Labor law

Changes to sickness benefit, working time and minimum wage

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A number of changes will soon take place in labour law, with direct implications for everyday life in the workplace. The changes pertain to employees’ rights and benefits.

1. Starting in July, the sickness benefit will be paid from day 4

On 1 July 2023, an amendment to the Occupational Health and Safety Act will come into force in relation to payment of sickness benefit. Sickness benefit is a financial compensation that is paid to a medically insured person who loses income subject to social tax due to illness.

Since 2021, due to the pandemic, the procedure for payment of the sickness benefit encouraged employees to stay home from work as soon as they experienced symptoms of illness. The employer paid compensation from day 2 to day 5 and the Estonian Health Insurance Fund paid the compensation starting at day 6. No compensation was paid for day 1, this being the employee’s co-pay.

The pre-pandemic arrangements will be reinstated on 1 July 2023, with changes to the payment of benefits. Benefits will be paid as follows for illnesses where the employee went on sick leave on 1 July 2023 and later: The employer pays compensation from day 4 to day 8. From day 9, the Health Insurance Fund pays the compensation. The employee will not receive compensation for the first three days.

The compensation rate paid by the Health Insurance Fund will stay the same – 70% of the employee’s average salary. The employer takes into consideration the average salary paid to the employee over the last six months. The month in which the need to calculate the benefit is considered to be the month in which the certificate of sick leave was opened. The sickness benefit is always calculated on a calendar-day basis.

2. New interpretation of the directive concerning employees’ rest time

A European Court of Justice decision that recently came into force interpreted the directive of European Parliament and of the Council concerning certain aspects of the organisation of working time. The interpretation will result in changes in organisation of work and rest time.

The court decision pertains to use of daily and weekly rest time. According to the Employment Contracts Act in force in Estonia, employees must have at least 11 hours of rest time during every 24-hour interval. The minimum requirements for weekly rest time vary depending on whether the employee works on the basis of summarised working time or not. An employee working on the basis of day-by-day accounting of working time must have at least 48 hours consecutive rest time and an employee working on the basis of summarised working time must have at least 36 hours per seven days.

Prior to the entry into force of the court decision, the granting of weekly rest time was calculated such that the daily rest time was included in weekly rest time. The European Court of Justice however took the position that the right to daily rest time and the right to weekly rest time are two independent rights with different goals. For that reason, it should be ensured that employees can actually use these rights. The Court of Justice ruled that daily rest time must be added to weekly rest time. The purpose of this interpretation is for ensuring more effective employee health protection.

The new interpretation of the directive and calculation of rest time on that basis does not have any bearing on those who work eight hours a day from Monday to Friday. For people working on the basis of a schedule, organisation of work may however change. The minimum rest time requirement – 11 hours – is added to the weekly rest time of 36 or 48 hours, which results in 47 or 59 consecutive hours of weekly rest time. There is a changeover period running to the end of the year to allow for adjustment to the changes. The new interpretation will begin to be implemented on 1 January 2024.

3. The rise in the minimum wage will become incremental 

The chairman of the Confederation of Estonian Trade Unions, the Estonian Employers’ Confederation and the minister of economic affairs and information technology signed a memorandum of intent on 30 May approving the model of the rise in the minimum wage for the next four years. The agreement set the goal of raising the minimum wage gradually to attain a minimum wage of 50% of the average gross wage by 2027.

The minimum wage will rise incrementally. The minimum wage will make up a certain percentage of the average wage, which is planned to be raised each year. As of the time of the agreement, the minimum wage makes up 39.5% of the average gross wage. It is planned to raise the percentage of the minimum wage so that it makes up the following share of the average gross salary:

  • 42.5% in 2024
  • 45% in 2025
  • 47.5% in 2026
  • 50% in 2027

The agreement sets out conditions that potentially trigger a review of the above-mentioned changes to the growth rate but only in regard to agreement on the minimum wage for that given year. Such an agreement will help to raise the minimum wage slightly more, which is especially important considering the tax changes that lie ahead. The exact minimum wage will be established in the autumn in the course of talks between the parties to the agreement.

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