Entrepreneurs: YEL insurance provides security if you become unemployed

Many self-employed persons are wondering how the daily allowances paid to entrepreneurs by unemployment funds or Kela are calculated. The YEL income reported and confirmed for the YEL insurance policy affects the amount of unemployment benefits. For this reason, it is vital to maintain the YEL income at an appropriate level throughout one’s career.

The many-sided functions of YEL insurance are discussed by Elo’s specialists in a series of articles. In this final article, Heta Virkki, Customer Service Manager at Elo, explains how the YEL income affects the unemployment security of entrepreneurs.

Employment history is a condition for unemployment benefits

The amount of the YEL income confirmed for the YEL insurance policy is crucial when determining if an entrepreneur is entitled to receive unemployment benefits. Entrepreneurs have the right to receive basic allowance paid by Kela, or earnings-related allowance paid by the unemployment fund for entrepreneurs in Finland (Yrittäjäkassa), provided that they meet the condition of employment history. To meet the employment history condition, the entpreneur shall have an annual YEL income of a minimum of 13,247 euro (in 2021) and must have been engaged in entrepreneurial activities for a minimum of 15 months during the period of two years preceding unemployment. Entrepreneurs who do not meet the employment history may, however, be entitled to receive a labour market subsidy paid by Kela. The labour market subsidy is a discretionary benefit.

“Entrepreneurs cannot join the Yrittäjäkassa unemployment fund, if the amount of their YEL income falls below 13,247 euro. As members of the unemployment fund, they must ensure that their income reported to the fund is always up-to-date. The income reported to the fund cannot be larger than the YEL income confirmed for the YEL insurance policy”, Virkki says.

YEL income affects directly the amount of unemployment benefit

The amount of the earnings-related allowance paid by the unemployment fund is based on the entrepreneur’s confirmed YEL income. The basic allowance paid by Kela, on the other hand, is 33.78 euro per day, regardless of the amount of the YEL income. The earnings-related allowance paid to an entrepreneur who is a member of the unemployment fund is primarily calculated on the basis of the YEL income that was valid during the period of 15 months preceding unemployment.

“For this reason, it is a good idea to always have the YEL income at an appropriate level. Any changes to the YEL income that are made shortly before the start of unemployment will not necessarily have the desired effect on the amount of earnings-related allowance. It is also worthwhile to bear in mind that the YEL income should correspond to the actual work input of the entrepreneur, that the YEL insurance contribution is based directly on the YEL income, and that it is not possible to adjust the YEL income retrospectively. Moreover, for the purposes of meeting the employment history condition, the YEL income must be, at least, 13,247 euro per year”, Virkki advises.

Examples of estimated earnings-related allowances for members of the unemployment fund who meet the employment history condition:

• with an annual income of 13,247 euro, the earnings-related allowance totals approx. 869 euro per month,
• with an annual income of 24,000 euro, the earnings-related daily allowance totals approx. 1,300 euro per month,
• with an annual income of 48,000 euro, the earnings-related daily allowance totals approx. 2,000 euro per month.

For entrepreneurs who are not members of the unemployment fund but who meet the employment history condition, the basic allowance paid by Kela totals approx. 726 euro per month. The amount of the basic allowance is the same regardless of the YEL income.

The easiest way to update your YEL income is to use Elo’s Online Service. You can also call Elo’s Customer Service to adjust your YEL income. It is advisable to update the YEL income without delay since no changes can be done retrospectively.

Use our YEL calculator to estimate how the YEL income amount will affect your pension, social security and insurance contributions >