Estonia: Salary subsidies extended to March

Subsidies will be paid for March 2021.

In order to receive an Unemployment Insurance Fund subsidy, the employer must meet the following criteria:

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 March 2021 compared to the average monthly turnover or income between December 2019 and February 2020;

2) the code of the employer’s principal activity registered in the Estonian commercial register as of 1 March 2021 is included in the following list of codes of entrepreneurs eligible for a subsidy: https://www.tootukassa.ee/sites/tootukassa.ee/files/lisa_emtak-d_04.03.2021.pdf;

3) 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;

4) the employer has taken one of the following measures in respect of the employee in March:

• reduced the employee’s working hours under Section 35 of the Employment Contracts Act; or
• reduced the employee’s salary under Section 37 of the Employment Contracts Act.

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

1) one of the measures specified in point 4 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 October 2020 (an entry for the employee’s starting work has also been made in the employment register on the same date).

Compensated amount and time period

Before submitting an application, the employer must pay the employee that is to be subsidised a gross salary of at least 200 euros for March.

The Unemployment Insurance Fund will pay the employer a subsidy of 60% of the employee’s average wages but not more than 1,000 euros in gross amounts. The subsidised amounts are calculated based on payments subject to individually registered social tax declared to the Tax and Customs Board in Annexes 1 and 2 of the TSD form for October, November and December 2020.

Unlike the previous salary subsidies paid by the Unemployment Insurance Fund, the extended subsidies for March will be transferred to the employer’s bank account, and the employer will pay the employee. The employer is required to pay the employee the amount of salary that the employee is entitled to for March under the Employment Contracts Act (applying either Section 35 or 37 of the Act), regardless of the amount of subsidy received from the Unemployment Insurance Fund. In other words, the state subsidy received by the employer will cover part of the salary payable to the employee.

Combined with the portion of the salary payable by the employer, the subsidy paid by the Unemployment Insurance Fund must not exceed the employee’s monthly salary for March 2021. The employer is required to calculate the relevant salary for the employee and submit the amount to the Unemployment Insurance Fund.

Applying for the extended salary subsidy

Before submitting an application to the Unemployment Insurance Fund, the employer must make a payment of at least 200 euros (gross) to the employee. Applications can be submitted from 1 April to 3 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.

Important points regarding the necessary authorisation for the person submitting an application:

1) Please make sure that you have valid authorisation as a management board member in the commercial register.

2) Where board members have joint representation rights, it is sufficient if one of them submits the application (this is according to a spoken statement by the Unemployment Insurance Fund).

3) If the employer’s board members are foreign nationals who do not have an Estonian ID card or e-residency card, and no representative of the employer (e.g. an accountant) is currently authorised to submit documents to the Unemployment Insurance Fund, then the Fund recommends issuing a power of attorney to an employee who holds an ID card or an e-residency card. The Estonian ID card or e-residency card will allow the employee to enter the e-service and submit the application on behalf of the employer. Please remember to provide the employee with all the information and documents necessary for the submission of the application.

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 2021 if the employer is VAT registered);

2) the gross salary, unemployment insurance contribution and social tax details for March 2021 for each employee to be subsidised;

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

4) if the employer’s principal activity is one of the listed areas of activity, but this was not indicated in the commercial register as the employer’s principal activity as of 1 March 2021, the employer must submit additional information or documents verifying the activity to the Unemployment Insurance Fund.

Timing of the payments

The Unemployment Insurance Fund seeks to make the payments to employers as soon as it has processed a correctly submitted application and made a decision on payment of the subsidy. Payments will start on 12 April 2021.

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 between 1 March 2021 and 31 May 2021 due to a redundancy, the employer must repay the subsidy in full.