News 26.10.2021

What employers should know about 2022 earnings-related pension contributions?

The average level of earnings-related pension contributions will rise 0.45 percentage points in 2022. The need for the increase was agreed on earlier when reductions were made to TyEL contributions due to the COVID-19 pandemic. Client bonuses, in turn, will return to their previous level. The pension insurance companies’ application concerning actuarial principles has been sent to the Ministry of Social Affairs and Health for ratification, and the Ministry will confirm the percentages in November.

According to the applied for actuarial principles, the TyEL basic contribution will be 25.85 per cent of the payroll in 2022. For the majority of customers, this is an important percentage as Ilmarinen uses it to invoice customers each month based on the salaries they have reported.

“Employers received reductions on TyEL contributions in 2020 due to the pandemic. We agreed then that the discount would be recovered as increases in contributions. This increase will affect contributions next year and in the three following years, which means that the last increase will be made in 2025,” says Ilmarinen’s Insurance Manager, Major Customers, Miika Aromaa.

Client bonuses will return to their previous level

The TyEL contribution is divided into the employee’s and the employer’s share. The employee’s share will remain on the same level as this year, i.e. 7.15 per cent for those aged under 53 and over 63, and 8.65 per cent for those aged 53–62.

The size of the employer’s final contribution depends on different reductions, such as the client bonus paid by the pension company. The employer’s share of the contribution is an average of 17.40%, and the rest is the employee’s share.

The average pension insurance contribution proposed by the labour market organisations (24.85 per cent) that was publicised earlier, is important for employers as it illustrates the general contribution level and offers an overview of differences between years.

“It is, however, important to remember that customer-specific contributions can differ significantly from the average contribution. The client bonus granted by Ilmarinen is deducted from the basic contribution. In addition, for major companies, the contribution is also impacted by many other factors, and for them, the differences to the average contribution are often the largest,” Aromaa explains.

Due to COVID-19, only a third of client bonuses were paid in 2021, but the situation is now returning to normal in terms of bonuses.

“Even though the basic contribution percentage will rise by more than a percentage point compared to this year, the increase in the contribution level will level out to only the size of the COVID-19 increase due to the expected excellent client bonuses.”

Disability cases declining

If a company’s payroll in 2020 exceeded EUR 2,169,000, the size of the TyEL contribution will also be impacted by the so-called contribution category, which is based on the disability pensions granted to employees in previous years.

“The most significant change is that next year’s disability premium rate will fall due to the decrease in disability cases. As a result, the impact of the contribution category on the total contribution will be lower than before. Those who have a high contribution category will experience a drop in the contribution and, on the other hand, customers with a good contribution category will receive a smaller discount.”

The disability premium rate is included in the TyEL contribution. It describes how much of the contribution is being collected for future disability pensions.

“The contribution category still impacts the employers’ contribution significantly, even though the impact from the current year will fall. Managing work ability risks is still worthwhile.”

Ilmarinen supports its customers’ work ability risk management in a number of ways. The Work Ability Hub is also available online, providing tips on managing work ability risks.

Discussing the sustainability of the earnings-related pension system

The sustainability of the Finnish earnings-related pension system has been a topic of recent public discourse.

“There is long-term pressure on the contribution level due to the aging of the population and the low birth rate. This does not impact the contribution level for upcoming years, but in the longer term, it is important to discuss what types of adjustment measures will be required to guarantee the sustainability of the system in the future,” Aromaa sums up.

Check your company’s contribution forecast to support budgeting

It is easy to check your company’s insurance contribution percentage by logging in to our online service. In our online service, you can see a projection of next year’s contribution percentage and TyEL contributions.

“Even though the figures are a projection, they offer good tools for budgeting. The earlier figures in the service have now been restated, so it’s worth taking a look at the updated forecast,” says Aromaa.

You can already find the applied for contribution percentages and other figures on our website here. Included are also key figures related to temporary employers.

The contribution for self-employed persons will remain the same as in 2021 , i.e. 24.10 per cent for those aged under 53 and over 63, and 25.60 per cent for those aged 53–62. The YEL income is automatically adjusted annually with the wage coefficient. The updated figures can be found here.

The Ministry of Social Affairs and Health will confirm the contribution percentages during November.

Read more

• News from the Finnish Centre for Pensions (etk.fi), in Finnish 

• Determining the TyEL contribution

• Employer’s online service

• Ilmarinen’s Work Ability Hub

• Blog of Matias Klemelä, Ilmarinen’s Chief Financial Officer and Head of Risk Management, on the sustainability of the pension insurance system (in Finnish)