For an entrepreneur, YEL insurance (The Self-Employed Persons' Pensions Act, Yrittäjän eläkelaki) is often seen as a "necessary evil" – an expensive monthly cost that feels unnecessary when the company's cash flow is tight. Sometimes, this view is justified. On the other hand, YEL is the cornerstone of an entrepreneur's social security, affecting not only your pension but also sickness allowances and parental leave.

Why is YEL mandatory? And how exactly is the YEL confirmed income (työtulo) determined after the 2023 reform? We will cover everything you need to know about YEL and its significance in your financial management.

Table of Contents

• What is YEL Insurance and When is it Mandatory?

• YEL Confirmed Income: What Does It Mean and How is it Determined?

• The 2023 YEL Reform: Why Have Confirmed Income Reviews Tightened?

• The Two Sides of the YEL Payment: Cost vs. Security

1. What is YEL Insurance and When is it Mandatory?

YEL insurance is Finland's statutory pension insurance designed specifically for self-employed persons. Its purpose is to guarantee the entrepreneur social security comparable to that of an employee.

Who is YEL Mandatory For?

YEL insurance is mandatory for all entrepreneurs (both Private entrepreneurs and partners of a limited liability company who work in the company and own a sufficient share of it), if the following conditions are met:

• You are between 18 and 68 years old.

• The entrepreneurial activity has lasted for at least four months.

• Your calculated annual confirmed income exceeds the annual minimum limit (e.g., €9,208.43 in 2025 and €9,423.09 in 2026).

Tip: Always verify the current terms and limits with the pension insurance companies.

If the YEL obligation is met, the insurance must be taken out within six months of starting the business. Failure to take out the insurance can lead to retrospective payments and late payment charges.

2. YEL Confirmed Income: What Does It Mean and How is it Determined?

YEL confirmed income (työtulo) is the most central, yet often misunderstood, concept in the YEL system.

Confirmed Income is Not Salary or Turnover

YEL confirmed income is not your company's turnover, nor is it the salary the entrepreneur pays to themselves or the amount of private withdrawals.

The YEL confirmed income is the monetary value of your work—the amount that would have to be paid to an equally competent person to perform the same work for a year.

The level of confirmed income directly affects two things:

• YEL Fee: You pay the insurance contributions (approx. 24–25% of the confirmed income) to the pension company.

• Social Security: In addition to your pension accrual, the confirmed income determines the benefits paid by Kela (Social Insurance Institution of Finland), such as sickness allowance, parental allowance, and voluntary unemployment benefit (via the Entrepreneur Unemployment Fund).

  
  

If you set the confirmed income too low (below the true level), you save on insurance premiums in the short term, but you compromise the level of your own social security in the long term—even in the event of illness.

3. The 2023 YEL Reform: Why Have Confirmed Income Reviews Tightened?

The YEL reform that came into effect in 2023 aimed to correct the widespread problem of under-insurance among entrepreneurs. Setting the confirmed income too low has been a common practice, which has weakened entrepreneurs' pension and social security.

Following the reform, pension companies were obligated to monitor the confirmed income reported by entrepreneurs more actively and compare it with the median wage for the industry.

• Review Interval: Pension companies review the confirmed income regularly (e.g., every 3 years).

• The 15% Rule: If your reported YEL confirmed income deviates significantly (usually more than 15%) from the median wage in the corresponding field, the pension company can adjust your confirmed income to better match the market level.

• Goal: To ensure that the confirmed income is at a realistic level and complies with legislation.

  
  

The reform makes the YEL fee a more concrete "necessary evil," as many entrepreneurs have had to raise their confirmed income, thus increasing their monthly costs.

4. The Two Sides of the YEL Payment: Cost vs. Security

Paying YEL contributions certainly strains cash flow. However, it is essential to see what you get in return:

YEL insurance is often viewed as a cost and a "necessary evil," because it is a statutory expense that immediately reduces the company's available cash flow. Payments must be made regularly, even if the business results are not always excellent. This direct financial burden is the reason why many entrepreneurs primarily perceive YEL as an expense.

On the other hand, YEL is a mandatory security for the entrepreneur. It is not just future pension accrual; it also forms the basis for social security during the business operation. If you fall ill, the level of sickness allowance paid by Kela is based directly on the YEL confirmed income, as is the level of any parental allowances. While the YEL payment stings today, it is an investment in your own and your family's financial security in unexpected life situations.

Note: YEL payments are fully deductible expenses in taxation – you can deduct them either in your company's taxation or in your personal taxation.

Summary: YEL insurance is a cost that only pays itself back in the future or during unpleasant surprises. The general consensus is that the cost paid for YEL insurance does not bring benefits in equal measure. It is often advisable to consider other alternative ways alongside YEL insurance to accumulate wealth and/or pension for the future.

Do you need help with exploring alternatives, realistically determining your YEL confirmed income, or calculating its effects on your company's taxation? Contact our experts, and let's review your situation together!

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