YEL, the pension insurance for entrepreneurs, is the only obligatory insurance for entrepreneurs. Entrepreneurs are required to get YEL insurance within one month of starting the business. YEL insurance is obligatory because it's a large part of social security for entrepreneurs. You are required to get YEL insurance if:
- You are 18-67 years old
- You have worked as an entrepreneur continuously for at least 4 months
- Your annual income is at least 7958,99€ in 2020
- You are working in a company you own
- You work in a industry that is not obligated to be insured with some other pension act
YEL income does not mean your gross income, but the salary an equal employee would get to do the same job. YEL income is self-defined and it will also define the cost of your insurance. Insurance fees can be paid monthly or as larger payments. You can get more information about YEL insurance from the insurance companies that offer YEL insurance. YEL insurance fees are deductible expenses and as a Private trader you can report this expense with our FREE! Entrepreneur service.
Effects of YEL
YEL affects the entrepreneurs social security during sickness and unemployment. YEL of course has an effect on the entrepreneurs pension as well.
Sickness allowance issued by KELA is defined by your annual income and with entrepreneurs by your YEL income. Entrepreneurs annual income is calculated by YEL and MYEL incomes during a 12 months reference period. If your income has changed during this period, median income will be taken into account.
Pension accumulation is 1,5% per year from your YEL income. When you are starting your company, its important to announce a very close estimate to your real annual income. If you raise your YEL income later when your pension is getting closer, you won't have time to accumulate enough pension. Your employee salary will also be calculated to your pension.
If your business is closed down, you are entitled to unemployment benefits: earnings-related allowance, basic unemployment allowance or tide over allowance. You have to register to TE services as unemployed and seeking for work and certain conditions have to be met to be entitled for the allowances. For earnings related allowance your condition for previous employment has to be met and your YEL income has to be over a defined limit. Also you have to be registered to an unemployment fund for more than 15 months. In 2020, the limit for YEL income is 13 076 euros. Condition for previous employment is met if you have been in business for over 15 months in a 48 month period before going unemployed. It's also possible to get basic unemployment allowance or tide over allowance from KELA, if you are not part of an unemployment fund.