Self-employed person’s pension made up of YEL contributions

As a self-employed person, you are responsible for your YEL contributions. Each contribution increases the size of your pension. And improves your other social security benefits. Your contributions are tax deductible.

As a self-employed person, you are responsible for taking out insurance for yourself. The more you pay YEL insurance contributions, the larger your pension will be. And the better your social security benefits.

The YEL contribution is calculated as a percentage of earned income under YEL. As YEL insurance is statutory, the percentage is the same for all self-employed persons. It is confirmed by the Ministry of Social Affairs and Health annually.

Calculate your YEL contribution

The contribution still varies slightly. It is affected by four things.

  1. Your age. When you are below 53 years or over 62 years of age, you pay less than when you are 53-62 years during the transformation period 2017-2025.
  2. Being a first-timer. When you become a self-employed person for the first time, you receive the reduction for new entrepreneurs.
  3. Number of instalments and payment dates. Those who pay their YEL contributions in one instalment in January pay the least.
  4. Taxation. You can deduct all of your YEL contributions in taxation.

AGE, YRS

PENSION ACCRUAL, % OF EARNED INCOME

YEL CONTRIBUTION, % OF EARNED INCOME IN 2019

YEL CONTRIBUTION, % OF EARNED INCOME IN 2018

Aged under 53

1.5

24.1

24.1

Aged 53-62

1.7

25.6

25.6

Aged over 62

 1.5

 24.1

 24.1

During transition period from year 2017 until 2025 the contribution is higher for 53-62 years-olds. The percentage is higher from the beginning of the following year when you turn 53 years until the end of the year when you turn 63 years.

What does yel insurance contribution cover?

Earned income forms the foundation for the self-employed person’s social security. The following social security benefits are calculated based on earned income:

  • old-age pension, disability pension and partial old-age pension
  • daily sickness allowance
  • maternity, special maternity, paternity, parental and partial parental allowances
  • special care allowance
  • rehabilitation allowance
  • unemployment allowance
  • and survivors’ pension payable to the family in case on the self-employed person passing away.

Reduction for new entrepreneurs

If you are starting up entrepreneurial activities for the first time in your life, you will get a 22% reduction on your YEL contributions to ensure a smooth start. You will benefit from the reduction for 4 years regardless of your age. The table shows you the reduced contribution.

ENTREPRENEUR’S AGE, YRS

YEL CONTRIBUTION, % OF EARNED INCOME IN 2019

YEL CONTRIBUTION, % OF EARNED INCOME IN 2018

Aged under 53

 18.798

18.798

Aged 53-62

 19.968

19.968

Aged over 62

 18.798

18.798

If your first YEL insurance lasts for less than 4 years, you can save the reduction for later. You can use it when taking out a new YEL insurance.

Online invoices

Would you like to receive your YEL invoices elecrtronically? Online invoices arrive quickly and are environmentally frindly. And are easy to file.

You can pay your annual contributions in as many instalments as you wish: 1, 2, 3, 4, 6 or 12 instalments. However, you should pay at least half of your YEL contribution before August.

The less frequently and earlier you pay, the less you pay. This results from the contribution being either credited or debited with interest. This premium interest rate is 2 per cent as of 1 January 2019. The credit or debit is calculated from halfway through the invoicing period to the due date.

Your YEL contribution is at its lowest when you pay it once a year in January. It is at its highest when your payments are concentrated towards the latter part of the year.

You can change the due months and the payment schedule whenever you want.

Change the instalments

The due date of the YEL contribution is the 20th of the month or the first weekday following the 20th. If you forget to pay the invoice in time, you will be charged penalty interest. The penalty interest rate is updated every six months. From the beginning of July 2018, it is 8.0 per cent.

If your YEL contribution due date is approaching but your funds are low, no worries! Apply for an extended term of payment. Or change the whole rhythm of your contribution payments. 

Apply for an extended term of payment 

You can temporarily adjust your YEL contribution.

Adjusting the contribution will only affect your pension security, i.e. increase or decrease the pension you accrue. A temporary adjustment of the contribution will not affect any of your other social security benefits, since they are based on the confirmed earned income for YEL. You can adjust your YEL contribution once per calendar year.

If you want to change your YEL contribution and your YEL earned income permanently, adjust your earned income instead of your contribution. In that case, the adjustment will also affect your other social security benefits in addition to your pension security.

Pay more

You can pay a higher YEL contribution than usual if you wish to improve your pension security temporarily for a year. Or if you wish to reduce your company’s profit.

In that case, you can pay an additional YEL contribution for the year in question. The additional YEL contribution can be, according to your choice, 10–100 per cent of the YEL contribution calculated in accordance with your confirmed earned income. Pay the additional contribution by the end of the year and deduct it from taxation in the same way as the other YEL contributions.

You can do this every year if you wish.

Pay less

You can pay a lower YEL contribution than usual if you wish to pay a lower amount of insurance contributions during one year. By doing that, you reduce your pension security for the year in question.

You can lower your contribution by 10–20 per cent of the YEL contribution calculated in accordance with your confirmed earned income. You can do this a maximum of three times in seven consecutive years.

You can only lower your YEL contribution when your YEL insurance has been valid for a full calendar year and you have paid all of your YEL contributions. You cannot lower your contribution for the years during which you benefit from the reduction for new entrepreneurs.

Adjust your YEL contribution temporarily

Adjust your YEL income

The YEL contributions are paid by you or by your company. You can deduct all of your YEL contributions from your personal or your company’s taxation.

If you pay your YEL contributions yourself, you should deduct them from your or your spouse’s personal taxation. It is advisable to deduct the contribution from the taxation of the spouse who has the bigger earned income subject to salary income taxation and other progressive taxation.

If your company pays your YEL contributions, you can deduct the contributions from your company’s profit.