Social Security of a Self-Employed Person in General

Self-employed persons’ social and pension cover differs from the above mentioned. It is, e.g. possible for the self-employed person to take a statutory pension insurance and stay totally outside then unemployment security system. The social security system of self-employed persons is based on the mandatory pension security which the self-employed person may, if he/she wishes, supplement with voluntary arrangements.

The basis for a self-employed person’s statutory income security is the annual income, known as YEL income, which must be defined when taking out self-employed persons’ pension insurance. In addition to determining the amount of pension insurance contributions and the amount of pension accrued, the YEL income largely defines the level of all other statutory social security benefits. A self-employed person is obligated to take out self-employed persons’ pension insurance if they are between 18 and 67 years old, engage in continuous business activities, and earn an annual income from the business that exceeds a certain euro threshold. The mandatory pension coverage for entrepreneurs provides insurance against old age, disability, and death.

The self-employed persons do not have statutory accident insurance. Therefore it is recommendable for the self-employed persons to take a voluntary accident insurance.

Self-employed persons do not either have wage security that employees enjoy. The self-employed person’s unemployment security consists of the basic unemployment allowance paid by the Social Insurance Institution (Kela) and the earnings based daily allowance from the unemployment fund. If the self-employed person becomes a member of the self-employed person’s unemployment benefit society, he/she is also entitled to earnings-related allowance.

Self-employed persons are also outside the scope of group life insurances so they must arrange a life insurance on their own.

The Health Insurance Act is, however, applicable to self-employed persons as well as employees. The Social Insurance Institution (Kela) may pay self-employed persons maternity, special maternity, paternity, parental, partial parental, special support, rehabilitation and sick pay allowances. The basis for a self-employed person’s daily allowance is the earned income of the self-employed persons’ pension insurance. Consequently, the Social Insurance Institution (Kela) may pay a daily allowance to a self-employed person with a self-employed persons’ pension insurance although the person has no taxable income.

The position of the self-employed person in the business affects his/her benefits and compensations.