TyEL or statutory employment pension insurance for employees
As an entrepreneur, you must take out employees’ pension insurance or TyEL if you employ at least one person and pay wages.TyEL insurance for employees is usually mandatory for employers
With TyEL insurance, you contribute to your employees’ pension cover. TyEL insurance is a form of mandatory insurance for entrepreneurs.
As an employer, you are responsible for insuring your employees with TyEL insurance and for reporting wages to the national Incomes Register. The Incomes Register is an electronic database used by all employers. The pension insurance company receives information on reported wages on the same day.
As the employer, you need to take out TyEL insurance before you pay your first wages to an employee. This way, the employee’s statutory pension insurance is in order before you report the employee’s first wages in the Incomes Register.
TyEL insurance is mandatory when you hire employees as a:
- Company
- Corporation
- Household
Companies, corporations, and households must take out insurance with a pension insurance company or, in the case of small-scale employment, report wages to the Incomes Register as a temporary employer and pay the contributions to a pension insurance company.
As an employer, you must pay TyEL contributions when:
- You employ at least one employee.
- Your employee is aged between 17–68. When your employee turns 17, their insurance must begin from the start of the following month. The upper age limit for TyEL insurance depends on the employee’s year of birth.
- You must take out TyEL insurance if your employee earns at least 68.57 euros per month (2024). You can take out the insurance as either an occasional employer or a TyEL contract employer.
- The lower limit for temporary employers is 9822 euroa (2024) in six months. If the limit is exceeded, the employer must apply for TyEL insurance.
TyEL insurance includes a number of pension covers that affect employees’ livelihood. Old-age pension offers cover for employees who retire after meeting the minimum retirement age. Partial early old-age pension allows employees to reduce their hours or retire altogether.
Disability pension is paid to employees whose work ability is severely reduced. Years-of-service pension allows employees to retire at the age of 63 if their work ability has reduced, and their working career has lasted at least 38 years. Survivors' pension offers financial security to the family of a deceased employee.
How is the amount of TyEL contribution determined?
The Ministry of Social Affairs and Health confirms the average amount of TyEL contribution annually. The TyEL contribution is a set percentage of the employee’s gross wages or salary. The TyEL contribution is calculated monthly based on TyEL wages and salary reported by the employer to the Incomes Register. The employee and employer each pay their share of employment pension insurance contributions.
The TyEL contribution rate can vary between pension insurance companies. The basic amount of TyEL contribution is 25.12 per cent (2024) of TyEL pay. Administration expenses are added to the TyEL contribution, and the contribution may be reduced by a customer bonus.
The basic TyEL contribution rate is equal in all pension insurance companies, but the amount of the contribution depends on the pension insurance company’s efficiency, meaning administration expenses. Administration expenses are the part of the contribution that covers the operations of the pension insurance company, such as expenses resulting from the management of insurance policies and pensions. The amount of the customer bonus depends entirely on solvency. One per cent of the pension insurance company’s solvency capital is compensated to the customers in the form of customer bonuses, and the bonuses reduce the following year’s pension insurance contribution.
The amount of TyEL contribution depends on the due date, the size of the employer, and the payroll bill. The cost-efficiency of the pension insurance company is significant because it affects the TyEL contribution rate. Customer bonuses may reduce the amount of pension insurance contribution. At Ilmarinen, customers have received excellent customer bonuses. The bonuses depend on the good solvency of Ilmarinen, among other factors.
In addition, you should promote your employees’ work ability in order to reduce cases of disability pension. See which factors affect the price of corporate insurance.
TyEL contributions are paid from TyEL pay, which is the compensation paid for work. In many cases, TyEL pay is equal to the employee’s gross wages or salary before withholding tax. TyEL pay includes monetary wages and salaries, overtime pay, wage supplements, holiday pay, holiday bonus, holiday compensation at the end of employment, in-kind benefits, and pay during sick leave due to illness or accident.
TyEL contributions are not paid for tool allowances, tax-free travel expense allowances and tax-free per diem allowances.
The basic TyEL contribution rate is equal in all pension insurance companies, but the amount of the contribution depends on factors such as customer bonuses, the size of the company, and the number of cases of disability pension.
Distribution of TyEL insurance contributions between the employer and employee
As the employer, you are responsible for your employees’ pension cover by paying a fixed share of their TyEL contribution.
Employees pay a part of the TyEL contribution out of their wages or salary. As the employer, you are responsible for paying the entire TyEL contribution to the pension insurance company.
The employer pays a part of the TyEL contribution. The remainder is paid by the employee. The average share of contribution paid by employers is 17.43 per cent (2024).
The basic amount of TyEL contribution is a fixed sum regardless of the insured employee’s age and sex. The employer’s share varies depending on whether the employee is under or over 53 years old. If the employee is between the ages of 53 and 62, the employer’s share is lower and the employee’s contribution higher.
The employee’s share of TyEL contributions depends on their age. In 2024, the distribution of share is:
- For ages 17–52, 7.15 per cent of earnings.
- For ages 53–62, 8.65 per cent of earnings.
- For ages over 63, 7.15 per cent of earnings.
What is the minimum pay for TyEL insurance?
As an employer, you are obligated to take out TyEL pension insurance for your employee if their monthly wages or salary is at least 68,56 euros (2024). If you pay wages less than this amount, you will still need to report them to the Incomes Register.
If you are a temporary employer, the minimum is EUR 9822 (2024) in six months. If this amount is exceeded, you must apply for TyEL insurance.
YEL or TyEL?
Employees and employers in the private and public sectors pay statutory employment pension insurance contributions. The Employees Pensions Act (TyEL) provides for the pensions of employees in the private sector. TyEL contributions are paid by both employees and employers. About 60 per cent of Finns with employment pension insurance are covered by TyEL.
Self-employed persons and farmers pay employment pension insurance premiums based on their earned income. This is known as YEL insurance. If you are a self-employed person, be sure to get your insurance in order and set your YEL earned income at an adequate level.
Is self-employed persons’ employment pension insurance mandatory?
As an entrepreneur, you must look after both your employees’ and your own pension cover. When starting out as an entrepreneur, you must take out pension insurance for yourself within six months of setting up the company. You must usually also take out pension insurance if you are a private trader.
YEL insurance accrues your employment pension insurance or old age and secures your livelihood in the event of illness, parenthood, disability or unemployment. As with TyEL insurance, YEL is required by law and cannot be substituted by voluntary insurance policies. You can supplement your cover with entrepreneurs’ voluntary pension insurance.
If you are considering or planning on becoming an entrepreneur, we offer assistance in selecting insurance for new entrepreneurs to protect your and your family’s and company’s future.
How to take out statutory pension insurance
Ilmarinen, our pension insurance company partner, offers mandatory YEL and TyEL insurance. Our partnership with Ilmarinen offers you the chance to handle all our insurance needs in one place to get the best solutions for your company and business.
Entrepreneurs can transfer TyEL insurance to another pension insurance company once in every quarter, provided that they have had statutory employment pension insurance with the other pension company for at least one year. By taking out employment pension insurance for self-employed persons and employees at Ilmarinen, you get potential discounts and access to training courses.