If you are starting up your first company, you get a discount of 22% on your YEL contribution for the first four years. The discount period starts when you take out YEL insurance for the first time. The entrepreneur’s pension insurance contribution is also fully tax deductible in personal or corporate taxation.
Your YEL income is used as the basis for calculating your YEL insurance contribution.
Your age determines your YEL contribution percentage:
if you are under 53 or over 62 years old, the contribution is 24.1% of your confirmed income
if you are 53–62 years old, the contribution is 25.6% of your confirmed income
As an entrepreneur, you determine the appropriate level of your YEL income and the pension insurance company confirms this. YEL income equals the value of your work input. It should equal the sum that would be paid to an employee with the same professional skills as you. Your YEL contribution is calculated on the basis of the YEL income confirmed by Varma. You may change your YEL income as your entrepreneurial activities or your work input changes, but you cannot do this retroactively.
The insurance cover has been calculated using the following assumptions
The YEL earnings have been in force for two years. The unemployment cover has been calculated under the assumption that the person does not have dependent children. An estimated effect of the life expectancy coefficient is included. The person lives in Finland. The calculated insurance cover applies to this insurance only and should be considered approximations. The purchasing power of the pension estimate corresponds to present-day values.
Entrepreneurs are entitled to a daily sickness allowance when unable to work due to illness provided that they have worked as an employee or entrepreneur for at least three months prior to the disability. If the work requirement is not fulfilled, the entrepreneur is entitled to sickness allowance only after 10 consecutive days of disability. Entrepreneurs are entitled to unemployment allowance when becoming unemployed after ending their entrepreneurial activities. Receiving earnings-related unemployment allowance requires membership in an unemployment fund. The YEL insurance contribution can be paid by the entrepreneur or by the company. The contribution is deductible for both. YEL provides security also in the event of disability or the death of a family provider. YEL pension is the amount of old-age pension according to the earned income you entered.
The basis of Kela's daily allowances will change
The basis on which daily allowances paid by Kela are determined will change as of 1 January 2020. The allowances will be based on annual confirmed income preceding the allowance period. For entrepreneurs, this is calculated on the basis of their confirmed YEL income for the preceding 12 months.
It is also wise to take out legal expenses insurance right from the start. You can supplement your insurance to cover essential matters. If P&C Insurance Company can help you map out your insurance needs. Visit If's website or ask for an offer +358 (0) 10 19 15 00.
If you don't employ regular staff and salaries are less than 8 676 euros within 6 months, you can act as a temporary employer.
As of 1 January 2019 you will be report the payroll information to the Incomes Register. To make it easier to make notifications, you can use the free-of-charge Palkka.fi service (in Finnish and Swedish) or a commercial payroll service such as Palkkaus.fi (in Finnish).
If you use the Palkka.fi service, choose "Varma" as insurance company on the dropdown-list on the online form. The system will generate Varma's company ID and pension insurance number.
If you use the technical interface or the upload service of the Incomes Register, remember to provide Varma's company ID "55" and as pension insurance number "55-3999990D".
You may also need to take out accident insurance for your employees, ask If for an offer +358 (0) 10 19 15 00 or visit If's website.
Important facts about income under YEL insurance for the self-employed
Your pension accrual is based on your earned income under YEL insurance. If you fall ill or if a child is born into your family, the benefits paid by Kela are also determined according to your YEL income. Your entitlement to unemployment benefits depend on the amount of your earned income.
The minimum and maximum limits for YEL income in 2020
Minimum: EUR 7,958,99
Maximum: EUR 180,750.00
The lower limit for unemployment security is EUR 13,076.00
It is important that your YEL income is at the correct level right from the start of your self-employed activities. Important considerations for setting your income level:
You set the level of your YEL income.
Your YEL income is an estimate of your work input.
Your YEL income should equal the sum that would be paid to an employee with the same professional skills as you have for carrying out the same work.
YEL income is not the same as your taxable income from self-employment or the salary you have taken out