Background information

In order to ensure the business continuity during times when the volume of work must be reduced due to unforeseen and reasons beyond the control of the employer, the employer have the right to reduce the working time and salary of the employees.

The terms and conditions are established in the Employment Contracts Act (§37) that entered into force in 2009. However, the measure has been available since the first Employment Contracts Act since 1992.

Content of measure

The employer may reduce the salary to a reasonable extent for up to three months over a period of 12 months. The reduced wage cannot be lower than the national minimum wage.

Before reducing wages the employer must offer the employee other work, if possible. Also, the employer must inform the employee representative or, in his or her absence, the employees and consult them. The employer must provide notice of the reduction of wages no less than 14 calendar days in advance. The employee or their representative shall give his or her opinion within seven calendar days as of the receipt of the employer's notice.

The employee has the right to refuse to perform work in proportion to the reduction of the wages. Also, the employee has the right to cancel the employment contract instead of accepting the reduced pay. In this case, the employee must notify the employer 5 working days in advance. In this case, the employee must be paid compensation to the extent of one month’s average wage. Also, cancelling the contract on those circumstances (that is, cancelling the contract due to reduced salary) gives the employee the right to receive unemployment insurance benefit. In other circumstances, unemployment insurance benefit is not paid to employee if the employment contract is cancelled at the initiative of employee.

During COVID-19 crisis, employers fulfilling the above criteria could apply for a governmental wage subsidy covering 70% of the average monthly wage of the employee (see more: Temporary subsidy programme .

Use of measure

Since employers are no longer required to inform the labour inspectorate about using this measure since July 2009, information is no longer collected on cases of reduced salary and working time. The use of the measure during COVID-19 crisis is available here: Temporary subsidy programme .

Target groups

Workers	Businesses	Citizens
Employees in standard employment	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
Trade unions Company / Companies	No special funding required

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Unknown	Unknown
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• Only trade unions
• Main level of involvement: Company level

Involvement

Trade union must be informed and consulted prior to reducing the wages.

Views and reactions

Unknown

Sources

• 01 July 2009: Employment Contracts Act (www.riigiteataja.ee)