Coronavirus and Payday: Crisis Mitigation Measures

The spread of the coronavirus has caused anxiety and uncertainty in the economy. Amid this crisis, the government of Estonia has lent a helping hand to businesses and workers by introducing a package of crisis mitigation measures of € 2 billion.

The package represents nearly 7% of the Estonian GDP. The measures concerning employees include new labor market benefits of the Estonian Unemployment Insurance Fund and a change in sickness benefits.

As a newly introduced measure, the Unemployment Insurance Fund is paying benefits to the employees who are employed by companies whose activities are significantly disturbed due to the restrictions caused by the COVID-19 virus.

The Unemployment Insurance Fund shall reimburse 70% of the average gross monthly wages of an employee, but no more than € 1.000. The employer in turn, is obliged to pay the employee an additional gross wage of at least € 150. The Estonian Unemployment Insurance Fund and the employer, respectively, pay all taxes on the benefits and wages.

In order to qualify for the benefit, the employer must meet at least two of the three following conditions, which have been called the 30-30-30 conditions:

  • the turnover of the company for the calendar month for which the compensation is claimed has decreased by at least 30% compared to the turnover of the same month of the previous year;
  • the employer cannot provide the agreed amount of work for at least 30% of the employees and the employer applies § 35 or § 37 of the Employment Contracts Act;
  • the employer has reduced the wages of at least 30% of the employees by at least 30% or to the minimum wage.

The benefit can be claimed by the employers starting from April by submitting an application to the Estonian Unemployment Insurance Fund for each calendar month. Employees are entitled to the benefit for up to two months over a three-month period (1 March to 31 May). Payments will be made until June 30, 2020, and directly to the employees.

Another state benefit for the employees compensation the first three days of sick leave between March and May for all certificates of incapacity for work. Under normal circumstances, the first three days of sick leave are unpaid and thus employees are reluctant to go on sick leave even if they are not feeling well.

The storm will pass eventually. In the meantime, these measures should help employees retain an income while softening the economic blow for employers and avoiding mass lay-offs.

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