When is an entrepreneur unemployed?

In order for you to be able to obtain unemployment allowance, as a rule, you must have terminated your business activities or your employment in the business must have ended, as specified in the Unemployment Act. It depends on the form of your company when exactly your business activities can be considered as having been terminated. Unemployment allowance is not paid if you are still employed in your business full-time, because the purpose of the unemployment security system is not to support nonviable business operations or cause market distortion.

To be issued a labour policy statement, you need to provide to the TE Office information that your business operations have in fact been terminated. The TE Office will review the status of your business activities and your work situation. The TE Office will then give its labour policy statement to the unemployment fund.

Read more below about when are business activities considered as having been terminated, when is a part-owner of a company no longer considered an entrepreneur and when has an entrepreneur’s employment in the company ended.

When are business activities considered terminated?

Unless there is reason to assume otherwise, business operations may be considered having been terminated, if 

  • the company has been sold; 
  • the company has been declared bankrupt; 
  • the company has gone into liquidation
  • in case of company forms other than limited liability companies, the partners have agreed to dissolve the company;  
  • production activities and economic activities have ended, and the entrepreneur has:

a) terminated his/her pension insurance (YEL/MYEL/TyEL) 

b) filed a request with the Tax Administration to delete the company on the Prepayment Register and the Employer Register, and 

c) filed a request with the Tax Administration to delete the company on the Value-added Tax Liability Register or reported that his/her entrepreneurial operations have been disrupted. 

Good to know:
  • If you are acting as liquidator for the company, you may be considered working full-time as an entrepreneur and you may consequently not be entitled to an unemployment allowance. (Please contact the TE Office for more information). 
  • Your company may remain in the Trade Register.

When has an entrepreneur’s employment ended?

In certain situations, to be entitled to an allowance, you are not required to terminate business operations, if can demonstrate that you are no longer employed as an entrepreneur. As provided for in the Unemployment Security Act, such situations are limited to the following situations.

Unless there is reason to assume otherwise, in case the following applies, a person can be considered having stopped working for the company: 

  • Your work ability has been permanently and significantly reduced.
  • You are considered an entrepreneur comparable to a wage-earner.
  • Business operations are considered seasonal and the season has ended.

If you have received sickness allowance from Kela to cover the maximum period and your work disability continues, you may be entitled to an earnings-related allowance in case your application for an invalidity pension is pending or has been declined. 

If you have been considered an entrepreneur comparable to a salary-earner and have been carrying out your work based on assignment contracts, you may be entitled to unemployment allowance when your assignment relationship ends. Your work must also, because of its non-independent nature, equal work carried out as a salary-earner. 

  • your assignment relationships consist of the same principals, which are few in number 
  • you have carried out the work by yourself in accordance with instructions given by your principals 
  • you do not have a fixed location for purchase or sales, or a corresponding office for exercising your business, and 
  • over the past year prior to registering as a job-seeker, you have not employed anyone other than on an occasional basis. 

In the case of entrepreneurs comparable to salary-earners, any assignments must have been terminated, and any remaining assignments must not represent full-time work. 

If, as a result of natural conditions (other conditions do not apply), your business operations can be exercised on average for a total of 6 months per year, you are entitled to an allowance when the season ends. 

Good to know:

  • When you have not terminated business activities, but rather your employment has ended, a sales profit review is not carried out. However, if you later terminate said activities, report this to the TE office and send a completed sales profit report to the fund

When is a part owner of a company no longer considered an entrepreneur?

If you have been considered an entrepreneur due to your ownership and position in a company, the TE office may deem you unemployed when you no longer meet the definition of an entrepreneur.

Your entrepreneurship may be considered as having ended when you have given up your shares or position in the company so that you no longer meet the definition of an entrepreneur.

The TE office may consider your entrepreneurship as having ended when

  • you have sold your shares
  • you own less than 50 % of the company and you resign from a leadership position (CEO, chairperson of the board, ordinary board members)

When can business activities be considered part-time employment?

In very limited situations you may have the right to daily allowance if your entrepreneurship has turned to part-time employment. You have the right to apply for adjusted daily allowance during part-time entrepreneurship.

The TE-office will investigate whether your business activities be considered part-time. They may deem your activities as part-time if for example you have been employed as a wage-earner for at least six month whilst operating a business.

Please note, that your business will not become part-time based only on reduced work hours or income.