case, it should be examined whether the person performing the work has gotten their remuneration in the form of a salary or as a dividend.

The managing director of a limited liability company and the general partner in a general partnership or limited partnership are not in an employment relationship, and they work as an actor under corporate law often on the basis of a separate managerial agreement. Similarly, a chairman or member of a board, who own a significant share of the company's shares are not in an employment relationship.

A rough rule of thumb may be that a when a party holds more than 50 per cent of a company's shares they are not in an employment relationship. A smaller shareholding can demonstrate entrepreneurship if the person does not receive a salary, receives dividend income from the company, has contributed significantly to the financing of the company with their own assets - or if there is another factor that indicates acting on their own behalf. A shareholding of less than 20 per cent rarely indicates acting on one’s own behalf. However, a person who owns most of the company may conclude an employment contract with a company that is an employer if they so wish.

Remuneration need not be money, but a person performing work must be paid either a salary or some other remuneration with financial value. In other words, the remuneration may be training, reciprocal work, employment opportunities or a fringe beneit, such as housing or a meal. The remuneration may also consist of only tips from customers.

It does not matter who pays the remuneration. In other words, the remuneration characteristic is also met when work is carried out for one party, as a result of which the other party provide remuneration. Such a situation arises, for example, in the situation of invoicing services and some forms of social work and, for example, personal assistants. Personal assistants are usually paid by a municipality or a wellbeing services county, even if the employer on whose behalf the work is carried out is the person to be assisted.

Due to the presumption of remuneration, the Employment Contracts Act applies regardless of the absence of any agreement on remuneration, if the facts indicate that the work was not intended to be performed without remuneration.

Direction refers to the employer's right to determine where, how and when the work is carried out before the start of the work and during the work if desired or when necessary. Supervision, on the other hand, refers to the employer's right to monitor - if they so wish or if necessary - that the employee complies with the regulations they have been given concerning the performance of work. In practice though, the employer is not required to direct and supervise the employee’s work in a concrete and in-depth manner. Direction and supervision can also take place technically, for example, through a computer program, as is the case with food couriers.

The mere fact that an employee is allowed to decide on their daily or weekly working hours does not indicate the absence of this characteristic. This is more of a working time condition. Attention should be paid to whether the employer has the opportunity, if they so wish, to influence how, when and where the employee works once work has been taken on and whether they can supervise that each employee acts in accordance with the instructions given during that period.

However, an overall assessment is only necessary in situations where, in practice, the actual working conditions have revealed facts that speak clearly against an employment relationship and in favour of self-employment.

According to an amendment to the Employment Contracts Act that entered into force on 1 July 2023, in situations that are open to interpretation, the existence of an employment relationship is assessed through overall discretion, taking into account

• the terms of performing work
• the conditions in which the work is carried out
• the interpretation of the parties as regards the nature of the legal relationship, and
• other factors affecting actual status of the parties in the legal relationship.

Overall discretion is a challenging whole. Legal literature outlines the so-called material and formal characteristics that form the line between employment and self-employment. Material characteristics refer to the terms and conditions of work, while formal characteristics indicate the will of the parties or otherwise affect the actual status of the parties in a legal relationship.

The following factors have been considered tangible characteristics of entrepreneurship:

• the prevalence and publicity of the activities and the freedom of entrepreneurs (the person offers their own services publicly and openly - in an employment relationship, this would, as a rule, be contrary to a non-compete clause)
• entrepreneurial risk (risk of loss of capital, i.e. financial risk of operations)
• the person performing the work may self-determine their working hours
• pension and accident insurance contributions are taken into account in the amount of compensation paid for work (i.e. the remuneration should be higher than the corresponding pay of an employee)
• the person performing the work has several simultaneous assignments
• the party commissioning the work is not entitled direct the work
• the person performing the work has the right to decide on the way in which the work is performed and how it is organised, i.e. the end result is what counts.

Formal characteristics of entrepreneurship include:

• submission of trade register and other similar notifications
• getting a business ID
• prepayment register entry
• purchasing an entrepreneur's pension insurance policy
• the method of paying compensation, i.e. is the person performing the work invoicing the charge themself and does the amount include VAT (the use of an invoicing service alone does not prove that there is an entrepreneur relationship).

In an employment relationship, it is normal for the employer to acquire the necessary equipment with which work is performed. However, it is possible that it has been agreed to that the employee will perform work using their own equipment and devices. Chapter 1, section 1, subsection 3 of the Employment Contracts Act specifically provides that such an arrangement is possible in an employment relationship. Entre-preneurship is supported by the fact that the purchase of devices indicates some kind of entrepreneurial risk. On the other hand, if separate compensation is paid for the use of one's own tools this speaks in favour of an employment relationship.