Why Should a Construction Entrepreneur Obtain YEL Insurance?
Why Should a Construction Entrepreneur Obtain YEL Insurance?
When working as an entrepreneur in the construction industry, obtaining YEL insurance (Entrepreneurs’ Pension Insurance) is not only a mandatory obligation but also a crucial part of your social security. This article discusses the reasons why YEL insurance is essential, the consequences of neglecting it, and the benefits you can receive from the insurance.
YEL insurance is mandatory for construction entrepreneurs if certain criteria are met. It is an integral part of Finnish social security, covering your pension and providing protection in case of incapacity to work. An entrepreneur must obtain YEL insurance if they are between 18 and 67 years old, work as an entrepreneur for at least four months, and have annual earnings of at least €9,010.28 (in 2024).
Why is YEL Insurance Mandatory?
YEL insurance is designed to secure the entrepreneur’s livelihood in situations where their ability to work deteriorates or when they retire. The insurance is mandatory if the entrepreneur:
- Is between 18 and 67 years old,
- Works as an entrepreneur for at least four months,
- And their earnings exceed the YEL threshold.
Consequences and Penalties for Operating Without YEL Insurance
If an entrepreneur neglects to obtain YEL insurance, the consequences can be significant. The entrepreneur will naturally lack comprehensive social security, such as sickness allowance, parental allowance, and pension – but that is not all. If the entrepreneur has not taken YEL insurance despite meeting the criteria, the Finnish centre for pensions (Eläketurvakeskus, ETK) can intervene and order the insurance to be taken retroactively. This retroactive order leads to significant back payments, increased fees, and delay penalties, which can amount to thousands of euros.
What Penalties Do I Face If I Do Not Take YEL Insurance?
If an entrepreneur neglects to obtain YEL insurance, it can lead to various negative consequences:
- Loss of Social Security: Without YEL insurance, the entrepreneur does not accumulate a pension and is not entitled to self-employed social security benefits, such as sickness or parental allowance.
- Back Payments: The Finnish Centre for Pensions (ETK) can order the entrepreneur to take YEL insurance retroactively and add fees and delay penalties, which can amount to thousands of euros.
Benefits of YEL Insurance for Entrepreneurs
Although YEL insurance is a mandatory cost for entrepreneurs, it also offers numerous benefits that can support the entrepreneur’s financial security in the long run. Benefits include:
- Pension Security: YEL insurance secures the entrepreneur’s livelihood during retirement. The amount of the pension is determined by the paid YEL contributions and the entrepreneur’s declared YEL income.
- Family Pension: YEL insurance also covers family pensions, ensuring the livelihood of the entrepreneur’s family members after the entrepreneur’s death.
- Disability Pension: If the entrepreneur becomes disabled, YEL insurance provides financial security in the form of a disability pension.
- Social Security: YEL insurance improves the entrepreneur’s social security by providing entitlement to earnings-related benefits, such as sickness and parental allowances.
- Flexibility: The YEL income can be adjusted annually based on the entrepreneur’s business results, which can help optimize pension contributions and the benefits derived from them.
YEL insurance is an essential part of operating as an entrepreneur in the construction industry. It is not only mandatory but also provides comprehensive protection for the financial future of the entrepreneur and their family. Although YEL contributions may seem substantial, it is important to recognize their benefits in unfortunate situations!
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