Entrepreneurs Can Utilize Family Leaves with Correctly Defined Earned Income

Entrepreneurs have equal rights to family leaves as salaried employees, but ensuring benefits requires careful determination of their YEL-based earned income, reminds pension insurance company Varma. Many entrepreneurs, especially sole proprietors, consider the impact of family leaves on their business operations and income.

Varma stresses that correctly defined YEL earned income from the start of a career is the foundation for secure family leaves. Earned income is not intended as a buffer for specific benefits but must correspond to the entrepreneur's actual work contribution. The birth of a child is not a legal basis for increasing earned income unless the previous income was insufficient or the work contribution has increased.

During family leaves, entrepreneurs are entitled to Kela benefits, such as parental allowances. However, these allowances are based on the YEL earned income, not on the salary drawn by the entrepreneur. If the YEL earned income is low or not up-to-date, the parental allowance amount can be surprisingly small. During parental leave, YEL insurance contributions are generally not required if business operations cease for more than four months.

The Kela parental allowance reform, effective from the beginning of 2020, will change the calculation basis for these allowances. For entrepreneurs, future allowances will be based on the annual earned income of the preceding 12 months, calculated from YEL earned income. The reform does not affect the determination of the YEL earned income itself.