Business owner, what you need to know about YEL reform: we selected the nine most important questions – expert answers

In its April budgetary talks, the Government presented the main outlines of its reform of the Entrepreneur’s Pension Act (YEL). Suomen Yrittäjät, the Finnish SME association, says the Government’s YEL model still involves many issues that must be resolved during further drafting.

On 4 May, Suomen Yrittäjät, held an information session explaining the key changes in the YEL reform and their impact on the day-to-day reality of business owners. In the webinar, Petri Salminen, Chair of Suomen Yrittäjät, and Vice President Atte Rytkönen-Sandberg discussed how the reform responds to the association’s objectives and what impact it is expected to have on different groups of business owners.

Watch a recording of the webinar here.

What is the maximum increase before 2028?

Harri Hellstén, Labour Market Affairs Manager at Suomen Yrittäjät, answered questions submitted by business owners before the webinar. We selected the most important questions.

Does the change mean that I will not have to pay YEL if I do not draw a salary or any other income from my company?

“No. The obligation to take out insurance, and whether that obligation is met, will continue to be based on the concept of labour input, not actual income. If a person works in a company and puts in labour of value that continues to exceed the lower threshold for mandatory insurance, YEL contributions must be paid regardless of whether they withdraw any money from the company, or only a small amount.”

After the reform, could I pay myself a salary of no more than €18,840 per year from my company, meaning that 50% of it would be just below the minimum YEL income (€9,423.09), and therefore not be covered by YEL at all if I wanted? I could instead save for my pension myself, for example by investing in equity funds.

“Based on the published outlines, this would not be possible. The 50% limit in the Government’s plans relates to insuring the value of work input, not insuring actual income. When actual income is insured, the insurance contribution is paid on 100% of the defined earned income, based on the plans.”

Can a pension company raise YEL contributions significantly before 2028, for example by pointing to a business’s turnover, even if earned income is only somewhat above the YEL contribution level? Is the maximum increase before 2028 €4,000 per year, meaning I will not have to pay the shocking amount proposed by the YEL calculator?

“While the new legislation is being drafted and before or if it enters into force at the beginning of 2028, the current rules will apply as normal. The pension insurer reviews YEL income every three years. If a review falls within this period, the pension insurer will make its decision under the current regulation. Pension insurers are subject to the maximum increase limit until the end of 2028. It is €4,000 per review, not per year.”

How part-time business owners are taken into account

Will the lower threshold for YEL income remain, and will it change from the current €9,423?

“Based on the proposed outlines, the lower threshold won’t be changed. It is, of course, increased annually by index adjustments, but the base level isn’t being lowered or raised. After the proposed changes, the YEL income of business owners who are subject to mandatory YEL insurance but whose income remains below the YEL threshold could fall at the lowest to the level of the mandatory insurance threshold.”

What does the new model mean for a business owner who has both a limited liability company and a sole trader business?

“In practice, the new model does not introduce separate changes for someone who operates through more than one business. The basis for insurance will continue to be all the business activity that the person does as a business owner. Activity in both businesses will be taken into account either in earned income or in work input.”

How are part-time sole trader business owners taken into account? At the moment, my income is so low that I am not covered by YEL.

“In the same way as now. The lower threshold for mandatory insurance is €9,423. If the activity is small-scale and the value of the work input remains below the threshold, a part-time business owner isn’t required to take out insurance.”

Can the choice be changed later?

A business owner has drawn a salary of €20,000 per year, but YEL income has been €30,000. The pension insurer’s calculator says YEL income should be €60,000. In the new model, can the business owner continue with YEL income of €30,000 if they want, or are the only options actual income or YEL income calculated using the calculator? In other words, will this create a situation where some business owners’ YEL contributions fall against their wishes?

“Based on current information, if the earned income option is chosen, YEL income will be set at €20,000, and under the work input model it will be €60,000. In principle, then, €30,000 would no longer be an option. The Government’s outline does not describe precisely how application practice and the YEL income calculator will be changed in future. My answer therefore applies based on the information currently available.”

From 2028, will the calculated YEL income option, or the related calculator, still include company turnover, or only the median salary of employees in the sector when determining YEL income? Can the choice later be changed from calculated YEL income to actual taxable earned income, excluding dividend income treated as earned income, or is the choice permanent and therefore binding?

“Based on current information, the calculator won’t be changed radically, although the intention is to guide application practice in a new way. The current outline says the choice would be binding for three calendar years, after which it would be possible to switch in the other direction.”

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