Self-employed persons’ statutory pension insurance YELSelf-employed persons’ pension insurance, or YEL insurance, is mandatory for most entrepreneurs. YEL provides coverage for self-employed persons’ pension and social security. Contact us for Mutual Pension Insurance Company Ilmarinen’s statutory self-employed persons’ pension insurance.
Mandatory for most self-employed persons
YEL pension insurance is mandatory if you meet certain criteria as a self-employed person. YEL insurance cannot be substituted by voluntary insurance policies.
Determines entrepreneurs’ pension and social security
Self-employed persons’ YEL insurance is the basis of your income when you retire or need social security. YEL determines your income during unemployment, sick leave and parental leave, for example.
Take out Ilmarinen’s YEL insurance easily through us
You can take out Ilmarinen’s statutory self-employed persons’ pension insurance while taking care of your other insurance matters. Our co-operation helps ensure the smooth exchange of information and customer service.
YEL insurance is mandatory for most entrepreneurs
You should take out pension insurance according to the Self-Employed Persons’ Pensions Act immediately when you start a business. You must take out YEL insurance within six months from the start of the business at the latest. YEL insurance is mandatory if entrepreneurship lasts more than four months.
YEL insurance accrues old-age pension for the entrepreneur. In addition, YEL gives you cover if you lose your capacity for work, fall ill or go on a parental leave. Your family members are entitled to a survivors' pension if you perish. The amount of the pension is often determined on the basis of YEL income.
YEL insurance is mandatory for most entrepreneurs and cannot be replaced with voluntary insurance policies. According to the Finnish Centre for Pensions, there are approximately 200,000 YEL-insured entrepreneurs in Finland. Persons running a light-entrepreneurship business also need YEL insurance. Part-time entrepreneurs must take out YEL insurance if the other conditions for insurance are met.
You must take out YEL insurance if:
- You are resident in Finland.
- You work in your company.
- You have been an entrepreneur continuously for at least four months.
- You do not have any other pension cover for the same activities.
- Your annual income is at least EUR 7,958.99 (in 2020).
- You are aged 18–68 years. The upper age limit for insurance increases gradually: 68 years (persons born 1957 or before that), 69 years (persons born between 1958 and 1961) and 70 years (persons born in 1962 or after that).
Owners having a managerial position in a limited liability company and holding more than 30 per cent of the company, or voting alone or with family members, are insured under YEL insurance. Partners in general partnerships and general partners in limited partnerships are also insured under YEL insurance.
For private traders, YEL insurance is provided for the self-employed person. Often family members also work in the company. They are insured under YEL or TyEL.
YEL is the basis of the entrepreneur’s pension and social security
All entrepreneurs personally determine their YEL income. If the YEL contribution is too small, insurance cover will also remain small. The YEL contribution affects entrepreneurs’ income in case of unemployment, illness, disability, parental leave and retirement.
Entrepreneurs’ social security benefits are determined on the basis of the YEL income they have reported. Such benefits include the right to receive sickness allowance as well as maternity, parental and unemployment allowance from Kela. Unemployment allowances can be paid out by Kela or the Unemployment Fund of the Federation of Finnish Enterprises.
In addition to the entrepreneur, YEL insurance covers their family’s livelihood. The better entrepreneurs have kept their YEL insurance up-to-date, the more secure the livelihood of their widows and children.
The YEL income reported by the entrepreneur determines the amount of contributions
The self-employed person’s YEL contribution is a specific percentage of the YEL income they have reported. The Ministry of Social Affairs and Health confirms the percentage of the YEL contribution annually.
Firstly, the price of the YEL insurance depends on the entrepreneur’s age. Persons aged under 53 years or at least 63 years pay a smaller contribution. Secondly, a person establishing their first business usually has to pay a reduced YEL contribution. Thirdly, an entrepreneur paying their YEL contribution as a single instalment in January benefits from the payment period concerned. Lastly, an entrepreneurs should deduct YEL contributions in his/her own or the companies’ taxation.
You can calculate your own YEL contribution using Ilmarinen’s YEL calculator.
Minimum YEL contribution reduces cover to the minimum
The entrepreneur must pay a YEL contribution if their annual earned income is more than EUR 7,958.99 (2020) The lower limit is determined annual.
The minimum YEL contribution can be calculated from this sum, and many entrepreneurs unfortunately use it as the basis of their YEL income. However, they take a risk at the same time, as their cover for the future will remain at the minimum.
New entrepreneurs in particular under-insure themselves and set their YEL income to the minimum or close to it. When the business becomes established, the reported YEL income usually starts to better reflect the actual situation. Many entrepreneurs change their YEL income according to the company’s financial standing.
A good rule of thumb is that the reported YEL income should be the same as what the entrepreneur would pay for an employee doing the same work.
According to the Finnish Centre for Pensions, average YEL income in the last few years has been approximately EUR 22,000–23,000 a year. Our partner Ilmarinen recommends that a full-time entrepreneur sets his/her income at a minimum of EUR 20,000–30,000.
Entrepreneurs are entitled to YEL sickness allowance
Entrepreneurs are entitled to Kela’s sickness allowance, which covers losses in earnings due to disability lasting less than a year. The sickness allowance must be applied for from Kela after two months from the beginning of the disability.
The sickness allowance is paid after disability has lasted at least for the qualifying period. If the entrepreneur has YEL insurance, the qualifying period is the date of falling ill. If the entrepreneur does not have YEL insurance, the qualifying period is the same as that for wage-earners: the day of falling ill and the following nine business days.
What is the difference between YEL land TyEL?
Self-employed persons’ pension insurance (YEL) and the employer’s pension insurance (TyEL) both provide cover for retirement. Which one to choose depends on whether the work was done as an assignment or in an employment relationship. The general rule is that if you are an entrepreneur and fulfil the criteria set out above, you choose YEL.
Uncertainty in choosing the right pension insurance may be caused by the fact that the company form, one’s position in the company, and family relations affect the type of insurance chosen.
- As a rule, YEL insurance is sufficient for a trader or self-employed person. If salary is paid to the family member of a trader or self-employed person, TyEL insurance is used.
- YEL insurance should be selected in a limited liability company if the shareholder holding a managerial position alone owns more than 30 per cent or, together with their family, more than 50 per cent of the company. If ownership is smaller, TyEL insurance should be chosen.
- YEL insurance is taken out for a partner working in a general partnership. TyEL insurance is selected for a family member to whom salary is paid.
- In a limited partnership, YEL insurance is taken out for a general partner working in the company. TyEL insurance is taken out for a silent partner working in the company or to a family member to whom salary is paid.
- Freelancers may have an employment relationship with one customer and assignments with other customers. According to the terms of TyEL insurance, the employer is responsible for pension cover in employment relationships. A situation, for example, where the employer pays salary to a freelancer and supervises the work is considered an employment relationship. If some other compensation than salary is paid, the freelancer must ensure their pension cover by taking out YEL insurance.
One-stop service for entrepreneurs’ all insurance policies
You can take out the mandatory YEL insurance easily from our partner Ilmarinen. The partnership allows you to easily take care of insurance matters for the entrepreneur and company all at the same time. Our aim is to offer customers a customer relationship team through which communication is smooth and things are taken care of successfully. This allows our customers to focus on their business. Read more about the benefits that co-operation between Ilmarinen and Pohjola Insurance offers to entrepreneurs and companies.