Achievement: soon employers will be able to pay sickness benefit free of social tax to the pregnant employees

In December 2022, the Chamber proposed to the Ministry of Social Affairs and the Ministry of Finance to amend the law in such a way that in the future employers would be able to pay sickness benefit free of social tax to pregnant employees. Currently, the benefit can be paid exempt of social tax only to an employee who is not pregnant. To date, the corresponding amendment to the law has been sent to the Riigikogu's proceedings.

Current law treats employees unequally
Starting from 1 July 2023, employers shall pay the employee sickness benefit for the fourth to eighth day of illness to the extent of 70 per cent of the employee’s average wages during the last six months. At the same time, employers are allowed to voluntarily pay the employees a larger compensation. Pursuant to the law, a sickness benefit is exempt of social tax for an employer in case the employer pays the sickness benefit to an employee for the second to the eighth sickness day to the extent of the employee’s average salary. 

Pursuant to the current law, a pregnant employee receives sickness benefit from the Health Insurance Fund starting from the second day of illness, the amount of which is 70 per cent of the average social-taxed income per calendar day of the previous year. If an employer paid sickness benefit to a pregnant employee on a voluntary basis to the extent of, for example, 30 per cent, the employer shall pay social tax on it pursuant to the current law. In addition, a pregnant employee would lose their right to sickness benefit from the Health Insurance Fund, because at the same time as sickness benefit, a pregnant employee may not receive income subject to social tax.   

In the future, employers can pay sickness benefit also to the pregnant employees
In September, the Social Affairs Committee of the Riigikogu initiated the Act on Amendments to the Social Tax Act, which gives employers the opportunity to pay voluntary sickness benefit exempt of social tax to a pregnant employee who is sick. This can be done similarly to other employees for the second to eighth day of illness and the amount of compensation must not exceed 30 percent of the average wage of the pregnant worker. If the employer decides to pay sickness benefit to a pregnant employee upon the entry into force of the amendment, the pregnant employee will no longer lose their right to sickness benefit from the Health Insurance Fund as a result.

The amendment of the Social Tax Act also extends to pregnant self-employed persons who will have the right to reduce the income subject to social tax by the calculated sickness benefit. The amount of the deduction is equivalent to the benefit established for pregnant workers, i.e. 30 percent of the average income per calendar day calculated on the basis of the social tax paid as self-employed persons for the previous year.  

The amendment may enter into force in the coming months
The planned amendment enters into force pursuant to the general procedure, i.e. on the tenth day after the date of publication in the Riigi Teataja. The exact date of entry into force of the amendment is not known, but the amendment is expected to enter into force at the end of this year or at the beginning of 2024. The proceedings of the Bill are currently pending in the Riigikogu.

You can read more about the Chamber’s previous proposal here.

The Bill on Amendments to the Social Tax Act can be found here.