Definition of ‘entrepreneur’ for the purpose of unemployment security

For the purpose of unemployment security, entrepreneurship may be a primary or a secondary occupation. If entrepreneurship is your secondary occupation, you may be entitled to earnings-related daily allowance. The evaluation of whether your entrepreneurship is a primary or secondary occupation is made by the TE Office, which will issue a binding labour market policy statement on your entrepreneurship to KOKO-kassa.

You must notify the TE Office of all your business activities. The notification obligation applies to agriculture, forestry, start-up enterprises and business activities begun before you became unemployed.

The concept of ‘entrepreneur’ for the purpose of unemployment security may be defined differently than in pensions legislation, for instance This causes discrepancies for instance when under pensions legislation you do not need entrepreneur’s employment pension insurance (YEL) or agricultural entrepreneur’s employment pension insurance (MYEL) but for the purpose of unemployment security you may nevertheless be deemed an entrepreneur.

For the purpose of unemployment security, any and all work not performed in a private or public employment relationship is considered business activities. Ownership or formal position has no relevance. If you work through a billing cooperative, for instance, you are an entrepreneur as far as unemployment security is concerned.

However, even if you are considered an entrepreneur for the purpose of unemployment security, you can still accrue the employee’s employment condition in other work. Work done as an entrepreneur does not accrue your employment condition, regardless of whether entrepreneurship is your primary or secondary occupation. Simply fulfilling the definition of an entrepreneur does not make you a full-time entrepreneur or remove your entitlement to a wage earner’s daily allowance.

Under unemployment security, you may be deemed an entrepreneur in the following cases

  • You have YEL or MYEL insurance
    • as a private entrepreneur (self-employed person or private trader),
    • as an agricultural entrepreneur,
    • as partner in a general partnership, or
    • the general partner in a limited partnership.
  • You are in a managerial position in a limited liability company where
    • you yourself have a holding of 15% or more, or
    • your family, or you and your family together, have a holding of 30% or more.
  • You are employed in a limited liability company where
    • you yourself have a holding of 50% or more, or
    • your family, or you and your family together, have a holding of 50% or more.
  • You are working but not in a private or public employment relationship, regardless of what your holdings and position may be.

Holdings are calculated taking into account the votes vested in shares or similar decision-making powers. You are considered to be in a managerial position if you are a managing director, a member of the board of directors or a similar officer.

Starting an entrepreneurship as an unemployed person

Starting a business as an entrepreneur, whilst you are unemployed, will not prevent you receiving the daily allowance during the first four months from starting the business. Income from your entrepreneurial business is adjusted, i.e. the income you receive reduces the amount of daily allowance you are entitled to, as does income from other employment.

During the first four months, the TE office will not assess whether your business is primary or secondary employment. After the four months, the TE Office will evaluate how much your business is employing you. If your activity is judged as a secondary employment, you may continue to receive the daily allowance. However, if your activity is judged to be your primary employment, after the four month period, you will no longer receive daily allowance from the Unemployment Fund.

Entrepreneurship as a secondary occupation

You may be entitled to earnings-related daily allowance paid by KOKO-kassa if the TE Office considers that your entrepreneurship is a secondary occupation. What is crucial here is not how little income you make through business activities but primarily how much time you invest in it.

If you receive an income from entrepreneurship as a secondary occupation, you may receive adjusted earnings-related daily allowance, meaning that your income from business activities is taken into account when calculating daily allowance. KOKO-kassa independently evaluates your entrepreneurship status as regards payment of adjusted earnings-related daily allowance.

Entrepreneurship as a primary occupation

If the TE Office considers that entrepreneurship is your primary occupation, you are not entitled to receive earnings-related daily allowance from KOKO-kassa. Generally, entrepreneurship is considered a primary occupation if the work commitment is so great that it would prevent you from accepting a full-time job.

If entrepreneurship is your primary occupation as defined in the Unemployment Security Act, you should consider joining another unemployment fund. Entrepreneurs may turn for instance to the Unemployment Fund for Entrepreneurs and the Self-Employed (AYT).

Beginning entrepreneurship

When you start a business as an unemployed person, the TE office will not evaluate whether you are a part-time or a full-time entrepreneur for the first 4 months. This means that you are entitled to earnings-related allowance for at least 4 months since starting your business.

Please contact TE office prior to becoming an entrepreneur, because they will examine the starting and ending dates of entrepreneurship. If you receive income from your business activities within the first 4 months, the earnings-related allowance will be paid adjusted. You must apply for a full-time job even during your 4-month period of entrepreneurship.

After the 4-month period has passed, the TE office will evaluate whether you are a part-time or a full-time entrepreneur and give your unemployment fund a statement regarding the matter.

Family members and entrepreneurship

The following are considered family members: spouse (also cohabitee) and any person related to you and living in the same household (parents, grandparents, children, grandchildren). This means that you may be considered an entrepreneur if you are working in an enterprise owned by a member of your family even if you yourself do not have a holding in it.

Remember that simply fulfilling the definition of an entrepreneur does not remove your entitlement to a wage earner’s daily allowance.

Indirect ownership

Indirect ownership through another enterprise or corporation is also considered when calculating holdings. Ownership is indirect if you or your family or both have a combined holding of 50% or more in the intermediary body.