The payment of a Government-approved follow-on wage subsidy will help businesses most affected by the restrictions to maintain jobs
The Government, on the proposal of the Supervisory Board of the Estonian Unemployment Insurance Fund, approved the payment of a follow-on wage subsidy related to the restrictions set for preventing the spread of COVID-19. The subsidy is paid to partially reimburse the labour costs if the employee's working hours or wages have been reduced. The purpose of the subsidy is to help businesses overcome temporary difficulties and maintain employment relationships and to prevent a rapid rise in unemployment.
The fields of activities that receive the subsidy are specified through the main fields of activities of the businesses, i.e. EMTAK codes, in order to ensure that the subsidies quickly reach the business operators. “In order to prevent a rapid rise in unemployment, businesses need support during the restrictions or the month immediately following them, when employers are paying wages for the restriction period. The payment of the subsidy is accompanied by a restriction on redundancies, with which we help to keep people feeling safe and socially secure because their jobs are being preserved,” said Tanel Kiik, the Minister of Health and Labour.
“The COVID-19 crisis and the restrictions related to coronavirus prevention have created serious economic difficulties in the fields most affected and may therefore lead to redundancies. Our goal is to maintain the highest possible employment by supporting both business operators and employees,” explained Minister Kiik.
According to the proposal of the Supervisory Board of the Unemployment Insurance Fund, a business whose turnover or income has decreased by at least 50 per cent in March 2021 compared to the average of the period from December 2019 to February 2020 can apply for the follow-on wage subsidy. The subsidy shall be paid to employees with a contract of employment who do not have work in the agreed extent or whose pay has been reduced and whose date of employment with the given employer is 1st October 2020 at the latest.
The Unemployment Insurance Fund compensates the employer up to 60 percent of the employee's previous average salary, but not more than 1,000 euros in gross amount. When calculating the average salary of an employee, the Unemployment Insurance Fund uses the employee's salary period from October to December 2020 as the basis for the calculation. The employer is required to pay a gross salary of at least 200 euros to the employee who receives the additional wage subsidy, but the employer may also pay a higher salary. The subsidy is transferred to the employer's bank account and is intended for paying the employees' salaries. The business is not allowed to lay off the employees who have received the subsidy until 31st May. Follow-on wage subsidy can be requested for March.
Self-employed persons whose business income was 50 percent lower in 2020 than it was in 2019 can also receive the subsidy. The amount of subsidy for self-employed persons is 584 euros. A self-employed person can apply for the follow-on wage subsidy from the Unemployment Insurance Fund after they have submitted the 2020 income tax return.
The cost of the follow-on wage subsidy is planned to be up to 37.9 million euros and it will be financed from the Unemployment Insurance Funds. Follow-on wage subsidy is also paid to self-employed persons and the subsidy that is paid to them is financed from the reserve fund of the Government of the Republic in the amount of up to 4.66 million.
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