YEL insurance – the most important insurance for the self-employed

​​​​​​YEL insurance is governed by the Self-Employed Persons' Pensions Act, i.e. it is mandatory for a self-employed person. Upon retirement, you can apply for pension cover from Finland.

What do you get in exchange for your YEL premium?  YEL insurance helps to secure your income after retirement and in case of disability. If you live permanently in Finland or you are working here for a period of at least four months, your other social security will also be based on your YEL confirmed income.  Sick leave, parental leave, unemployment – during these periods your income will be based on YEL insurance. Or to be more precise, on your YEL income, as determined by you. ​


Frequently asked questions

What does YEL insurance cover?

Confirmed YEL income is used as the basis for calculating

  • old-age, disability and part-time pension
  • sickness allowance
  • maternity, special maternity, paternity and parental allowances, as well as partial parental allowance
  • entitlement to unemployment security and to earnings-related unemployment security
  • survivors' pension paid to your family in the event of death.

What constitutes self-employment requiring insurance under YEL?

​The following are insured under YEL

  • Self-employed persons
  • Partners in a general partnership
  • Responsible partners in a limited partnership
  • Persons in an executive position in a limited liability company if they hold more than 30% of the company’s share capital or voting rights themselves or more than 50% together with their family members and at least one share or vote themselves.
  • Shareholders who have an executive status in another corporation, such as a co-operative. Usually, those working in a co-operative are insured on the basis of employment under TyEL.
  • Family members of self-employed persons if they work in the company without pay and live in the same household on a permanent basis.

The following are not insured under YEL

  • Farmers are insured under the Farmers’ Pensions Act (MyEL).
  • Persons in an executive position in a limited liability company if they hold 30% or less of the company’s share capital or voting rights themselves or 50% or less together with their family members.
  • Self-employed persons who do not work in their company.
  • Shareholders in a limited liability company who do not hold an executive position.
  • Silent partners
  • Family members of partners in a general partnership or a limited partnership.

TyEL insurance for the self-employed
If a self-employed person or their family member is not covered by YEL but is in an employment relationship and receives a salary, the company needs to take out TyEL insurance. In that case, pension and other social security benefits are determined according to the salary and fringe benefits.

For the purposes of YEL, a person holding an executive position refers to
  • Managing directors
  • Board members
  • and those in similar positions. In a small family business, an owner-family member working in the company usually holds an executive position regardless of his or her formal position, if the company does not employ personnel.

Deputy members of the Board of Directors are also insured under YEL if they hold the right to sign for the company or if they act in the place of the ordinary member for an extended period of time and otherwise meet the conditions required under YEL.

​What if I am a freelancer?

A person working as a freelancer can be either a self-employed person or an employee and thus be covered either by TyEL or YEL. A person can simultaneously be in an employment relationship with one employer and hired to do specific assignments for another.

It is not required to have a company or a registered business name for one’s activities to be covered by YEL.

The decisive factor when determining whether a person is covered by TyEL or YEL is whether the work is done in an employment relationship or not. If the work is carried out in an employment relationship, the freelancer is insured under TyEL. In that case, the employer is responsible for arranging pension cover.

The characteristics of an employment relationship include, among other things:

  • receives a salary
  • employment contract
  • cannot hire a substitute for him- or herself
  • work is supervised or managed

In the absence of the characteristics of an employment relationship, freelancers shall arrange and pay their pension cover themselves according to YEL.

Freelancers receiving nonwage compensation for work shall also take out YEL insurance for themselves. Nonwage compensation for work means compensation other than wages. What is essential here is the absence of the characteristics of an employment relationship.

​Do I need YEL insurance during retirement?

YEL insurance is voluntary if a self-employed person receives an old-age pension or early old-age pension according to the earnings-related pension acts.

New pension accrues on voluntary pension at a rate of 1.5% of the confirmed YEL income.

YEL insurance is mandatory when the conditions for YEL insurance are met and the self-employed person is

  • on part-time pension or
  • on disability pension or partial disability pension.

If my share of ownership grows, do I need to take out YEL ​insurance instead of TyEL insurance?

​If the share of ownership of an owner working in a limited liability company grows to the extent where he or she owns more than 30% alone or more than 50% together with his or her family members, he or she must be insured under YEL instead of TyEL.

Starting up a business for the first time?
If an owner switching from TyEL to YEL engages for the first time in self-employed activities under YEL, he or she receives a new entrepreneur discount of 22% on the insurance contributions for 48 months.

What about indirect ownership in a limited liability company?

​A person holding an executive position is covered by YEL, for example, if

  • he or she owns more than 50% of the intermediate company alone and the intermediate company owns more than 30% of the share capital of the company in which the person works or
  • he or she owns more than 50% of the intermediate company together with his or her family members and the intermediate company owns more than 50% of the share capital of the company in which the person works.

Do the family members of a self-employed person need YEL?

​The family members of a self-employed person are also insured under YEL if they work in the company without pay.

Family member according to YEL

  • the self-employed person’s married spouse regardless of whether the spouses live in the same household or not
  • the self-employed person’s children, parents or grandparents that live in the same household on a permanent basis
  • the self-employed person’s adopted child or parent
  • common-law spouse if the couple live in the same household
  • persons of the same gender who have registered their partnership regardless of whether they live in the same household or not.

Not a family member according to YEL

  • siblings even if they live in the same household.
  • a common-law spouse or child, parent or grandparent living in a different household.

If the self-employed person and his or her spouse engage in business activities together, the income is divided between the spouses according to their work inputs for tax purposes. If no separate account is provided, the income is halved. In YEL supervision, income allocated to a spouse is usually considered to show that the spouse must also be insured.


Company form, family members and YEL?

Employment relationship or self-employment?

​Sometimes it is difficult to tell the difference between an employment relationship and self-employment. The table lists some of the differences between an employment relationship and self-employment.

Self-employed activity (YEL) Employment relationship (TyEL)
performing work on one's own behalfperforming work for an employer
oral or written employment assignmentoral or written employment contract
self-employed person bears risk for success of workrisk and liability borne by the employer
risk relating to the capital investmentno capital investment by the employee
raw materials, tools and equipment provided by the self-employed person him- or herselfraw materials, tools and equipment provided by the employer
work performed without direction and supervisionwork performed under the employer's direction and supervision
work usually performed on the premises of the self-employed personwork performed on premises designated by the employer
a self-employed person can define his or her working hours independentlythe employer defines the employee's working hours
a self-employed person can work for several customers simultaneouslythe employee may not work for other employers simultaneously
a self-employed person can hire an assistant or substitute without consulting the customerthe employee may not hire an assistant or substitute without consulting the employer
the customer does not supervise the workobligation to report on work performed
remuneration based on work outputthe employee receives pay for work performed
the customer does not pay holiday compensation or compensate any expensesthe employer pays holiday compensation and compensates expenses arising from the work
is included in the tax authority's prepayment register and in the VAT register

Self-employed person’s family members – YEL or TyEL?

 

Company formYEL or TyEL?
Limited liability company
The spouses jointly own more than 50% and work in executive positions in the companyYEL
The shareholder's family member receives a salary in the company, does not own any shares.TyEL
The shareholder's family member works without pay in the company, does not own any shares.Excluded from earnings-related pension cover
Siblings own a limited liability company 50/50 and work in executive positions in the companyYEL
Private registered business name
The company is owned by one of the spouses and the other spouse works in the company without pay. YEL
The self-employed person's child living in the same household works in the company without pay.YEL
The self-employed person's child living in the same household works in the company and receives a salary.TyEL
General partnership
The partner's family member works in the company and receives a salary but is not a partner.TyEL
The partner's family member works in the company and does not receive a salary. Is not a partner.Excluded from earnings-related pension cover.
Limited partnership
The partner's family member receives a salary from the company, is not a partner or is a silent partner.TyEL
The partner's family member works in the company without pay, is not a partner or is a silent partner.Excluded from earnings-related pension cover if he or she does not receive a salary.