Redundancy and redundancy pay in Estonia

When may the employer make an employee redundant?

Redundancy is allowed when continuing the employment relationship on the agreed terms becomes impossible because of a reduction in the volume of work, a reorganisation of work or another end of work (TLS § 89 lg 1) [1]. Termination on the cessation of the employer's activity, on the declaration of the employer's bankruptcy, or on the termination of bankruptcy proceedings by abatement (raugemine) is also redundancy (TLS § 89 lg 2) [1].

Before making an employee redundant, the employer must offer other work where possible, arranging further training or changing working conditions if needed, provided this does not cause disproportionately high costs; this duty does not apply when the employer's activity ends, bankruptcy is declared or bankruptcy proceedings end by abatement (TLS § 89 lg 3) [1]. The employer must respect the principle of equal treatment (TLS § 89 lg 4) [1].

Employee representatives and employees raising a child under three have a preferential right to keep their jobs; this does not apply in the same cases of cessation of activity and bankruptcy (TLS § 89 lg 5) [1].

A pregnant woman, a woman entitled to maternity leave (emapuhkus), or a person on paternity, adoptive or parental leave may not be made redundant, except when the employer's activity ends, when the employer's bankruptcy is declared and its activity ends, or when bankruptcy proceedings end by abatement (TLS § 93 lg 1) [6]. This protection applies if the employee informed the employer of their situation before receiving the notice of termination or within 14 calendar days after receiving it (TLS § 93 lg 3) [6].

How much notice must be given?

For extraordinary termination, the employer must give the employee notice of at least the following, depending on how long the employment has lasted (TLS § 97 lg 2) [2]:

1. less than one year – 15 calendar days;
2. one to five years – 30 calendar days;
3. five to ten years – 60 calendar days;
4. ten years or more – 90 calendar days.

A collective agreement may provide for different notice periods (TLS § 97 lg 4) [2]. During the notice period, the employer gives the employee a reasonable amount of time off to look for a new job (TLS § 99) [7]. If the employer gives less notice than the law requires, the employee is entitled to the average daily wage for each working day by which the notice fell short (TLS § 100 lg 5) [3].

What compensation is paid on redundancy?

• Employer's compensation. On termination due to redundancy, the employer pays compensation equal to one month's average wage of the employee (TLS § 100 lg 1) [3].
• Töötukassa insurance benefit. An employee whose employment with that employer lasted at least five years is entitled to it (TKindlS § 14¹) [4]. It equals one month's average wage for five to ten years of employment and two months' average wage for more than ten years (TKindlS § 14² lg 1) [8]. The employer submits the application to Töötukassa within five calendar days of the end of the employment; if the employer does not, the employee may also submit it (TKindlS § 14³ lg 1 and 2) [9].
• Fixed-term contract. If a fixed-term contract is terminated for economic reasons, the employer pays compensation equal to the wages the employee would have received until the end of the term; this does not apply when the employer's bankruptcy is declared or bankruptcy proceedings end by abatement, or when the contract is terminated due to force majeure (TLS § 100 lg 3) [3].

Töötukassa decides within 14 calendar days of receiving a proper application and documents (for good reason it may extend this by 14 calendar days), and pays the benefit no later than on the fifth calendar day after the decision (TKindlS § 14⁴ lg 1, 2 and 4) [5].

What is collective redundancy?

Collective termination means making redundant, within 30 calendar days, at least 5 employees in a business with on average up to 19 employees; at least 10 employees in a business with on average 20–99 employees; at least 10 percent of the employees in a business with on average 100–299 employees; or at least 30 employees in a business with on average at least 300 employees (TLS § 90 lg 1) [10]. Before deciding, the employer must consult the employees' trustee or, if there is none, the employees in good time (TLS § 101 lg 1) [11]; after the consultation the employer submits the information to Töötukassa (TLS § 102 lg 1) [12]. Collective termination generally takes effect when the notice period ends, but not earlier than 30 calendar days after Töötukassa received the required information (TLS § 103 lg 2) [13]; Töötukassa may shorten this period or extend it to up to 60 calendar days (TLS § 103 lg 3 and 4) [13].

What the law says

• „Töölepingu ülesütlemisel koondamise tõttu maksab tööandja töötajale hüvitist töötaja ühe kuu keskmise töötasu ulatuses.“ [3] (translation: on termination of the employment contract due to redundancy, the employer pays the employee compensation equal to one month's average wage; TLS § 100 lg 1).
• „Enne töölepingu ülesütlemist koondamise tõttu peab tööandja pakkuma töötajale võimaluse korral teist tööd“ [1] (translation: before terminating the employment contract due to redundancy, the employer must offer the employee other work where possible; TLS § 89 lg 3).
• „Tööandja peab ülesütlemist põhjendama.“ [14] (translation: the employer must give reasons for the termination; TLS § 95 lg 2) – in a form that can be reproduced in writing.
• „Kohtule peab hagi või töövaidluskomisjonile avalduse ülesütlemise tühisuse tuvastamiseks esitama 30 kalendripäeva jooksul arvates ülesütlemisavalduse saamisest.“ [15] (translation: an action to a court or an application to the labour dispute committee to establish that the termination is void must be filed within 30 calendar days of receiving the notice of termination; TLS § 105 lg 1).

What to do

1. Check that the notice of termination is in a form that can be reproduced in writing and gives reasons (TLS § 95 lg 1 and 2) [14].
2. Work out your notice period from the length of your employment (TLS § 97 lg 2) [2] and ask for time off to look for work (TLS § 99) [7].
3. Check that the final settlement includes redundancy compensation of one month's average wage (TLS § 100 lg 1) [3].
4. If your employment lasted at least five years, make sure the employer applied to Töötukassa within five calendar days; otherwise apply yourself (TKindlS § 14³ lg 1 and 2) [9].
5. If you believe there was no ground for redundancy or the requirements were breached, file an application with the labour dispute committee (töövaidluskomisjon) or an action with a court within 30 calendar days of receiving the notice (TLS § 105 lg 1) [15]. If the termination is void, the contract is deemed not to have ended; at the request of the employer or the employee, the court or committee terminates the contract as of the time it would have ended had the termination been valid (TLS § 107 lg 1 and 2) [16]. In that case the employer pays compensation equal to three months' average wage, which the court or committee may change in view of the circumstances (TLS § 109 lg 1) [17]; for an employee who is pregnant, entitled to maternity leave or elected as an employee representative, it is 12 months' average wage (TLS § 109 lg 2) [17].

Frequently asked questions

Must the employer offer other work before redundancy?

Yes, where possible, except when the employer's activity ends, bankruptcy is declared or bankruptcy proceedings end by abatement (TLS § 89 lg 3) [1].

Who may not be made redundant?

A pregnant woman, a woman entitled to maternity leave, or a person on paternity, adoptive or parental leave may not be made redundant, except in the cases of cessation of the employer's activity or bankruptcy listed in the Act (TLS § 93 lg 1) [6]. Employee representatives and employees raising a child under three have a preferential right to keep their jobs (TLS § 89 lg 5) [1].

How much is redundancy compensation?

The employer pays one month's average wage (TLS § 100 lg 1) [3]. If the employment lasted at least five years, Töötukassa's insurance benefit of one or two months' average wage is added (TKindlS § 14² lg 1) [8].

What if the employer gave too little notice?

The employee is entitled to the average daily wage for each working day by which the notice fell short (TLS § 100 lg 5) [3].

Within what time can redundancy be challenged?

An action to a court or an application to the labour dispute committee to establish that the termination is void must be filed within 30 calendar days of receiving the notice of termination (TLS § 105 lg 1) [15].