Entrepreneur, this is how you assess your YEL income

One of the most common contact topics in our customer service is the entrepreneur’s YEL income: what it means and how it should be assessed. Guidelines and aids can be found in the legislation but no direct answer to the question can be obtained. We compiled this article to help you assess your YEL income.

Even if you’re just considering entrepreneurship and aren’t happy to think about pension matters yet, read this article already when you’re preparing your business plan. The self-employed person’s pension insurance, i.e. YEL insurance, is one of the essential business costs and your most important insurance as an entrepreneur.

In the early stages of business activities, it may be difficult to estimate future turnover or your own work input. The work input is essential because the monetary value of your work input will determine your YEL income. And your YEL income determines the price of your YEL insurance and the amount of benefits covered by the insurance. The YEL income must be proportioned as realistically as possible to your own situation as an entrepreneur.

What on earth is YEL income?

YEL income refers to the value of your work as an entrepreneur in euros over a period of twelve months. Under the law, it must correspond to a salary that you would have to pay to someone who is doing similar work and who is equally competent.

Read more about YEL income

Your YEL income does not directly mean the salary you pay to yourself as an entrepreneur, and it is not the same as your company’s performance. How can I know the right YEL income for me? Viivi Haverinen and Sari Gherab from Ilmarinen's customer service explain this in detail.

- If you work as an entrepreneur and invoice your customers for it, your invoicing may well be the amount that best describes the financial value of your work input. However, there are many ways of entrepreneurship, so the salary raised from the company or its turnover as such is not directly an indicator of the value of your work, Viivi says.

- When you purchase YEL insurance online, you can already get our recommendation for YEL income on the YEL application to make it easier to assess your income. The recommendation is based on your estimated turnover and the median salary of your sector. These initial data provide a YEL income recommendation for full-time employment. In the assessment of YEL income, we will also take into account the possible part-time or seasonal nature of your entrepreneurial work, Sari continues.

- You can also use our YEL calculator to test the effects of different amounts of YEL income on the contribution and benefits even before submitting the application, Viivi suggests.

What should be taken into account in the assessment of YEL income?

If you are doing several different entrepreneurial jobs at the same time, estimate the value of your work input for all of these in total. You only need one YEL insurance.

In other words, the YEL income recommendation you receive from us is a tool for assessing your YEL income. It is not always suitable for all situations as such.

- If you perform entrepreneurial work in more than one sector, the recommendation may not be directly suitable, as the recommendation can automatically take into account pay levels from only one sector at a time, Sari says. - And by the way, you should check that the sector and turnover data used by the calculator are correct so that the starting level for the recommendation is in the right direction, she adds.

- Besides accepting the YEL income recommendation calculated by the pension company, there are other options as well. The recommendation includes a margin that may be a maximum of 30% more or less than the recommended amount. In other words, within the 60% total room of manoeuvre, you can usually determine a suitable YEL income that secures social security during your career and your future pension, Viivi continues.

- We do not take into account other costs related to your business activities when we confirm your YEL income, because under the Self-employed Persons’ Pensions Act , your YEL income does not mean your taxable income or the salary you pay yourself. In addition, YEL income is not the same as your company’s earnings or turnover, and it is not dependent on the profitability of your business activities, Sari explains.

How do you review my YEL income?

After your YEL insurance has been valid for three years without an essential change in your YEL income, we are required by law to review your YEL income. In this case, we will recalculate your YEL income recommendation, in which we utilise information obtained from public sources. We receive information for the calculation of the recommendation from the Tax Administration, Statistics Finland and the Incomes Register.

In the calculation of the recommendation, we will take into account your turnover data, the salary data of your sector’s employees and any earned income you may have received from elsewhere.

Review our recommendation and tell us if you disagree

As an entrepreneur, you are left with the task of assessing whether our YEL income recommendation and the margin included in it are suitable for your situation. You can choose any YEL income that suits you between the lower and upper limits.

- If you feel that the recommendation and its margin are not of the right size, please tell us more about your situation. Even then, you should fill out the application online but apply for a YEL income that differs from the recommendation. In this case, we will ask you to provide us with additional information about your work either by using an online form or by email. So be sure to keep an eye on your email! We always send the message as secure email, Sari explains.

- If you are in any doubt about what to do, call us before submitting your electronic insurance application. We can then together come up with a solution that suits you, Viivi advises.

Does the YEL income change every time it is reviewed?

- No it does not. If your YEL income is already at the recommended level, i.e. within the 60% margin, we will acknowledge the review as completed by text message without changing your confirmed income. If, in the light of the information we have received, there is reason to change your YEL income, we ask you to review our proposal and either accept or reject it. You can provide us with more information about your situation even during the YEL income review process. You have at least two weeks to do this. We will familiarise ourselves with the information and then confirm your YEL income based on the overall assessment, Viivi explains.

How do you perform the overall assessment of YEL income?

- We take into account information that describes the value of your work input when determining your YEL income. There is still plenty of room for individual consideration and variation in YEL income, and this is also required by law, Sari explains.

- If we do not hear from you, we will confirm your new YEL income with the information available to us. However, the maximum increase is EUR 4,000 for the first two reviews. This means a maximum of approximately EUR 85 more to your monthly insurance contribution, Viivi adds.

What does my YEL income affect?

The level of your YEL income affects the benefits related to different life situations. Read more on website about the benefits of insurance contributions. In the YEL calculator, you can also compare how changing your YEL insurance affects your old age pension and the sickness allowance, parental allowance or unemployment security paid by Kela.

- Entrepreneurs explain how important they find it that their YEL income has been at the level corresponding to their work input since the beginning. The significance of YEL income has become concrete in the event of an illness or accident. YEL insurance also plays an important role during parental leave or unemployment, Sari says.

- By the way, YEL contributions can be deducted entirely either in your own or your spouse’s taxation. You can also deduct YEL contributions in your company’s taxation if the company pays them. The level of deductions depends on the company form of the paying company, Viivi sums.

YEL income also has a lower limit (EUR 9,010.28/year) and an upper limit (EUR 204,625/year). Both limits change slightly annually, as the amount is always increased at the beginning of the year by the index following the wage and price development, i.e. the wage coefficient.

Read more

Who is YEL insurance for and when?