The 5 most common questions self-employed persons ask about the YEL reform

The Parliament of Finland has accepted the reform of the Self-Employed Persons' Pensions Act (YEL). The legislative reform will enter into force on 1 January 2023.

The key issues in the reform concern a more precise method for determining the YEL income and a regular review and adjustment of the YEL income. The reform has raised a lot of questions among self-employed persons. We compiled the 5 most commonly asked questions and our responses.

1. What does a more precise method for determining the YEL income mean?

The law will specify those factors that will be used to determine the YEL income. The pension insurance company must make an overall estimation when determining and confirming the YEL income. Part of the overall estimation is the median salary/wages, but it equally includes other factors, such as information that shows the self-employed person’s amount of work input, the extent of the entrepreneurial activities, the professional competence of the self-employed person and the value of the self-employed person’s work input.

Despite the legislative reform, the definition of YEL income will not change. The YEL income of a self-employed person will, therefore, continue to be the reasonable wage that would be paid to equally skilled employee for doing the same work, or the average compensation that is in line with the self-employed person’s work input.

2. What is the purpose of the YEL income adjustments?

From here on out, YEL income levels will be reviewed and adjusted regularly every three years in order to keep the YEL income up-to-date in relation to changes in business activities. The pension insurance company will issue a proposal for the new YEL income amount to the self-employed person, providing them with an opportunity to clarify if the proposal does not correspond to their situation. If the YEL income is already at the proposed level – the business activities have not expanded, for example, or the self-employed person has already adjusted the YEL income on their own initiative – the pension insurance company will not make any adjustment proposal.

The review and possible adjustment will be enforced in 2023 for YEL income levels under 15,000 euro, in 2024 for YEL income levels under 25,000 euro and in 2025 for YEL income levels of more than 25,000 euro. No adjustment will be made if a substantial revision of the YEL income has been carried out in the last three years. The first adjustment can be a maximum of 4,000 euro and two consecutive adjustments a maximum of 8,000 euro. An increase of 4,000 euro translates into an increase in the insurance contribution of approx. 80 euro per month.

3. Is it still possible for a self-employed person to influence their own YEL income?

It is still possible. As has been the case, self-employed persons will continue to be heard prior to the confirmation of their YEL income and, if necessary, they will be asked to provide additional information.

4. Will the YEL income be determined only on the basis of the median salary/wages?

5. What is the YEL income calculator?

The YEL income calculator is a service maintained by the Finnish Centre for Pensions that makes use of Statistics Finland’s data on the median wages and turnover information in different fields. The YEL income proposal is based on this information in addition to the field and turnover data provided by the self-employed person.

In this calculation service, the current YEL income application recommendations of the Finnish Centre for Pensions are applied electronically. Self-employed persons are granted a given range of leeway to adjust the proposed YEL income. Self-employed persons will be asked to provide separate justifications if they suggest a YEL income that deviates from the given range.

The proposal issued by the YEL income calculator will not automatically become the self-employed person’s YEL income, but is simply a tool to help determine the appropriate YEL income level. The final YEL income will be confirmed for each self-employed person based on their individual situation. Elo added the YEL income calculator to its YEL insurance application form in autumn 2022 in order to help new self-employed persons to determine the correct amount of their YEL income.

Read more about YEL insurance and take YEL insurance from Elo >

The article has been updated on 19 December 2022: The Parliament of Finland has accepted the reform of the Self-Employed Persons' Pensions Act (YEL). The legislative reform will enter into force on 1 January 2023.