Pension insurance scheme for entrepreneurs (YEL)

To qualify for an entrepreneurs’ pension, you do not have to set up your own company, register as a sole trader or get your own business ID. Instead, you can be considered to work as an entrepreneur under the Entrepreneurs Pensions Act if you carry out an independent economic activity for the purpose of profit. For example, freelance artists can fall under this category. Artists who are required to take out pension insurance for entrepreneurs are considered entrepreneurs in terms of unemployment security.

Artists are responsible for taking out their own pension insurance for entrepreneurs. You must take out a pension insurance for entrepreneurs if:

1. you have worked as an entrepreneur for more than four months,
2. your labour income* is more than EUR 8 575,45 p.a. (in 2023) and this economic activity does not entitle you to pensions under other pensions acts,
3. you are 18–69 years old (for those born in 1957 or earlier, the insurance obligation ends at age 68, for those born between 1958 and 1961, the insurance obligation ends at age 69, for those born in 1962 or later, the insurance obligation ends at age 70).

Those working as entrepreneurs in a secondary capacity must also take out pension insurance for entrepreneurs if they meet the above criteria. You must take out pension insurance for entrepreneurs at the latest within six months of the date your economic activity meets the above criteria. Voluntary pension insurance does not replace statutory pension insurance.

The Finnish Centre for Pensions oversees the pension contributions of entrepreneurs, and it may consider an artist to be an entrepreneur even if the artist him- or herself does not or has not made pension contributions. For example, the tax authority may report an artist’s economic activity to the Finnish Centre for Pensions if the tax return shows that the artist’s income from working as an artist exceeds the limits set for entrepreneurs. In a situation like this, the artist may have to retrospectively take out pension insurance for entrepreneurs, make pension contributions and pay interest on late payments.

Labour income under the Entrepreneurs Pensions Act (YEL labour income)

Determining the amount of labour income under the Entrepreneurs Pensions Act is central to the entrepreneurs’ pension insurance. Determining the amount of YEL labour income is important, as it determines the entrepreneurs’ pension insurance contributions and, later, the amount of pension, as well several benefits influencing an entrepreneur’s social security, such as parental and sickness allowance and earnings-related unemployment allowance. In other words, the amount of social security benefits is determined based on YEL labour income rather than actual income.

YEL labour income is the value of your contribution to your own company, which means that it does not refer to your actual income or taxable income. YEL labour income refers to an amount that could reasonably be paid as a salary to someone else doing the same job over the course of one year.

Even though the labour income reported as the basis for the payment of the entrepreneurs’ pension is always determined on an annual basis, the amount of labour income can be changed during the year though not retrospectively. As such, it is recommended that you pay close attention to the amount of labour income when taking out pension insurance for entrepreneurs.

Note: The amount of labour income must be at least EUR 14 088 (in 2023) for an artist to join a fund for entrepreneurs and be entitled to the basic unemployment allowance paid by Kela. You do not meet the work requirement for self-employed persons for any period of time your YEL labour income falls below the limit of EUR 14 088.

In 2023, the YEL pension contributions are

• 24.1% of confirmed YEL labour income (18–52-year-olds)
• 25.6% of confirmed YEL labour income (53–62-year-olds)
• 24.1% of confirmed YEL labour income (63–69-year-olds)

Entrepreneurs who are only starting out are entitled to discounted pension contributions for a total of four years. In 2023, the discounted rate for new entrepreneurs is 22%.

You can claim tax relief for pension contributions. The pension insurance contribution is either paid by the artist or his or her company, and the payer can claim tax relief for such payments in full. The artist’s partner can also claim tax relief.

In addition to taking care of his or her own pension provision, an artist may have to arrange pension provision for other persons. For example, if you manage production and hire persons to work on the production, you must take care of their pension provisions. This is because you are considered an employer in this situation, which means that you are responsible for arranging pension provisions for the persons working for you.

Determining labour income of visual artists for YEL contributions

The formerly used annual guide on labour income for entrepreneurs published by the Finnish Centre for Pension will no longer be in use from 1 September 2022. The Finnish Centre for Pensions has developed an income calculation formula to help determine an entrepreneur’s YEL labour income.

The YEL income calculation formula shows the median salaries by industry, the median turnover and the turnover for which the accounting service recommends the median salary as the labour income recommendation. For visual artists, the most suitable sector in the calculation formula is 900300 Taiteellinen luominen (Artistic creation).

To determine earned YEL income, the pension insurance companies follow the common application recommendations of the Finnish Centre for Pensions, for example with the help of income calculators. These calculators replace the former industry-specific guides on YEL income produced by the Finnish Centre for Pensions. The calculators are based on statistical data provided and maintained by the Finnish Centre for Pensions. The calculator asks you to fill in an estimate of your future turnover for the next 12 months and your main business sector. The calculators are openly available on the pension insurance companies’ websites to determine the YEL income.

YEL insurance for income and/or MYEL insurance for income for grants

Since 2009, income from grants awarded under MYEL has also influenced the amount of social security benefits paid to artists in addition to the YEL income.

Starting from early 2009, any grants exceeding the minimum threshold (EUR 4 288 awarded to support working for at least four months, 2023) are governed by the Farmers Pensions Act, or MYEL, meaning that they are not considered when determining YEL labour income. Grants awarded by the government before 2009 for five or more years, which are still being paid, are also part of a separate national pension provision, meaning that they are not taken into consideration in the determination of YEL labour income.

In conclusion, this means that grants are insured through MYEL insurance and income from other artistic work is insured through YEL insurance (if the conditions for insurance are met). In the case where an artist has both received a grant and insurable YEL income, he or she will have to insure his or her work input simultaneously through two insurance policies.

LINKS

Calculation formula for the YEL income recommendations 2023 (PDF in Finnish)  

MYEL insurance guide for grant recipients 2023 (PDF in Finnish)