Policy brief: Analysis of earnings-related social insurance payments in Finland. Employment status matters.

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by Mikko Perkiö, Arseniy Svynarenko, and Meri Koivusalo

This policy brief asks what kind of differences exist between different types of employment in Finland in terms of earnings-related social insurance payments. In 2020, the number of employed people in Finland was 2,528,000. This consisted of 2,189,000 employees and 340,000 self-employed persons and unpaid family workers (Statistics Finland 2021). Among employees, temporary contracts are more widespread in Finland than in OECD counties generally, but the prevalence of part-time work in Finland is equal to the OECD average (OECD 2019, 58–59). More than 100,000 persons engaged in paid work with a zero-hours contract (Pärnänen 2019). Additionally, the number of self-employed entrepreneurs grew 1.5 fold between the turn of the millennium and 2018, when it reached 183,000 (Sutela & Pärnänen 2018). Those self-employed entrepreneurs who hold YEL-insurance (see below) have access to broader social protection compared to the rest of the self-employed.

The increase in platform-mediated work partly accounts for the increase in self-employment, particularly as platform work has spread to more traditional areas of work (Mattila 2020). Pesole et al. (2018, 18) provided a mid-range estimate among the studies assessing the prevalence of platform-mediated work, which found that 3.3% of adults in Finland had earned at least one fourth of their income through platforms. The current estimates are likely to be underestimated due to the fast growth of the platform work sector and the high share of migrant workers. It is also noteworthy that a quarter of self-employed entrepreneurs were in the lowest income decile (annual income below €10,000), while only 8% of employees fell within this decile (Sutela & Pärnänen 2018, 62; Statistics Finland 2016).

Self-employed persons are insured under the Self-Employed Persons’ Pensions Act (YEL), which affects not only pensions but also other social security benefits (Finnish Centre for Pensions 2021). Entrepreneurial activities must be insured if the work input of the self-employed person (aged 18–67 and resident in Finland) is valued at more than €8,064 per year and their work as an entrepreneur continues for at least four consecutive months (Ilmarinen 2021). The available tax data shows that about 200,000 self-employed workers are not covered by the YEL insurance, as they do not meet the above criteria. Some of them are part-time or full-time employed and may have access to employment related insurance. It has been estimated that only 10,000 of non-YEL insured self-employed have no other earned income (MSAH 2019: 23, 56-57).

Earnings-related social insurance plays a significant role in Finland’s social security system (Kela 2021). In the case of employment, both the employer and the employee pay contributions to the various schemes. The government contributes varying shares of the cost depending on the scheme. Among the schemes, insurance against occupational accidents and occupational disease is solely funded by the employer, not by the employee.

The following table presents the main forms of work-related social insurance and the contribution costs for employers, employees, and self-employed entrepreneurs. The purpose of the table is to facilitate cost comparisons of social security contributions between classifications of worker status. The classification of platform-mediated work has been contested across the EU. An estimate of employer costs in Finland for a food delivery worker who is defined as an employee is about 34.4 % of salary costs added to the salary, applying 1.9% for unemployment insurance (the rate for a large company) and assuming that the person is in the highest category of risk (premium 5%, TVK 2021) for occupational accidents and occupational diseases insurance (which is likely for food delivery work) and that holiday pay is included at the lower 9% level. The social security payment for the employee (aged 17–52) is 10.6%, but the employer pays the employee holiday benefits to the value of 9% of the employee’s salary. The platform company can save this 34.4% on wages if the social insurance costs are shifted to the contractor or self-employed person. We can use this to estimate how much of the costs could be shifted. If a delivery worker would earn about €18,000 per year after their work-related expenses but before personal taxes, the savings for the platform company would be more than €6,000 per worker. Correspondingly, this shift places an extra burden on the self-employed person compared to the cost burden if he or she were an employee.

A self-employed person would pay 35% social insurance costs without holiday pay. Adding the minimal value of an annual holiday (9%), a self-employed entrepreneur would pay 44%. This can be compared with an employee’s burden of 10.6% of the costs, which, if we deduct his or her gains of 9% holiday benefits, falls to a total share of pay of 1.6% for similar income-related social security. Correspondingly, a self-employed entrepreneur would need to spend around 40% of their wage to reach the same level of social security as a salaried worker. This analysis focuses on the big picture, without examining the details of the schemes. However, it should be noted that a new entrepreneur receives a discount of 22% for his or her pension expenses for 48 months, and all entrepreneur’s pension payments are tax deductible (Uusyrityskeskus 2021). An employee’s pension payments are also tax deductible. This is more relevant for those earning higher incomes and paying higher taxes. Furthermore, in Finland, health insurance under social insurance covers a sickness allowance for lost income for a maximum number of 300 days as result of illness but does not cover the cost of health care.

This analysis shows that employment status has a significant impact on earnings-related social security payments in Finland.

Table: Earnings-related social insurance payments in Finland. Click the table to enlarge (opens in a new tab).

We thank Elina Holmas, at Finnish Workers’ Compensation Center, for comments on the draft.

Table sources

Columns 2-5 (marked grey) source: Ilmarinen (2021) Employment Insurance Company. https://www.ilmarinen.fi/en/self-employed/yel-insurance/yel-income/

Columns 6-8 on contributions: Ministry for Health and Social Affairs (2021), unless other source is specified https://stm.fi/en/social-insurance-contribution

Other sources and references

Annual Holidays Act 162/2005   https://www.finlex.fi/fi/laki/kaannokset/2005/en20050162

Finnish Centre for Pensions (2021). Statutory social insurance contributions in Finland in 2021. https://www.etk.fi/en/

FIWH ( 2021) Finnish Institute for Health and Welfare. Use and costs of family-related leaves (in Finnish) https://thl.fi/fi/web/sukupuolten-tasa-arvo/tasa-arvon-tila/perheet-ja-vanhemmuus/perhevapaiden-kaytto-ja-kustannukset

FWCC (2021) Finnish Workers’ Compensation Center. https://www.tvk.fi/en/insurance/taking-out-an-insurance-policy/premium-base/ AND https://www.tvk.fi/vakuuttaminen/vakuutuksen-ottaminen/vakuutusmaksut/

IF (2021) Examples of accident and injury insurance cost. (In Finnish) (Tapaturmavakuutuksen hintaesimerkit) https://www.if.fi/yritysasiakkaat/vakuutukset/yrittajan-vakuutukset/yrittajaksi/yritysvakuutusten-hintaesimerkkeja (If is a private insurance company)

Kela (2021) The Social Insurance Institution of Finland. Social Security in Finland. https://www.kela.fi/web/en/social-security-in-finland

Mattila, M. (2020). Platform Workers’ Rights in Finland: Good Intentions, Too Little Progress. Mutual Learning Programme, DG Employment, Social Affairs and Inclusion. Peer Review on Platform Work-Finland. European Commission, Brussels. Pdf available at https://ec.europa.eu

MSAH (2019) Yrittäjän työeläketurvan kehittäminen. Ministry of Social Affairs and Health. Sosiaali- ja terveysministeriön raportteja ja muistioita 2019:23  http://urn.fi/URN:ISBN:978-952-00-4054-3

OECD (2019), OECD Employment Outlook 2019: The Future of Work, OECD Publishing, Paris. https://doi.org/10.1787/9ee00155-en

Pesole, A., Urzí Brancati, M.C., Fernández-Macías, E., Biagi, F., & González Vázquez, I. (2018). Platform Workers in Europe Evidence from the COLLEEM Survey, EUR 29275 EN, Publications Office of the European Union, Luxembourg. ISBN 978-92-79-87996-8, doi:10.2760/742789, JRC112157. https://publications.jrc.ec.europa.eu/repository/bitstream/JRC112157/jrc112157_pubsy_platform_workers_in_europe_science_for_policy.pdf

Pärnänen, A. (2019) Nollatuntisopimuksella työskentelee hyvin sekalaista sakkia. 3.6.2019. https://www.stat.fi/tietotrendit/blogit/2019/nollatuntisopimuksella-tyoskentelee-hyvin-sekalaista-sakkia-1/

Statistics Finland (2016) Suomen virallinen tilasto (SVT): Tulonjaon kokonaistilasto [verkkojulkaisu].ISSN=1797-3279. Tuloerot 2016, 2. Tulokehitys tulokymmenyksittäin http://www.stat.fi/til/tjkt/2016/01/tjkt_2016_01_2017-12-20_kat_002_fi.html

Statistics Finland (2021). Labour market. https://www.tilastokeskus.fi/tup/suoluk/suoluk_tyoelama_en.html   

Sutela, H. & Pärnänen, A. (2018). Yrittäjät Suomessa 2017. Helsinki: Tilastokeskus. Pdf available http://tilastokeskus.fi/ajk/julkistamiskalenteri/kuvailusivu_fi.html?ID=21465

TVK (2021) Keskimääräiset vakuutusmaksut vuonna 2021. https://www.tvk.fi/uutiset-ja-blogit/uutiset/2021/keskimaaraiset-vakuutusmaksut-vuonna-2021/

Uusyrityskeskus (2021) Guide – Becoming an Entrepreneur in Finland. Let’s Make Your Business Succeed. Available at https://uusyrityskeskus.fi/wp-content/uploads/2021/02/Perustamisopas_2021_EN.pdf


Mikko Perkiö, Dr., senior researcher, Faculty of Social Sciences, University of Tampere, mikko.perkio@tuni.fi

Arseniy Svynarenko, Dr., senior researcher, Faculty of Social Sciences, University of Tampere, arseniy.svynarenko@tuni.fi

Meri Koivusalo, Professor of Global Health and Development, Faculty of Social Sciences, University of Tampere, meri.koivusalo@tuni.fi

Research project Uberisation Influencing Working Conditions: Rights, Regulation and Redistribution in Helsinki, St Petersburg and London (RRR Uber) is lead by Prof. Meri Koivusalo at the University of Tampere and it is funded by the Academy of Finland, 2019-2021. Website https://www.platformeconomy.fi/