Employer, self-employed person, pensioner – 2023 earnings-related pension index and wage coefficient confirmed
The Ministry for Social Affairs and Health has confirmed the indices for earnings-related pension insurance for 2023. Next year, the earnings-related pension index is 2,874, which means an exceptionally large, approximately 6.8 per cent increase on pensions at the start of the year. The confirmed wage coefficient is 1.558. Compared to 2022, the wage coefficient will rise some 3.8 per cent.
The earnings-related pension index is used to adjust the paid earnings-related pensions. The wage coefficient impacts the calculation of the future earnings-related pension and many money and limit amounts that apply to employers and self-employed persons.
At the start of 2023, the earnings-related pension index will grow clearly more than the wage coefficient, which is exceptional compared to previous years. This is the result of a strong rise in prices during the year in progress.
Employers: this is how the earnings limits will change next year
In 2023, the lower limit for the obligation to take out TyEL insurance will be EUR 65.26 per month. In 2022, the lower limit for pension insurance is EUR 62.88 per month. The lower limit means that the employee does not need to be insured under TyEL, but their wages must be reported to the Incomes Register.
You must take out TyEL insurance for your employees when you have at least one employee under a permanent employment contract, or the salaries and wages you have paid to your employees exceed EUR 9,348 (the limit in 2022 is EUR 9,006). When this condition is met, you must fill in a TyEL application, and you become a contract employer.
As a contract employer, your company’s size affects the TyEL contribution. Starting next year, the expense loading included in earnings-related pension contributions will be determined on a company-specific basis. Expense loading is the part of the pension contribution that is used to cover the pension company’s operations; in other words, the costs arising from managing insurance policies and pensions. Ilmarinen’s excellent efficiency shows to our customers as lower earnings-related pension insurance contributions.
In 2023, an employer is considered a large employer if they paid more than EUR 2,197,500 in salaries and wages in 2021. As a large contract employer, i.e. a large employer, the work ability of your employees begins to impact the size of your TyEL contribution. You can see an estimate of your TyEL contribution and contribution percentages for next year by logging in to the employer’s service.
If you are a temporary employer, you only pay the basic TyEL contribution. If you do not continuously employ employees, and you have paid less than EUR 9,348 (EUR 9,006 in 2022) in salary or wages to your employee or employees in an employment relationship over six months, you are a temporary employer. As a temporary employer, you pay a TyEL contribution, but you do not need to take out TyEL insurance.
The percentage for the temporary employer’s TyEL contribution percentage is the same in all pension insurance companies.
You can read more about the TyEL insurance obligation for employers of different sizes on our website.
Self-employed person: this is how the wage coefficient impacts YEL income
Next year, the lower limit for YEL income is EUR 8,575.45 and the upper limit is EUR 194,750. In 2022, the lower limit is EUR 8,261.71 and the upper limit EUR 187,625. When your YEL income is at least the lower limit amount, you need YEL insurance.
As a self-employed person, YEL income is a key factor affecting your earnings-related pension and entire social security. The YEL income is determined annually and adjusted with the wage coefficient once a year, at the start of the year. This means that the YEL income for your annual insurance and the YEL income lower and upper limits will be adjusted with the wage coefficient. The index increment keeps the self-employed person’s YEL income in line with general payroll and price development.
How the index impacts pensions
If you have retired, the earnings-related pension index is used to adjust the paid earnings-related pensions. When calculating the earnings-related pension index, the portion of change in wages accounts for 20 per cent and the change in prices for 80 per cent.
As a pensioner, you can check your pension amount in the MyPension service as of 28 November 2022. You can already find next year’s pension payment dates online.
Also earnings limits concerning disability pensions are adjusted annually with the wage coefficient. You can check your personal earnings limit in the MyPension service.
If you are retiring soon, the wage coefficient matters. The wage coefficient is used to calculate the future earnings-related pension. It is used to adjust the annual earnings to the level of the pension’s starting year. In the wage coefficient, the portion of change in wages accounts for 80 per cent and the change in prices for 20 per cent.
If you do not receive a pension yet, the MyPension service’s pension calculator allows you to estimate your future pension amount, as of 29 October 2022.
Why are indices important?
The earnings-related pension index and wage coefficient are used to ensure that the amount of pension is reasonable in relation to the career-long earnings and that the purchasing power of current pensions is maintained.
The current pensions’ amounts are adjusted annually with the earnings-related pension index at the start of January. The indices therefore secure the earnings-related pension amounts.
To also ensure that self-employed persons’ YEL income does not fall behind the general payroll development, they are adjusted once a year, at the start of each year. The wage coefficient is used for this purpose.
YEL reform enters into force at the start of next year
The Self-Employed Persons’ Pensions Act will change at the start of the year: YEL income will be determined in more detail and adjusted more often. “Self-employed persons deserve the same level of pension and social security as employees. The reform will help achieve this,” says Minna Hakkarainen, Ilmarinen’s Director, Insurance Services.
Most frequently asked questions on the YEL reform
What questions are self-employed persons asking about the Self-Employed Persons’ Pensions Act (YEL) reform? We assembled all of the questions most frequently asked by self-employed persons. The expert for the article is Ilmarinen’s Director, Insurance Services, Minna Hakkarainen.
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