Increase in social protection for unemployed people
Several amendments to the Unemployment Insurance Act, which came into force in 2007, have increased the level of social protection available to unemployed people. The rules for eligibility have been simplified so that employees with repeated unemployment periods can also meet the requirements for unemployment insurance. In addition, the application procedures for unemployment benefits have been simplified and the level of unemployment assistance increased.
Unemployment insurance in Estonia
Unemployment insurance in Estonia is regulated by the Unemployment Insurance Act. This type of insurance is mandatory and provides employees with benefits in the event of unemployment, collective redundancies or insolvency of the employer. The benefits are financed through unemployment insurance premiums, which in 2007 amounted to 0.6% of employees’ gross monthly salaries and to 0.3% of employers’ payroll. Estonia’s unemployment insurance system has only been introduced relatively recently. The country’s first premiums were collected on 1 January 2002 and the first unemployment insurance benefits were paid a year later. Prior to this, only flat-rate unemployment assistance benefit was paid to unemployed people. At present, both benefits are in use.
Duration of unemployment benefit
The duration of unemployment insurance benefit payments depends on the length of employment and on contributions to the Unemployment Insurance Fund (Töötukassa). From 2007, the maximum duration of benefits is 270 days if the length of employment is at least 56 months. During the first five years since the unemployment system’s inception, the duration of the benefit payment was limited to 180 days as no one could fulfil the required employment and contribution period. After a number of years, benefits can also be paid for 360 days if the employment and contribution period exceeds 111 months.
Amount of benefits
The amount of the unemployment insurance benefit depends on previous earnings and is paid from statutory unemployment insurance contributions. This benefit is conditional on whether the salary earned prior to unemployment amounts to 50% of the average replacement rate during the first 100 calendar days of unemployment and to 40% during the next 260 days.
Unemployment assistance benefit, or unemployment allowance, is a flat-rate payment and is funded through the state budget. In 2007, this allowance amounted to EEK 1,000 (about €64 as at 30 July 2007) a month. This type of benefit is paid in cases where the individual is not eligible for unemployment insurance benefit or is unemployed for a period longer than the payment period stipulated for unemployment insurance. Unemployment assistance is regulated by the Labour Market Services and Benefits Act.
Amendments to unemployment system
On 1 January 2007, several amendments to the Unemployment Insurance Act came into force with the support of the trade unions. After five years since its introduction, it was felt that Estonia’s unemployment system needed to increase the level of social protection offered to persons experiencing repetitive periods of unemployment. Prior to this, 12 months of employment over the previous 24 months were required in order to become eligible for receipt of unemployment insurance benefit. This reference period has now been extended to 36 months. As a result, people who have had several temporary jobs, with a total duration of 12 months over the previous 36 months, are now also eligible for unemployment insurance benefit.
In addition, being granted unemployment assistance does not annul the previous insurance period – as was the case previously. It is hoped that this will increase the motivation of unemployed people to also accept temporary jobs. However, one aspect that remains unchanged is the stipulation that receipt of unemployment insurance benefit restarts the count of insurance period.
Also from 1 January 2007, the minimum level of unemployment insurance benefit has been brought into line with that of unemployment assistance. Thus, if the daily unemployment insurance amount is below the unemployment assistance amount, the former will be increased to the same amount as the latter. The ceiling on benefits will continue to amount to three days’ average wages, based on data regarding unemployment insurance tax payments for the previous year.
In addition, the unemployment assistance benefit has been increased from EEK 400 (€25.56) to EEK 1,000 (€64) a month in 2007(EE0610019I).
Simplified application procedures
The amendments to the Unemployment Insurance Act have also meant that the application procedures for unemployment insurance benefits have been simplified. Previously, in order to receive unemployment insurance benefits, unemployed persons had to provide data on their unemployment insurance contributions with certification issued by the employer. Under the new system, certification must be provided to the Unemployment Insurance Fund only in exceptional cases. From 2007, the insurance period and the amount of the unemployment insurance benefit are calculated in accordance with information obtained from the electronic unemployment insurance database, which is based on data from the Estonian Tax and Customs Board ( Maksu- ja Tolliamet, MTA). This enables better control of the data and reduces the administrative burden on both the employer and unemployed people.
Kirsti Nurmela and Epp Kallaste, PRAXIS Centre for Policy Studies