Advice and tips for entrepreneurs

If you are self-employed in Finland, you are covered by Kela’s family leave system just like employees. In practice, however, your situation is somewhat different because you may not be able to completely suspend your business operations for the duration of the parental leave.

Same family leave benefits as employees

In Finland, self-employed people are eligible for the same daily allowances that Kela provides for other parents. These include pregnancy allowance and, after the child is born, parental allowance.

Pregnancy allowance and pregnancy leave usually start 30 working days before the expected date of delivery. Once the pregnancy allowance period (i.e. pregnancy leave) ends, the parental allowance period (i.e. parental leave) begins. On the days you are working, you will not be paid pregnancy allowance. Nevertheless, such days do count as parental leave days and cannot be carried forward for later use.

Following the family leave reform, parental allowance is paid for up to 320 working days in total, and parents are free to divide these between themselves as they wish.

Kela pays the allowance directly to the self-employed person. Because your business will not receive any allowances or compensation, it is a good idea to plan in advance how you intend to run it during your family leave.

•  Read also: Daily allowances for parents and child care allowances for the self-employed 

Your YEL income determines your parental allowance

One of the most important things for a self-employed person to understand is how parental allowance is calculated. An employee’s daily allowance is generally based on their wages, but the situation is slightly different when you are self-employed.

Kela bases its calculations of your daily allowance on your YEL pension contributions, which are based on your annual income from self-employment. This means that your business revenue, profit for the fiscal year, or the salary you have drawn do not directly determine the amount of your allowance. Instead, the decisive factor is your YEL income. YEL income refers to the amount of YEL insurance contributions you have paid.

Kela generally determines your annual income by reviewing a period of about one year in your business preceding the start of the allowance payments. For this reason, it is a good idea to realistically assess your YEL income well in advance of taking family leave.

•  Read also: A self-employed person’s income and health insurance contributions 

In addition to parental allowance, YEL income also affects your sickness allowance and future pension, among other things, making it one of the most important factors affecting your social security as a self-employed person.

•  Book an appointment with a business adviser

Can a self-employed person work while receiving parental allowance?

One of the most common questions we hear is whether a self-employed person is allowed to work while on parental leave. Completely shutting down their business for several months is not a realistic option for most self-employed people.

According to Kela’s guidelines, parental allowance is not paid for days when you are working. This applies to both employees and self-employed people. Any day that you carry out work in your business – for example, client work, sales or active service provision – may be considered a workday.

However, This does not mean, that you should close down your business. Many self-employed people carry out essential administrative tasks, such as invoicing, customer communications or business planning during their family leave. What matters is how actively they work.

•  Kela’s detailed guidelines on working while on parental leave

Sunday is a good day to work on your business

One detail that is particularly useful for self-employed people relates to the days of the week. Parental allowance is paid for working days only, which are Monday through Saturday. No parental allowance is paid for Sundays.

This means that Sundays do not count against the number of days of parental allowance available and no daily allowance is paid for them. In practice, this allows self-employed people to work on Sunday without it affecting their daily allowance in the same way as work performed on weekdays does.

In fact, many self-employed people spend their Sundays performing administrative tasks, etc. It can be a good day to catch up on emails, prepare marketing materials, write proposals or handle invoicing. Tasks like these will help you keep your business running without having to work actively during weekdays.

If you are a self-employed person planning to take family leave, we recommend you review Kela’s guidelines well in advance and, if necessary, discuss your situation directly with a consultant from Kela.