All news

Estonia: Extended salary subsidies in March and April

2021-04-01

The subsidies will be paid for March and April 2021.

Unlike before, eligibility for a subsidy is no longer linked to the employer’s principal activity code registered in the Estonian commercial register. Under the new terms, the employer must meet the following criteria in order to be eligible for an Unemployment Insurance Fund subsidy:

1) the employer’s turnover, or income for non-VAT registered entities, declared with the Tax and Customs Board has decreased by at least 50% in the 2021 calendar month for which the subsidy is claimed compared to the average monthly turnover, or income, between December 2019 and February 2020 or between July and December 2020;

2) the employer is not subject to ongoing compulsory winding-up, liquidation or bankruptcy proceedings and has no tax debt at the time of submitting the application or the debt has been deferred;

3) the employer has taken one of the following measures in respect of the employee in the calendar month for which the subsidy is claimed:

  • applied Section 35 of the Employment Contracts Act as a result of which the employee’s working hours have reduced; or
  • reduced the employee’s salary under Section 37 of the Employment Contracts Act.

Extended salary subsidies are only paid to employees that meet the following criteria:

1) one of the measures specified in point 3 above has been applied to the employee (Section 35 or 37 of the Employment Contracts Act);

2) the employee has a valid employment relationship with the employer applying for a subsidy at the time of submitting the application, and the employee started work no later than on 1 January 2021 (an entry for the employee’s starting work has also been made in the employment register on the same date).

Subsidies are not paid for employees who were on sick leave or unpaid leave for the entire calendar month for which the subsidy is claimed.

Compensated amount and time period

Before submitting an application, the employer must pay the employee that is to be subsidised at least EUR 200 (gross) salary subject to an unemployment insurance contribution for the calendar month for which the subsidy is claimed.

For each calendar month, the Unemployment Insurance Fund will pay the employee a subsidy of 60% of the employee’s average monthly salary but not more than EUR 1,000 (gross). The average monthly salary is calculated by taking the total amount of salary subject to unemployment insurance contributions paid by the employer to the employee during the nine months of employment preceding the last three months of employment and dividing that amount by nine.

The extended subsidies for March and April will be transferred directly to the employee’s bank account.

For a full-time employee, the subsidy paid by the Fund, combined with the salary paid by the employer, will ensure that the employee receives at least the minimum wage established by the Government of the Republic. For part-time work, the subsidy combined with the salary paid by the employer will ensure that the employee receives his/her average salary calculated on the basis described above (not more than the maximum amount).

The salary subsidies are legally treated as salary paid by the employer, which the Unemployment Insurance Fund pays to the employee in the name of the employer but from the Fund’s own accounts. The Unemployment Insurance Fund withholds and pays the taxes and fees payable on the gross amount of the salary subsidies. The employer is required to pay the employee the difference between the amount of salary that the employee is entitled to for the calendar month for which the subsidy is claimed under the Employment Contracts Act (applying either Section 35 or 37 of the Act) and the amount of subsidy received from the Unemployment Insurance Fund.

Applying for the extended salary subsidy

The employer must submit separate applications for March and April. In order to receive the subsidy, the employer must meet the above conditions at the time of submitting the application.

Before submitting an application to the Unemployment Insurance Fund, the employer must make a payment of at least EUR 200 (gross) to the employee. Applications for March can be submitted from 1 to 30 April 2021, and applications for April from 1 to 31 May 2021.

Applications can be submitted only through the Unemployment Insurance Fund e-service at https://www.tootukassa.ee/tkauth/login. Applications can be made on behalf of the employer either by a member of the management board listed on the registry card or by a person authorised by a member of the management board in the Fund’s e-service. Instructions for authorisation are available at https://www.tootukassa.ee/sites/tootukassa.ee/files/volituse_andmine_e-tks.pdf.

Details and documents to be added to the application

When applying for the subsidy, the employer must attach to the application or indicate in the application:

1) evidence of reduced turnover or income (incl. a VAT return for March or April 2021 if the employer is VAT registered);

2) personal and contact details and bank account numbers of the employees;

3) confirmation and proof of payment of at least EUR 200 gross salary to each of the employees (e.g. a payment order);

4) confirmation that the employer is eligible for the subsidy.

Timing of the payments

The Unemployment Insurance Fund seeks to make the payments to employees as soon as it has processed a correctly submitted application and made a decision on payment of the subsidy (as a rule, within three working days of making the decision). Payments will start in the first half of April.

Redundancy restrictions

When applying for the extended salary subsidy, employers must also take into account the related restriction of redundancies. If the employer terminates the employment of a subsidised employee in the calendar month for which the subsidy is claimed or in the following two calendar months due to a redundancy under Section 89 or 90 of the Employment Contracts Act, the employer must repay the subsidy in full.