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The Government supported the extension of the remuneration compensation measure until the end of June

21. May 2020 - 0:00

Tallinn, Stenbock House, May 21, 2020 – Today the Government reached a principled agreement at cabinet meeting to support a proposal approved by the Unemployment Insurance Fund Council to extend the remuneration compensation until the end of June and to narrow the criteria of the measure.

“The remuneration compensation measure designed to mitigate the effects of the crisis, from which employers have been able to apply for support to pay workers since March, has helped to maintain jobs and people’s incomes and has improved the situation of companies in difficulty in the current crisis. We must make efforts to help our working people and businesses survive the difficult times and contribute to economic recovery,” said Prime Minister Jüri Ratas.

“Therefore, we considered it important to continue with the measure until the end of June so that the necessary assistance would still continue at the beginning of the summer after the emergency situation ended,” the Prime Minister added.

The Minister of Social Affairs Tanel Kiik said he considered it important to support workers and employers and to avoid large-scale redundancies, as recruitment later is more complex and training more costly. “We have to take into account that there may be additional applicants, and we want the possibility of applying for compensation to primarily be available for employers whose situation is the most difficult. To extend the measure, the Government agreed to allocate up to EUR 36 million of funds to the Unemployment Insurance Fund from the reserve of the Government of the Republic,” said Kiik.

According to the proposal, the criteria for the wage compensation measure are to be narrowed: if the turnover previously had to have fallen by 30%, the new proposal suggests that the fall in turnover should be at least 50%. If previously, the employer had to have reduced the pay or workload of workers by at least 30 per cent, then now, there should be at least half of such workers, or the workload should have fallen by at least half.

Also, the highest rate of compensation is reduced from the previous EUR 1,000 to EUR 800. It is also planned to lower the replacement rate of compensation from 70% to 50%, which means that if an employee had previously been able to receive compensation of up to 70% of their salary (up to EUR 1,000), they could now receive up to 50% of their salary, but no more than EUR 800. The employer’s own contribution remains the same, which previously also amounted to at least EUR 150.

For June, employers who received compensation for two months between March and May, may also apply for the planned measure for workers to prevent redundancies.

There will also be an increase in the time during which the employer cannot lay off the employee. Instead of the previous one month, the employer must guarantee a job for at least the two following months. Otherwise, the employer must return the entire amount of compensation to the Unemployment Insurance Fund.

Two additional criteria are also envisaged. In the future, the remuneration compensation can only be applied for employees working under an employment contract whose employment contract has been concluded before 1 March 2020. The compensation can be applied for by companies that did not have tax arrears as at 12 March, who have paid the arrears of taxes by the time of submitting the application or whose tax arrears have been deferred.

The cost of extending the measure depends on the number of applicants and their employees, the level of compensation received and other factors, remaining in the range of EUR 50–70 million, about half of which is covered by unemployment insurance funds and the other half, i.e., up to EUR 36 million, from the reserve of the Government of the Republic.