Estonia: Latest working life developments Q4 2018

A new collective agreement in the healthcare sector, negotiations over collective agreements in the transport sector, and social policy reforms to parental leave and the pension system, are the main topics of interest in this article. This country update reports on the latest developments in working life in Estonia in the fourth quarter of 2018.

New collective agreement in healthcare

A new two-year collective agreement in the healthcare sector was concluded on 30 November 2018 between the Union of Estonian Healthcare Professionals (ETK), the Estonian Medical Association and the Estonian Nurses’ Union (EÕL) on the employees’ side, and the Estonian Hospitals Association (EHL) and the Union of Estonian Medical Emergency Services (EKL) on the employers’ side. It was agreed that the minimum pay for healthcare workers would increase by 3–10% per year.

  • The pay for doctors will increase from €11.35 per hour to €12.40 per hour in 2019 and to €13.30 in 2020.
  • The pay for nurses will increase from €6.85 per hour to €7.45 in 2019 and to €8.00 in 2020.
  • The pay for carers will increase from €4.20 per hour to €4.65 in 2019 and to €5.00 in 2020.

Payments for unsocial working hours have also been introduced in the agreement. As of 1 April 2019, the hourly rate for night shifts will be 5% higher as provided by employment law and from April 2020, the hourly rate for weekend shifts will be 10% higher. Nurses were also granted two further additional paid leave days, increasing their entitlement to additional leave from 3 to 5 days per year.

Talks in transport sector yield mixed results

Negotiations over new agreements between the Estonian Transport and Road Workers’ Trade Union (ETTA) and the Union of Estonian Automobile Enterprises (AL) started in October. The current freight transport agreement has been in force since 2013 and the minimum pay is €620 per month. According to the draft agreement, which is currently open for public consultation, the minimum pay would increase to €950 per month in 2019, to €1,000 in 2020 and to €1,100 in 2021. The new minimum pay level is expected to enter into force in May 2019.

The negotiations for the passenger transport agreement have not gone as smoothly. The current agreement is valid until the end of 2019 and the minimum pay is set to rise to €945 per month from 1 January 2019. Passenger transport workers are demanding a minimum pay level of €1,200 per month. The ETTA asked the government to take a position in this matter, take part in the negotiations and find ways to increase workers’ wages. The ETTA pointed out that it is difficult for employers to stay competitive and pay higher wages in an unequal situation, where some companies receive state support through state subsidies for public transport. As the state sets the procurement conditions and has introduced free local public transport for eligible residents in some areas of the country, both the ETTA and the AL want the government to be involved in setting pay levels. The state has argued that they are not the employer in the sector and therefore cannot intervene in the negotiations.

Parental leave and benefit reforms approved

The Estonian parental leave and benefit system has been rather generous since 2004, allowing parents to take leave for up to 3 years, receive parental benefits for up to 1.5 years and earn additional income while on leave. This has resulted in long career breaks for women, especially given that the take-up of parental leave by fathers has been very low. This is worrisome in the context of Estonia’s gender pay gap, which is one of the largest in Europe.

A reform aimed at providing greater flexibility to improve the work–life balance of families and increase the participation of fathers in childcare was introduced in autumn 2016. The final phase was approved in October 2018 and the changes will be phased in gradually, with full implementation by April 2022.

The improved system allows additional income in the amount of 1.5 times the national average wage (around €1,500 per month), rather than the national minimum wage, before the parental benefit is reduced. It will also be possible to spread out the payments during the entire 3 years of parental leave instead of the current 1.5 years (although the total amount of the benefit remains the same). To encourage more fathers to participate in childcare, it will be possible for both parents to be on parental leave simultaneously for up to 2 months and a separate 30-day paternal leave period for fathers has also been introduced. The social partners have not explicitly expressed their views on the reform, but support the overall plan.

Pension reforms leads to more flexible system

Preparations for reforming the pension system started in 2015, stemming from the need to ensure the long-term financial sustainability of the system in the context of an ageing and decreasing population. It was finally approved by parliament in December 2018. The reforms aim to make the system more flexible and changes will come into force in 2021.

  • From 2021, flexible retirement options will allow individuals to choose their retirement age and whether to receive a full pension or combine a partial pension with work.
  • From 2021, 50% of state pension entitlements will come from the insurance component (a percentage of the individual’s wage) and 50% from the service component (number of years worked) instead of the current system which is entirely financed by the social tax contributions of current taxpayers.
  • The retirement age will be tied to life expectancy from 2027.
  • People born between 1970 and 1982 will be given the option to join the mandatory funded pension (about a quarter of them have not yet opted in).

While the social partners generally agree with the need to change the system, they have not made any statements about the reform. The Confederation of Estonian Trade Unions (EAKL) has instead pointed to the need to do more to increase access to lifelong learning and retraining. The confederation also underlines the need to focus on measures that allow older workers to remain active and healthy in the labour market for as long as possible, and to benefit fully from the new system.

In December 2018, the Estonian Employers’ Confederation (ETTK) discussed the importance of both the insurance component and the service component in pension calculations. The insurance component motivates individuals to gain further qualifications and may decrease the proportion of undeclared wages as only officially declared wages are taken into account in pension calculations. The service component motivates people to work for longer.

Outlook

In the next quarter, the main focus of attention will be on the upcoming parliamentary elections in March 2019. The main topics are likely to be related to the tax system, migration, the use of foreign workers, new forms of employment and flexibility in terms of employment relations.

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