Plans To Change the Unemployment Insurance System That Has Remained Unchanged For 18 Years
The Chamber has sent to the Ministry of Social Affairs an opinion related to the intent to develop a draft act for the amendment of the Unemployment Insurance Act and Labour Market Services and Supports Act. The new solutions aim at making the system of unemployment benefits more flexible so that it would be more understandable for the insured as well as those who have to implement the law.
Expanding the circle of insured persons
The law currently in force provides clearly employees with which contracts and positions are insured and obliged to pay unemployment insurance premiums. The Chamber supports a solution with which the definition of the term ‘insured’ is based on the payment of the unemployment insurance premium and that the law would not establish a fixed circle of persons. The insurance should be usable by all ‘forms of work’, i.e. insurance is valid for anyone who pays the unemployment insurance premium from the income taxable with social tax.
In their feedback, the members of the Chamber highlighted that if the unemployment insurance would be optional, it would be a positive motivation for the members of the managing bodies of companies. Furthermore, it was highlighted that students should be exempt from the unemployment insurance premium. For example, if a student or pupil of a regular school works after school or during holidays.
Simultaneous unemployment insurance and salary
The applicable system of unemployment benefits is based on the principle that the need for the benefit occurs in case of complete unemployment and loss of income from work and the unemployment benefit is not paid simultaneously with revenue from work.
In the Chamber’s opinion a person who has registered as an unemployed person could have the option to try different positions in order to simultaneously earn additional revenue on the form of temporary/odd jobs until they find a job with the suitable income. The current system favours payment of illegal salary to those who want to work but are registered as unemployed and want to do smaller temporary jobs. Entrepreneurs are ready to pay all taxes on the employee and employees are read to work, but during the period when a person is registered as an unemployed person, many companies and employees are forced to find alternatives to the provisions of the law. Here the state, employers and employees all stand to lose.
Changes to the unemployment benefit qualification conditions
During economically difficult times, employers are forced to decrease the volume of work and rearrange work, and they no longer can offer work to their employees under the same conditions. In such case, employers terminate the employment contract with an employee on the basis of economic reasons. Voluntary unemployment is a situation when an employee submits an application to terminate the employment contract by their own initiative or upon an agreement with the employer leaves work at the time and under the conditions that are suitable for the employee.
The Chamber supports a solution that would allow payment of unemployment benefit upon voluntary unemployment. However, it would not be possible to pay unemployment benefit to employees whose employment contract is terminated due to breach or under other similar grounds.
Changes to the conditions of unemployment benefits
The Ministry is also planning changes to the conditions of unemployment benefits. For example, it has been proposed that the current two-level system that consists of the unemployment insurance benefit and unemployment support should be changed to one-level one and only the unemployment insurance benefit would be paid in case of unemployment.
Furthermore, proposals have been made for changing the current calculation of the period of insurance and the period of benefits. In the Chamber’s opinion, it would be fair to tie the length of the unemployment insurance benefit with the requirement of the length of service. Additionally, a solution has been proposed that the duration of the unemployment insurance benefits should depend on the situation of economy, but the Chamber does not support such approach, because there are many companies in Estonia that dealing with foreign markets and very often they are impacted by recession much earlier than an average Estonian company. That is, if laying off takes place in these companies at a time when Estonian economy is at a peak, these companies and their employees would be in a disadvantageous situation.