New law to change working conditions and institutional framework

Under the new Employment Contracts Act, several changes have been introduced to Estonia’s labour market, taking effect from 1 July 2009. These changes will mainly affect working conditions and the country’s institutional framework – in particular, working time, proprietary liability, lifelong learning, the administrative burden and labour market institutions. The new act is based on a tripartite agreement concluded in 2008.

The main aim of the new Employment Contracts Act is to increase the flexibility of the labour market and, at the same time, workers’ social security (EE0901019I). The act will influence the regulation of working conditions and labour market bodies. The changes are based on a tripartite agreement that was concluded in 2008 (EE0805029I, EE0802019I).

Working conditions

Remuneration of unsocial working hours

Payment for night work – that is, between the hours of 22.00 and 6.00 – is to be increased from 1.2 to 1.25 times the regular wage, unless an additional salary for night work is already included in the total wages. Moreover, evening work – that is, work between the hours of 18.00 and 22.00 – will no longer be distinguished on the same basis as night work and will be paid as regular working hours. Remuneration for overtime work and work on national holidays will remain unchanged, at 1.5 and two times the regular wage, respectively. In 2007, about 17% of employees regularly worked in the evenings and 6% at night, according to the Labour Force Survey.

Proprietary liability

Regulations on workers’ proprietary liability are to be introduced – these regulations will define the limits of employee responsibilities depending on the fault. Currently, no such regulations exist and often collective responsibility is implemented irrespective of the actual fault. Under the new Employment Contracts Act, an employee is only fully liable for any damage if they have caused the damage. In relation to damages caused by negligence, the worker’s liability will be assessed on a case-by-case basis, taking into account factors such as the tasks of an employee and the level of negligence.

In addition, a written voluntary agreement may be signed which will make the employee responsible for company property at their disposal in all cases – irrespective of the actual fault. The agreement will have to define factors including the additional remuneration for such responsibility, the limits of the liability by defining the property, access to the property and the setting of a financial ceiling.

In order to protect employers against the negligence of workers, no upper limit for workers’ financial liability will be set; currently, this limit stands at one month’s salary.

Lifelong learning

In 2007, only 7% of employees had participated in any lifelong learning activity during the four weeks prior to the survey. To encourage participation in lifelong learning, changes in relation to study leave are to be introduced. For example, eligibility for study leave will be extended to both part-time and full-time students. Employees will be entitled to study leave for at least 30 calendar days each year, of which 20 days are to be financed at 100% of the employee’s average wage in the case of formal education or work-related training.

Additional study leave of 15 calendar days is also to be provided for the completion of formal education and this will be financed at the national minimum wage level. To encourage employers to finance employees’ education, expenses incurred by the employer for formal education will be exempt from fringe benefit tax. Up until now, only expenses on work-related training were eligible for tax exemption. The development of lifelong learning has been a priority for both the employers and trade unions (EE0802029I).

Changes in labour market organisations

The maximum amount of claims awarded in labour dispute committees is to be increased to EEK 150,000 (about €9,587 as at 10 March 2009) from the current amount of EEK 50,000 (€3,196). The current financial limit has been strongly criticised by the Estonian Trade Union Confederation (Eesti Ametiühingute Keskliit, EAKL) (EE0702069I).

In order to reduce the administrative burden for employers, several obligatory formal procedures will be abolished. These include procedures for the registration of employees, including employment record books and personnel files. In addition, the outdated requirement to obtain approval from the Labour Inspectorate (Tööinspektsioon) for certain procedures – such as when establishing internal work procedure rules in companies – is to be cancelled.

Another important change is the merging of the Estonian Labour Market Board (Tööturuamet, TTA) and the Estonian Unemployment Insurance Fund (Eesti Töötukassa) – which is due to take place by 1 May 2009. A new public institution called the Estonian Unemployment Insurance Fund will be formed, comprising representatives of both the government and the social partners on the board. The aim of the new institution is to improve the provision of services through tighter links between benefit payment and active labour market policies.

Kirsti Nurmela and Liis Lill, PRAXIS Centre for Policy Studies

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