YEL insurance is the most important insurance for entrepreneurs, accruing not only pension, but also serving as the basis for all their social security benefits. Entrepreneurs or light entrepreneurs need statutory YEL insurance when the obligation to take out YEL insurance begins.
It is a good idea to take out YEL insurance right at the start of self-employed activities or within six months of when they start, so as not to be caught off guard by extra payments. A self-employed person’s obligation to take out YEL insurance starts from the day when their YEL income exceeds 751 euros per month (in 2024) for a period of at least four months.
Below we have compiled the most common questions regarding paying for YEL insurance retroactively, meaning once entrepreneurial activities have already started.
1. Can YEL insurance be taken out retroactively?
YEL insurance can be taken out retroactively, but no later than six months after the YEL insurance obligation begins, i.e. when the value of the entrepreneur’s work input exceeds an average of 751 euros per month (in 2024) for the first time.
Some considerations:
- If YEL insurance is taken out less than six months after starting entrepreneurial activities, the starting date of the YEL insurance will be the starting date of the activities, and the insurance contributions will have to be paid retroactively.
- If YEL insurance is taken out more than six months after starting entrepreneurial activities, the entrepreneur might end up having to pay, in addition to the YEL contribution, a penalty that is at least 10 per cent of the amount of the YEL contribution during the period of neglecting to pay the contribution.
2. YEL insurance must be taken out within six months – what does that mean?
An entrepreneur is given a six-month arrangement period during which time they can review the start of their entrepreneurial activities and assess the amount of their earnings and their annual YEL income. This half-year period does not, however, mean the entrepreneur is exempt from paying the YEL insurance contributions for that time. Even if YEL insurance is taken out retroactively, its starting date will be the day when the entrepreneur’s income exceeds the EUR 751 limit. For example, if you start your self-employed activities in May but take out YEL insurance only in July, you must still pay the YEL insurance contributions for May and June.
3. For how long a period can YEL insurance be taken out retroactively?
If necessary, YEL insurance can be taken out retroactively for the current year and the three preceding years, in which case the entrepreneur accrues pension retroactively for that period. It is good to keep in mind that retroactive YEL insurance payments also accrue penalties that must be paid. The longer the retroactive period of YEL insurance is, the more YEL contributions will have to be paid at once.
A payment plan for retroactive contributions can be negotiated with Varma. Varma’s collection advisors will work with you to find the best solution for your payment situation.
4. What happens if YEL insurance is not taken out on time?
If YEL insurance has not been taken out within the six-month arrangement period, the earnings-related pension insurance company will look into the reason why insurance has not been taken out or why it has been taken out late. The pension insurance company will determine whether the failure to pay the contributions was intentional. If a justified reason cannot be found, the pension insurance company will seek to impose a penalty for neglecting to pay the contributions. An entrepreneur who neglects to arrange pension cover might end up having to pay a penalty that is at least 10 per cent of the amount of the YEL contribution during the period of neglect. The pension insurance company can decide not to impose a penalty for neglecting to pay the contributions if such neglect cannot be considered intentional and the estimated amount of the penalty is at most EUR 215.98, or if the self-employed person has proven through their actions that they have not tried to evade their obligation to insure.
Since YEL insurance is mandatory for the self-employed, the Finnish Centre for Pensions monitors the taking out of YEL insurance and can ultimately take out, for the entrepreneur and at the entrepreneur’s expense, YEL insurance from the earnings-related pension company of its choice. In this case, the penalty for neglecting to pay the contributions is 30–100 per cent of the YEL contributions during the period of neglect. The State Treasury confirms the amount of the penalty.
5. Can YEL insurance be taken out in the middle of the year or financial period?
Yes, YEL insurance can be taken out at any time during the year. The YEL income is not calculated by calendar year from January to December, but instead is always determined on an annual level, even if the YEL insurance is valid for only part of the year. Annual level means any 12-month period, for example, from 1 April 2023 until 31 March 2024. Even though the YEL income is estimated at the annual level, YEL insurance contributions are invoiced only for the period when the insurance is valid. That means that if you are self-employed, for example, from 1 June until 30 November, you must still estimate your YEL income at the annual level. However, you only pay the YEL insurance contribution for the period of your self-employed activities, i.e. for half a year.