Parliament ditches changes to unemployment benefit rules

The Estonian parliament has abolished planned changes to labour legislation that would have widened entitlement to unemployment benefit to include workers who had resigned by choice or by agreement with their employer. The changes, part of the 2008 Employment Contracts Act, had already been postponed until 2013 because of the global economic crisis. Despite strong opposition from trade unions and parliamentary opposition parties, the changes have now been abandoned.


In December 2008, a new Employment Contracts Act was approved by the Estonian parliament (Riigikogu) which took effect on 1 July 2009. One of the measures was to improve labour market security for employees by extending eligibility for unemployment insurance benefit to people who left their employment relationship voluntarily or by agreement with their employer (EE0901019I).

The eligibility conditions proposed were stricter for people in this new category, with workers being required to have been in employment for at least four years during the previous five-year period, compared to employment of at least one year during the previous three-year period for people who had not left their job voluntarily.

The rate of the benefit was also lower – 40% of the previous average pay compared to 50% for others who did not terminate their employment voluntarily or by agreement. However, due to the economic crisis the government decided in June 2009 to postpone these measures until 2013, despite opposition and strike action by trade unions (EE0907029I).

Annulment of the measure

In February 2012, the parliament’s Legal Affairs Committee presented a draft act to abolish the part of the Employment Contracts Act that would have widened eligibility for unemployment insurance benefits. The Unemployment Insurance Fund (EUIF) predicted the measure would cost between €32 million and €34 million in 2013, and would affect around 13,000 people.

The Chair of the Legal Affairs Committee of the parliament, Marko Pomerants, explained that the main reasons behind ditching the planned changes was to ensure the sustainability of the Unemployment Insurance Fund, to avoid the risk of people feeling motivated to remain unemployed, and to decrease periods of unemployment between jobs.

The aim of the measure had been to protect people who appeared to have formally left work voluntarily or by agreement with the employer, but in reality had been forced to resign. However, it was now argued that under the Employment Contracts Act, employees could choose whether or not they agreed to end the employment contract, and employers would have to take into account that illegal dismissal, including forcing an employee to resign, could result in a lawsuit and an obligation to pay additional benefits to the employee.


The ditching of these changes was heavily criticised by trade unions and parliamentary opposition parties. Harri Taliga, President of the Estonian Trade Union Confederation (EAKL), expressed his dissatisfaction, saying the measure had originally been agreed as part of the tripartite talks concluded in April 2008, but the government had changed the agreement unilaterally.

Some members of the parliamentary opposition parties also expressed their dissatisfaction with the fact that the initiative to introduce these changes came from the parliamentary commission rather than the government, shifting political responsibility for the changes. The opposition fears this change will have an effect on governments’ and parliaments’ reliability as trustworthy partners.

The Chair of the Estonia Employers’ Confederation (ETTK), Tarmo Kriis, said that although the changes did not have a direct negative impact on employers’ interests, they would have increased flexibility in the labour market. He said keeping the changes would have made workers more willing to leave jobs by choice or agreement, rather than being tempted to find ways of getting themselves dismissed so that they would qualify for unemployment benefit.

He also felt the changes would have had an effect on the number of labour disputes, as workers would not appeal to the labour dispute committee in an effort to win eligibility for unemployment insurance benefits. He therefore felt that the likely impact on the labour market of removing the changes from the Employment Contracts Act was not black and white.

Despite the counter arguments, the draft act was approved by parliament on 8 May 2012.

Other conflicting issues

This is not the first issue that has caused conflict between social partners and the government. At the end of 2011, the government decided to overrule the decision made by the Supervisory Body of the EUIF to decrease unemployment insurance tax for 2012 from 4.2% to 3%. In addition, the government decided to consolidate the EUIF’s reserves and those of the Estonian Health Insurance Fund (EHIF) into the state treasury in December 2011 without the social partners’ consent (EE1112019I).

Liina Osila, PRAXIS Center for Policy Studies

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