The determination of the sickness and parental allowances provided by Kela will change as of 1 January 2020

After the reform, it will be even more important to ensure that your YEL income remains at the correct level and that it corresponds to your actual work input. From the start of 2020, your sickness allowance can no longer be determined on the basis of your earnings from the six months preceding the sickness allowance period, even if those earnings were more than 20% higher than the confirmed taxable earnings from the previous tax year.

Changes to the allowance benefits provided by Kela will enter into force on 1 January 2020. The changes concern both self-employed persons and wage-earners. The significance of the changes is more pronounced for self-employed persons, however, since they determine their own YEL income, thereby affecting the level of their own pension insurance contributions and allowances. If, for example, a self-employed person takes sick leave, the calculation of the daily allowance will now be based on his/her annual income. The annual income is calculated from the reference period of 12 calendar months prior to the calendar month that precedes the initiation of the benefit entitlement.

For self-employed persons, the basis for the calculation of the annual income is the YEL income. If the amount of the YEL income has changed during the 12-month period in question, the average income will be used. If the self-employed person receives a paid salary or wages as an employee in addition to his/her entrepreneurial activities, both the earned income and the YEL income are taken into consideration in the calculation of the annual income. The annual income does not include salary or wages from one’s own company or earned income from business.

Previously, the daily allowances of self-employed persons were calculated in accordance with the YEL income confirmed in the individual’s taxation for the previous year. Thus, calculations in 2019 are based on tax information from 2017. Following the reform, the reference period for the allowance will correspond better to the situation right before the initiation of the allowance. As part of the reform, it will no longer be possible to use earnings from the past six months as the basis for the calculation of the daily allowance.

‘From the start of next year, self-employed persons will no longer be able to affect the amount of their maternity allowance by raising the level of their YEL income for a short time prior to their maternity leave. Ensure yourself the proper benefits by maintaining your reported income at the correct level’, comments Heta Virkki, Customer Service Manager at Elo.

The YEL income cannot be raised retroactively in response to changes or surprises

The YEL income cannot be changed retroactively but, at the earliest, from the date of the change notification. To ensure that an illness or family expansion will not cause a difficult financial situation, it is extremely essential that every self-employed person make sure that their YEL income is always at the correct level.

‘Fortunately, one can prepare for the birth of a child in advance, but illnesses and accidents cannot be foreseen.  One financial relief for those who are expecting another child is the fact that the parental allowance will, even after the reform, be determined on the basis of the income upon which the previous parental allowance was based, if the due date for the new child comes before the third birthday of the previous child’, explains Virkki.

These changes are part of a greater legislative reform

The legislative change concerns all daily benefits under the Health Insurance Act, which include the sickness allowance, partial sickness allowance and parental allowance. The parental allowances include the maternity allowance, special maternity allowance, paternity allowance, parental allowance and partial parental allowance.

The changes to the Health Insurance Act are the result of the launch of the Incomes Register, which involves the real-time reporting of payroll information and simplifying of the calculation bases for allowances.