Entrepreneurship and income security – Keep these in mind!

Topics

• Income security
• Työllisyys

Entrepreneurship brings flexibility and opportunities to working life. However, it also affects unemployment fund membership and income security requirements. We have compiled a list of things to keep in mind if you are planning to become an entrepreneur or are already one.

Three important things

1. membership and validity of the working condition
2. transition from employee to entrepreneur or vice versa
3. scope of work, as well as commencement and termination

Membership and validity of the working condition

If your membership is not in order, you cannot accumulate the right to earnings-related daily allowance

The prerequisite for receiving earnings-related daily allowance is that the working condition is met. In the wage-earners’ fund, the working condition is only fulfilled in salaried employment, while in the entrepreneurs’ fund, the working condition is only fulfilled in entrepreneurial work.

So remember to check that you have insured your work correctly. If you work as an employee, maintain your membership in YTK. If you work as an entrepreneur, you can only insure your entrepreneurial income in the entrepreneurs’ fund.

If you have mis­represented yourself, you may lose your right to earnings-related un­employment allowance

If you work as an entrepreneur for more than 18 months or if you fulfill the working condition for entrepreneurs as a member of the entrepreneurs’ fund, we cannot grant you an earnings-related daily allowance for employees until you have fulfilled the working condition for employees again after your entrepreneurial activity. In practice, this means that you will lose the working condition requirement you have accumulated as an employee when you have worked full-time as an entrepreneur for more than 18 months.

When you switch from being an entrepreneur to an employee, you will lose your right to entrepreneur’s earnings-related daily allowance once you have fulfilled the working condition for employees.

When you start working as a full-time entrepreneur, you can remain a member of YTK for a maximum of 18 months. After this, we will have to terminate your membership. The general advice is that you should change your fund as soon as you start working as a full-time entrepreneur.

Post-employment protection – security during transitions

When you change your fund, you will not lose your entitlement to earnings-related daily allowance.

Although switching from being an employee to an entrepreneur often means changing funds, your income security is protected in such a way that switching from an employee fund to an entrepreneur fund and vice versa does not interrupt your income security.

The post-employment protection works in such a way that when you switch from an employee fund to an entrepreneur fund or vice versa within a month, the new fund can pay you earnings-related daily allowance based on your previously accumulated working days until you accumulate working days in the new fund.

For example, if you switch from being an employee to being an entrepreneur, you will not lose the working conditions you have accumulated as an employee when you switch from the employee fund to the entrepreneur fund. The prerequisite is that you have joined the entrepreneurs’ unemployment fund within one month of leaving the employee fund.

Full-time and part-time entrepreneurship

The difference between full-time and part-time entrepreneurship is crucial in terms of unemployment security.

Full-time entrepreneurship prevents you from receiving unemployment benefits. Part-time entrepreneurship, on the other hand, can be combined with unemployment security.

The employment authority will assess whether your business activity is full-time based on the registers and the information you provide. If you do not provide any information, you will be considered a full-time entrepreneur.

The employment authority assesses full-time employment based on the overall situation, such as the scope of the activity and the working hours used. Income is not a major factor, as even loss-making activities can provide full-time employment.

Business activity is considered part-time if the employment authority assesses that the employment is so minor that it does not prevent you from applying for or accepting full-time paid work. This can be demonstrated, for example, by having worked for at least six months in full-time employment unrelated to the business activity in question during the period of business activity.

Starting a business

If you are unemployed, you can try out business activities for four months without it immediately affecting your unemployment benefits. This gives you the opportunity to test your business idea and find out whether entrepreneurship could be a permanent solution.

In practice, this means that the employment authority will not assess the full-time nature of your business activities during the first four months. After this, your main occupation will be assessed and your unemployment benefits may be terminated.

Even though the employment authority does not assess the main occupation of your business activity right from the start, the authority must nevertheless note that the business activity was started while you were unemployed.

Termination of employment and cessation of business operations

When you stop your business, the employment authorities will assess the situation. If your business is deemed to have ended, it will not prevent you from receiving income security.

If there is no reason for any other assessment, your business activities are considered to have ended if:

• Your ability to work has been permanently and significantly reduced;
• You are comparable to an entrepreneur whose contract has ended and who is not considered to be employed for other possible assignments; or
• Your business activity is considered to be seasonal and the operating season has ended.

When you cease business operations completely, the employment authorities will assess the matter. If business operations are deemed to have ceased, they will not prevent the payment of income security.

Unless there are grounds for a different assessment, business operations are considered to have ceased if:

• a court has issued a bankruptcy order at the initiative of the debtor or creditor;
• a limited company or cooperative has been placed in liquidation;
• an agreement has been made between all partners to dissolve a company other than a limited company;
• production and economic activity has ceased and the person has:
• given up pension insurance under the Self-Employed Persons’ Pensions Act or the Farmers’ Pensions Act;
• you have submitted a notification to the Tax Administration to remove the company from the prepayment register;
• you have submitted a notification to the Tax Administration to remove the company from the employer register; and
• you have submitted a notification to the Tax Administration to remove the company from the VAT register or to suspend business operations; or
• it is evident on the basis of other similar factors that production and economic activities have ceased completely.

A good opportunity

Entrepreneurship and income security are intertwined in many ways. Working conditions, post-employment protection, and whether entrepreneurship is your main or secondary occupation determine when and under what conditions you can receive unemployment benefits. Careful planning and timely decisions will ensure that your security remains intact even in times of change.

If you are considering becoming an entrepreneur or ending your entrepreneurial activities, do not hesitate to contact your unemployment fund and the employment authority in your area – you will receive personal advice and ensure that your right to unemployment security is maintained.