Unions call for financial suppport for workers on partially paid leave

Following social unrest at the beginning of May 2007, the issue of workers who are on partially paid leave due to a temporary decrease in work volume has recently resurfaced on the political agenda. Seven trade unions have proposed to provide additional financial support to the workers through the unemployment insurance fund. According to the Holidays Act, workers on partially paid leave at the request of the employer must be paid at least 60% of the national minimum wage.

Partially paid leave

Following Russia’s economic sanctions on Estonia which also left repairs on Russian railways pending, Estonian Railways (AS Eesti Raudtee) experienced a rapid decline of transportation volume in May. As a result, at the beginning of May, 350 out of the total 2,300 employees of Estonian Railways were sent on partially paid leave by the company and 200 more workers might follow if the situation persists. Due to worsening economic relations with Russia, other companies face a similar situation and will have to introduce short-time work or partially paid leave due to a significant decrease in work volumes and orders.

According to Paragraph 33 of the current Holidays Act (Puhkuseseadus), an employer is allowed to propose employees partially paid leave in the event of a temporary decrease in work volume for a maximum of three months a year (EE0406102F). Such leave can only be introduced following agreement between both the employee and employer, and with the permission of the regional labour inspector. The pay for this type of leave must not be less than 60% of the national minimum wage which, in 2007, stands at EEK 3600 (€230.08) a month (EE0701029I).

Proposals for change

Seven Estonian trade unions submitted a proposal to the government that employees on partially paid leave should receive additional financial support from the Unemployment Insurance Fund (Töötukassa). The trade unions argue that workers on this type of leave should receive a similar income to unemployed people who benefit from the receipt of unemployment insurance, because this situation has severe consequences on the income of employees and in effect increases labour market instability.

The proposed benefit would be 50% of the last salary as it is currently the case of unemployment insurance benefits. To implement this benefit would not constitute a supplementary burden on the state budget since the costs would be covered by the reserves of the Unemployment Insurance Fund, which is established through compulsory contributions of employees and employers.

The Estonian Employers’ Confederation (Eesti Tööandjate Keskliit, ETTK) declared that the trade unions’ proposal should be considered, while the amount of the benefit would be subject to discussion. However, ETTK also admitted that it is impossible to provide immediate support in the form of such a benefit to the railway employees since it requires an amendment of the current legislation.

On the political side, the Estonian Social Democratic Party (Sotsiaaldemokraatlik Erakond, SDE), which is part of the government coalition, supports the unions’ suggestion. SDE submitted a legislative proposal to supplement the Unemployment Insurance Law by developing a new type of benefit. Overall, SDE’s draft bill is similar to the trade unions’ proposal and serves the interest of both employers and employees. According to the draft bill, employers can still reduce the financial burden in the event of a temporary decrease in work volume and orders by offering employees partially paid leave, for which they will have to pay the employee only 60% of the national minimum wage. The employees’ income would be supplemented by the additional unemployment benefit scheme. As a result, the employer does not risk losing any employees until a normal level of work has been re-established, while the employees can maintain their living standard without changing job.

The proposal was sent to the social partners for discussion and, according to SDE, the party is open to suggestions on improving the draft legislation.

Issues raised in relation to proposal

The Estonian Prime Minister, Andrus Ansip, has declared that the damage caused by the riots at the beginning of May will be covered by state resources. However, the economic damage due to Russia’s sanctions on Estonia – sanctions that stem from the same reason as the rioting in May – will not be entirely compensated since each company is accountable for their business activities and if they have decided to do business with Russia it is their own responsibility.

The Deputy Secretary-General on Labour Policy within the Ministry of Social Affairs (Sotsiaalministeerium, SM), Janno Järve, has stated that in its present form the implementation of the proposal for a new form of unemployment insurance benefit would entail several problems.

The scheme may be exploited by employers and employees to cover cyclical fluctuations in demand, such as seasonal changes in work volume. Such a scheme would also send mixed signals to employees: if an enterprise is no longer competitive, it seems better for the employee to find a new job in a more competitive company which can offer sufficient work and pay. This is also beneficial for the whole economy. In general, employees should be encouraged to find another job either through the Estonian Labour Market Board (Tööturuamet) or on their own rather than remaining essentially jobless and receiving state benefits.

Kirsti Nurmela and Epp Kallaste, PRAXIS Centre for Policy Studies

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