Labor law

Unemployed people can temporarily work, and their benefits increase

Authors: Kristel Tiits, Legal Manager and Lee Laanemäe, Legal Adviser

Amendments to the Labour Market Services and Benefits Act (hereinafter LMSBA) and the Unemployment Insurance Act create the possibility of temporary employment, in other words, accepting temporary job offers during registered unemployment, plus unemployment allowance and unemployment insurance benefit increase.

Temporary working while being a registered unemployed, is allowed starting from 1st of September, 2020[1]. If, under current law, unemployment benefits are stopped as soon as a registered unemployed person goes to work, then the opportunity will be created to work temporarily and increase income. Temporary employment is made possible primarily because the unemployed have so far had insufficient social protection - for example, in 2018, 52.5% of the unemployed lived in relative poverty and 16.7% in absolute poverty[2].

Temporary employment

Temporary work means work performed based on a contract for services, authorisation agreement or contract under the law of obligations for the provision of other services or employment in the public service the single duration of which does not exceed eight days during the time the person is registered as unemployed[3]. During the time a person is registered as unemployed, the person may work on a temporary basis up to eight days in a calendar month but not more than during 12 calendar months over a period of 24 months. The 24 calendar months preceding each temporary work shall be regarded as the period of 24 months[4].

In essence, this complex wording means that you can work temporarily during one year, keeping in mind the previous two years. For example, if a registered unemployed person works temporarily from September 2020 to September 2021, then he or she can work temporarily again only in September 2023. During temporary employment, a person can remain registered as unemployed and at the same time receive unemployment benefits and wages. However, it is important to note that the period of payment of unemployment insurance benefit and unemployment benefit is not extended by temporary employment. If a person has been granted unemployment insurance benefit for 180 calendar days, the benefit will still be paid for up to 180 calendar days, regardless of working temporarily[5].

Another important thing to pay attention to is the number of days worked. LMSBA clearly states that the upper limit of temporary employment is eight calendar days per month. This means that records are kept by day, not by hour. It does not matter whether a person works eight hours a day or one hour a day during this eight-day period. This is an important observation for all those employers who, using job advertisements, are looking for substitutes for a holiday period, for example, and would like to divide the workload into, for example, ten working days, but must bear in mind that such a division is not possible. A person can also temporarily work on a one-day contract basis, because LMSBA does not regulate how many contracts a person can enter into in one calendar month.

Remuneration for temporary work in one calendar month is also limited - it may not exceed 40% of the minimum wage for the current calendar month[6]. In other words, if a person works for eight days in a calendar month, he or she may not receive more than EUR 233.60 in that calendar month. The lower limit is set primarily to encourage people to move to permanent jobs and maintain motivation to find a new job. Otherwise, it would be more beneficial to remain unemployed[7].

Bigger unemployment Insurance benefit

The amount of unemployment insurance benefits also increased. For one calendar day, from 01.08.2020, the amount of unemployment insurance benefit for the first 100 days is 60% of the employee's average salary and from day 101 until the end of the unemployment insurance benefit payment period, 40% of the employee's average salary. The principles for calculating the minimum amount of unemployment insurance benefit have not changed, but a higher benefit at the beginning of unemployment ensures a smoother and easier transition to unemployment status for people through higher replacement income[8]. In addition, unemployment allowance will be increased - instead of the current 35%, unemployment allowance will be 50% of the minimum wage, starting from 1 January 2021[9].

If you need advice on employment law, feel free to contact our specialists: legal manager Kristel Tiits kristel.tiits@ee.gt.com and legal adviser Lee Laanemäe lee.laanemae@ee.gt.com.

The above text cannot be construed as financial, legal and / or tax advice. This article is a generalized summary. Before making any decisions or approving actions, seek the advice of experts in the field.

Contact us to discuss your company and our legal services!

[1] President of the Republic of Estonia promulgated 14 new laws today. 01.07.2020. On the web: https://www.president.ee/et/meediakajastus/pressiteated/16092-vabariigi-president-kuulutas-taena-vaelja-14-seadust/index.html (17.07.2020).

[2]  Explanatory memorandum of Labour Market Services and Benefits Act.

[3] Labour Market Services and Benefits Act. RT I, 08.07.2020, 11, § 42 (1).

[4] Ibid., (2).

[5] Explanatory memorandum of Labour Market Services and Benefits Act, pg 4.

[6] Labour Market Services and Benefits Act. § 42 (3).

[7] Explanatory memorandum of Labour Market Services and Benefits Act, pg 5.

[8] Explanatory memorandum of Labour Market Services and Benefits Act, pg 9; Unemployment Insurance Act § 9 (4) p 1 and  2.

[9] Labour Market Services and Benefits Act. - RT I, 08.07.2020, 12 -  § 31 (1).