Is unemployment insurance mandatory?

Unemployment insurance is an important part of the social security system in Finland, and its purpose is to secure a living during unemployment by compensating part of the lost income. But is unemployment insurance mandatory? The answer to this question depends on whether you look at the matter from the perspective of an employee or an entrepreneur.

Employees

Unemployment insurance is practically mandatory for wage earners. The employer is obliged to pay unemployment insurance premiums, which consist of both the employer’s and the employee’s contributions. The employer withholds the employee’s share directly from the salary and pays it together with its own share to the Employment Fund (Työllisyysrahasto). In this sense, wage earners are covered by the unemployment insurance system automatically. To receive the larger, earnings-related unemployment allowance, however, you must be a member of an unemployment fund; otherwise you are entitled only to the basic unemployment allowance or labour market subsidy paid by Kela.

Entrepreneurs

The situation is slightly different for entrepreneurs. Entrepreneurs are not automatically covered by earnings-related unemployment security. To get it, they must join an unemployment fund that accepts entrepreneurs as members. This is not mandatory, but it is recommended, because without fund membership an entrepreneur is not entitled to earnings-related unemployment allowance.

Unemployment funds

Unemployment funds are organizations that pay earnings-related unemployment benefits to their members. Wage earners can join the unemployment fund of their own field or a general fund open to all, and entrepreneurs can join a fund that accepts entrepreneurs. Membership is not mandatory, but it is recommended for most people in work, as it offers better security against unemployment than the basic unemployment allowance or labour market subsidy alone. Whether it is worth it for you depends on your own situation, for example your job security and other financial reserves.

Summary

In summary, it can be stated that unemployment insurance is practically mandatory for wage earners, because the employer handles the insurance premiums. Unemployment insurance is not mandatory for entrepreneurs, but it is recommended to get it in order to receive earnings-related unemployment insurance. Membership in the unemployment fund is not mandatory, but it offers significant additional security in case of unemployment.

More information about unemployment insurance and unemployment security can be found, for example, on the websites of the Employment Fund and Kela.