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COVID-19 EU PolicyWatch

Database of national-level responses

Eurofound's COVID-19 EU PolicyWatch collates information on the responses of government and social partners to the crisis, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.

Factsheet for case EE-2020-10/325 Updated – measures in Estonia

Temporary subsidy programme

Ajutine töötasu hüvitis

Country Estonia , applies nationwide
Time period Temporary, 01 March 2020 – 31 May 2021
Type Legislations or other statutory regulations
Category Employment protection and retention
– Income support for people in employment (e.g. short-time work)
Author Ingel Kadarik (Praxis Center for Policy Studies) and Eurofound
Case created 07 April 2020 (updated 06 August 2021)
Related ERM support instrument

Background information

Due to the need to temporarily close down some companies and due to some companies losing a lot of clients, several companies have (temporarily) no income and thus paying wages is challenging or impossible. In order to avoid bankruptcies and a high share of unemployment, the Government decided to support the companies to pay wages to their employees. The measure was added to the Employment Programme 2017-2020 (programme through which additional active labour market measures are provided by the Unemployment Insurance Fund). It was discussed and approved by the Council of the Estonian Unemployment Insurance Fund and put into effect by a Government decree. The applications are accepted as of 6 April 2020 until the end of July 2020.

Content of measure

The subsidy is paid by the Estonian Unemployment Insurance Fund (EUIF) when the employer is in a situation where they comply with at least two of the following terms:

  1. The employer must have suffered at least a 30% decline in turnover or revenue for the month they wish to be subsidized for, as compared to the same month last year;
  2. The employer is not able to provide at least 30% of their employees with work;
  3. The employer has cut the wages of at least 30% of employees by at least 30% or down to the minimum wage.

Subsidy is paid to employees who work on the basis of an employment contract and whose employers are not able to provide them with work or whose wages have been reduced. It must be applied for by the employer, but is paid directly to the employee.

The amount of the subsidy is 70% of the average monthly wage of the employee. The maximum amount of the subsidy is €1,000. The employment and social security taxes are also paid by the EUIF. The employer must pay additionally a wage of at least €150 to the employee (plus pay national taxes on the wage). The employee receives at least the national minimum wage (€584).

The subsidy is paid for up to two months for March, April or May 2020.

The subsidy provides dismissal protection. In case the employee is made redundant in the course of the same or the following calendar month they have received the temporary subsidy, the employer must return the subsidy.

Updates

The following updates to this measure have been made after it came into effect.

06 May 2021

The Government decided to continue with the subsidy and compensate the employees' wages for May 2021 as well. The conditions remained the same. The application round was open throughout June. The additional budget for this was €20.1 million, which was covered from the additional state budget.

19 March 2021

To respond to the second wave of the pandemic, a second round of the wage subsidy was announced. As of 1 April 2021, the subsidy can be applied by employers whose turnover in March or April 2021 declined by at least 50% compared to the period of December 2019 - February 2020 or to the average turnover of the second half of 2020 (thus including those companies who started their activities in 2020). The subsidy is paid for employees who work in the company as of 1 January 2021 and whose work load or pay has decreased. The size of the subsidy is 60% of the average gross wage of the employee (max €1,000); the employer must pay additionally at least €200 before submitting the application.

Subsidy is also paid for sole-proprietors in the amount of €584 (national minimum wage) if their business income in 2020 was 50% lower than in 2019.

The budget is €140 million of which €38 million is covered by the Estonian Unemployment Insurance Fund and €102 million by the Government.

10 July 2020

The measure was prolonged, which means that it is possible to apply for the wage subsidy for June 2020 as well. However, the terms were changed. In June 2020, employers are eligible to applying for the wage subsidy to their employees if they suffered at least a 50% decline in turnover or revenue in June compared to June last year and comply with at least one of the following terms:

  1. they were not able to provide at least 50% of their employees with work and the work load of the employees has been cut by at least 30%
  2. they had cut the wages of at least 50% of employees by at least 30% or down to the minimum wage.

Use of measure

Uptake by month:

March 2020

33,508 employees of 6,705 companies received the subsidy in the total amount of €27.5 million

April 2020

121,003 employees of 16,009 companies received the subsidy in the total amount of €113.2 million

May 2020

91,010 employees of 10,482 companies received the subsidy in the total amount of €90.3 million

June 2020

31,825 employees of 4,063 companies received the benefit in the total amount of €24.6 million

March 2021

35,044 employees of 5,166 companies received the subsidy in the total amount of €27 million

April 2021

36,508 employees of 5,350 companies received the subsidy in the total amount of €28.6 million

May 2021

18,987 employees of 2,846 companies received the subsidy in the total amount of €15.6 million

According to the analysis by Praxis published in February 2021, the measure has prevented the potential rise in relative poverty as well as inequalities, e.g. the poverty rate would have increased by 4 percentage point without the measure. The effect was the highest among the age group 50-63 (Koppel, Laurimäe, 2021).

Target groups

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

Actors and funding

Actors Funding
National government
Trade unions
Employers' organisations
Company / Companies
Public employment service
National funds

Social partners

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

Trade unions Employers' organisations
Role Negotiated Negotiated
Form Any other form of consultation, institutionalised (as stable working groups or committees) or informal Any other form of consultation, institutionalised (as stable working groups or committees) or informal

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

  • No involvement
  • Main level of involvement: Peak or cross-sectoral level

Involvement

Social partners are directly related to the design of the temporary subsidy program via the Estonian Unemployment Insurance Fund (EUIF) council as being one of the council members. The council must agree with the measures offered by the EUIF, thus the social partners are strongly involved in the process.

Views and reactions

The measure was discussed in and approved by the council of the Estonian Unemployment Insurance Fund. The council consists of the representatives of the government, companies, trade unions and employer's organisation. Though both social partners had their own specific views and needs, overall they were very supportive of the measure and the degree of debates was much lower than usually when negotiating measures.

Sources

  • 20 March 2020: Explanatory note (in Estonian) (www.valitsus.ee)
  • 23 March 2020: Tööhõiveprogramm 2017-2020 / Employment Programme 2017-2020 (§19-1) (www.riigiteataja.ee)
  • 01 February 2021: Töötasuhüvitise analüüs (Socio-economic impact of COVID-19: Salary subsidy paid by the Unemployment Insurance Fund in 2020) (www.praxis.ee)
  • 19 March 2021: Töötasu hüvitis 2021 (wage subsidy 2021) (www.tootukassa.ee)
  • 06 June 2021: Subisidy will be continued for May 2021 (Hüvitise maksmine jätkub maikuu eest) (www.sm.ee)

Citation

Eurofound (2020), Temporary subsidy programme, case EE-2020-10/325 (measures in Estonia), COVID-19 EU PolicyWatch, Dublin, http://eurofound.link/covid19eupolicywatch

Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process. All information is preliminary and subject to change.