Article

Chapter 4 Unemployment Insurance Act: Chapter 9, § 52 (4)(5)

Description

Insolvency is understood as either the bankruptcy of the employer or the abatement of bankruptcy proceedings (if the assets cannot meet the costs of liquidation).

The trustee in bankruptcy or an interim trustee submits a standard format application to the unemployment insurance fund (Töötukassa) which pays insolvency benefits to employees in case of company bankruptcies.

Benefits upon insolvency of the employer include:

• unreceived salary from the period before the declaration of the employer as insolvent;
• unreceived holiday pay from the period before the declaration of the employer as insolvent;
• benefits from the period before or after the declaration of the employer as insolvent which were not received at the time of cancellation of the employment contract.

In case of unreceived salary, the amount paid is up to the employee's gross wages for the last three months of work but not exceeding in total the amount equal to three average gross monthly wages in Estonia during the quarter preceding the declaration of the employer as insolvent (according to the data published by the Statistical Office).

In case of unreceived holiday pay, the maximum paid amount is one gross monthly wage of the employee but not exceeding the amount equal to one average gross monthly wage in Estonia during the quarter preceding the declaration of the employer as insolvent (according to the data published by the Statistical Office).

In case of unreceived benefits, the maximum paid amount is equal to the employee's two gross monthly wages but in total not exceeding the amount equal to one average gross monthly wage in Estonia during the quarter preceding the declaration of the employer as insolvent (according to the data published by the Statistical Office).

Entitled are all employees, public servants, natural persons providing services on the basis of a contract, non-working spouses accompanying and officials serving in a foreign mission of the Republic of Estonia who have paid the unemployment insurance premiums pursuant to the procedure provided for in this act, including part-time and fixed-term workers, irrespective of the duration of the employment.

Exempted are sole proprietors, notaries, bailiffs, sworn translators, other independent persons engaging in a profession in public law, creative persons engaged in a liberal profession, management or controlling bodies of a legal person, some civil servants, those who have reached pensionable age and persons receiving early retirement pension.

Employers are defined as legal persons or structural units thereof if granted the rights of an employer, or a natural person with active legal capacity.

There has been a reform in the unemployment insurance benefit system, which affects the length of the grant of the benefit. An unemployed person shall be paid unemployment insurance benefit additionally for 60 calendar days on one occasion if the following conditions are fulfilled in the month the period of payment of unemployment insurance benefit ends: 1) registered unemployment rate in the calendar month before the previous calendar month was higher than 8.5%; 2) the period of payment of unemployment insurance benefit ends between 1 September 2021 and 28 February 2022.

Also, the unemployment insurance fund shall calculate the registered unemployment rate for the previous calendar month and publish it on its website once a month not later than by the tenth day of the given calendar month.

In addition, since 30th of June 2023, the length of the benefit payment period is not only dependent on the work experience but also the situation on the job market. At the end of the base benefit payment period, the situation will be reevaluated, whether on average the unemployment rate has worsened or improved in the last 3 years (also a reference to the average of the past 10 years is made). If the unemployment rate has increased, there will be an extensions of the benefit payment, as it has been harder to find a job. If the situation has improved, no extension is given. Individuals with work experience of more than 5 years can get an extension of 60 days twice or 120 days once. People with less than 5 years of experience can get a maximum of 60 days of extension.

Commentary

As shown from the table below, the number of people entitled to benefit upon insolvency of the employer was significantly higher during the economic downturn. The COVID-19 pandemic has also increased the number of cases. 

Source: Estonian unemployment insurance fund

Additional metadata

Cost covered by

National government

Involved actors other than national government

Public employment service Other

Involvement (others)

The trustee in bankruptcy or an interim trustee

Thresholds

Affected employees: No, applicable in all circumstances
Company size: No, applicable in all circumstances
Additional information: No, applicable in all circumstances

Sources

• Tööinspektsioon / The Labour Inspectorate
• Source in Estonian: Töötuskindlustuse seadus
• Source in English: Unemployment insurance act
• Deutsch, A., 2011, Europäische Beispiele für die Insolvenzentgeltsicherung, Vienna, Federal Ministry of Labour, Social Affairs and Consumer Protection/IEF
• Sargant, M., 2007, Implementation Report Directive 80/987 EEC amended by Directive 2002/74/EC [protection of employees in the event of the insolvency of their employer], Human European Consultancy/Middlesex University Business School
• Estonian unemployment insurance fund statistics