Your YEL income is determined by your pension insurance provider and should reflect the value of your work contribution to the business. In practice, it should correspond to the salary that would reasonably be paid to someone with similar skills and experience performing the same work.
When confirming your YEL income, the pension provider makes an overall assessment based on factors such as the median salary in your industry, the scale of your business, your professional expertise, and the value of your actual work contribution.
Pension providers review YEL income every three years. Before any adjustment is made, entrepreneurs receive a written proposal and have the opportunity to provide additional information about their work contribution. You may also request a review yourself if your business activities or workload increase or decrease significantly. If you believe your YEL income no longer reflects your actual work contribution, contact your pension insurance provider.
YEL income is an important figure because it affects not only your pension accrual and insurance contributions, but also the level of many social security benefits. Sickness allowance, parental allowance, rehabilitation benefits, and future pension benefits are all calculated based on your confirmed YEL income.
If your YEL income is set too low, your insurance payments will be lower. However, this may result in a smaller pension and lower benefits if you become ill, incapacitated for work, or take parental leave. Conversely, if your YEL income is set too high, you may build up a larger pension and qualify for higher benefits, but it may also create unnecessarily high costs for your business.
Because YEL income is intended to reflect the true value of your work input, the best approach is to keep it at the correct level and review it regularly as your business activities, responsibilities, and workload change.