Estonia: Latest working life developments – Q3 2017

Negotiations on the national minimum wage, changes to the tax rules for sole proprietors, revising the immigration quota, and supporting the employment of minority groups are the main topics of interest in this article. This country update reports on the latest developments in working life in Estonia in the third quarter of 2017.

Collective bargaining

On 7 June 2017, negotiations started between the Estonian Trade Union Confederation (EAKL) and the Estonian Employers Confederation (ETKL) over the national minimum wage agreement. However, after meetings in August and September, it is uncertain whether the parties will reach an agreement soon, as they cannot agree on whether the minimum wage should be increased in 2018.

Taxation of sole proprietors

There are around 31,000 sole proprietors (FIEs) in Estonia. A FIE is defined as ‘a natural person whose permanent activity is the sale of goods and services’. On 7 September 2017, the government approved changes to legislation in order to create a similar tax environment for FIEs as for companies. This would reduce FIEs’ tax burden as the measure includes:

  • lowering the ceiling of social tax paid from business income;
  • allowing the deduction of several costs from their taxable business income, for example sickness leave benefit for the first eight days of sickness, which is usually paid by the employer to the employee.

Immigration quota under revision

ETKL is strongly promoting the need to increase the immigration quota, which applies to nationals of non-EU countries who want to work in Estonia (except for information and communications technology workers who were recently excluded from the quota in response to the lack of such workers). ETKL says that foreign workers are entering the Estonian labour market anyway, but if they do it outside the quota (for example as temporary or posted workers) the quality of the work force becomes poorer and the state loses control and knowledge about these people. On 28 July 2017, the Ministry of Interior formed a working group of 19 specialists in the field to find solutions on how to handle the quota more flexibly, taking into account the changing situation in the labour market. The deadline for their proposals is 1 December 2017.

Supporting the employment of youth and refugees

As of 1 September 2017, the eligibility requirements for the measure ‘My First Job’ (the implementation of the Youth Guarantee) were relaxed. Employers were previously paid a wage subsidy if they hired a person aged 17–29 with no professional education who had been registered as unemployed for at least four months. The employment contract had to be indefinite or last for at least two years. Now, those aged 17–29, those with a professional education, and those who have been out of employment for at least three months are included in the target group and the term of the employment contract has been shortened to one year.

Also, as of 1 September, the Unemployment Insurance Fund is offering a new scheme ‘My First Job in Estonia’ aimed at employers who hire or employ someone who has been given asylum with the aim of supporting their integration. The measure comprises of:

  • a wage subsidy of 50% of the gross wage for 12 months;
  • compensation for the cost of obtaining qualifications;
  • work-related translation services;
  • language training and/or payment for professional mentoring.

Equal opportunities in the labour market

The labour market participation of people with reduced work capacity has been an important topic in Estonia during the past few years, especially in the light of the incapacity to work reform, which aims to support their employment opportunities. To further contribute to this goal, on 15 August 2017, ETKL and the Estonian Human Resource Management Association (PARE) formed a group of employers to support, encourage and promote the employment of people with reduced work capacity. Currently, 12 companies that have experience in hiring such employees have joined the group.

Commentary

In the coming months, the most important topics to monitor will be the national minimum wage negotiations and proposals by the experts’ group on the immigration quota.

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