Unemployment insurance is a type of compulsory insurance the purpose of which is to provide, upon unemployment, partial compensation for the lost income to insured persons for the time of the search for work, and partial compensation of the expenses related to the termination of employment contracts to employees and service relationships to public servants in the case of lay-offs, and the protection of the claims of the employees upon insolvency of employers. The Unemployment Incurance Act entered into force on 1 January 2002, unemployment insurance benefits are paid by the Estonian Unemployment Insurance Fund.  

Unemployment insurance is financed from the unemployment insurance premiums made by the insured persons (employees) and the employers. The collection of unemployment insurance premiums started from 1 January 2002, first unemployment insurance benefits were paid out from 1 January 2003.  

The rate of unemployment insurance premium for employees may be 0.5 to 2,8 percent on wages paid to them and the rate for employers may be 0.25 to 1,4 percent on the payroll. Each year the Supervisory Board of the Unemployment Insurance Fund will submit a proposal to the Government of the Republic of Estonia for the establishment of the rates of unemployment insurance premium.    

The unemployment insurance premium in 2010 is 2,8 % of earnings and other fees for employees and 1,4 % on gross payroll for employers.

The unemployment insurance benefit is intended to provide compensation to insured persons, upon their losing employment, which helps them cope during the search for new work.  

In order to receive unemployment insurance benefit three main requirements have to be met: 

• Registration as unemployed. Only those unemployed persons who are registered as unemployed in a regional office of the Estonian Unemployment Insurance Fund are eligible to apply for unemployment insurance benefit.   
• Required insurance periods. In order to receive an unemployment insurance benefit, a person must have worked and paid unemployment insurance premiums for at least 12 months during the 36 months preceding the registration as unemployed.
•  Involuntary unemployment. Only those unemployed persons who lost their job involuntary have the right to receive unemployment insurance benefit. The benefit is not granted if a person left employment or service on his/her own initiative (upon personal request) or if person left employment or service by agreement between the parties or due to a breach of duties of employment or service, loss of confidence, an indecent act or act of corruption.  

Duration of benefit The duration of an unemployment insurance benefit depends on the length of the uneployment insurance period, and is:

• up to 180 calendar days if the insurance period is under 56 months;
• up to 270 calendar days if the insurance period is 56-110 months;
• up to 360 calendar days if the insurance period is 111 months or more.

If the insured person attains a pensionable age during the benefit duration, he/she will be granted an unemployment insurance benefit until the date of attainment of the pensionable age.  

Value and calculation of benefit The value of unemployment insurance benefit is connected to the insured person salary prior to unemployment, at first forming 50 percent of the insured person average remuneration per calendar day for the first 100 days and then 40 percent of the same from the 101st day of unemployment. 

In order to receive insurance benefit in case of lay-offs  two main requirements have to be met:  

• employment relationship or service relationship has lasted for at least five years;
• employment relationship or service relationship was cancelled or terminated due to a lay-off.  

Amount of insurance benefit in case of lay-offs An insurance benefit shall be paid to an employee whose employment relationship with an employer or to an official whose employment in the service has lasted for:

• five to ten years - in the amount of one month's average salary or wages;
• over ten years - in the amount of two months' average salary or wages.

The amount of the benefit shall be calculated, based on the data in the unemployment insurance database, from the employee's or public servant's average salary or wages for one calendar day during a period of nine months.  

For the purposes of the Unemployment Insurance Act, an employer's insolvency is an employer's bankruptcy or the abatement of an employer's bankruptcy proceeding. The insolvency of employer is determined by the court by a ruling (declaration of bankruptcy or dismissal of the bankruptcy case).
Upon the insolvency of an employer, the Unemployment Insurance Fund will pay the employees the following compensation:

• wages and holiday pay owed from the period prior to the formal declaration of the insolvency;
• benefits upon termination of the employment contract provided for in the Employment Contracts Act, owed from the period before or after the formal declaration of the insolvency.  

Unpaid wages are compensated to an employee up to three times the monthly gross wage of the employee, but limited to three times the Estonian average monthly gross wage in the calendar quarter preceding the declaration of the employer's insolvency.  

Unpaid holiday pay is compensated for up to the employee's holiday pay for one month, but limited to the Estonian average monthly gross wage in the calendar quarter preceding the declaration of the employer's insolvency. 

Unpaid benefits upon termination of the employment contract is compensated for up to twice the monthly gross wage of the employee, but limited to the Estonian average monthly gross wage in the calendar quarter preceding the declaration of the employer's insolvency.

Aditional information is available in  Estonian Unemployment Insurance Fund  website.