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Estonia will have a new Employment Contract Act

Estonia is about to implement new Employment Contract Act (ECA) on 1st July 2009. Draft of a new ECA has been heavily debated within the last years. The aim of new act is to make labor market more flexible. As new act takes effect, the old Salary Act, Vacation Act and final parts of the old Soviet time Labor code, cease to exist.

Main things that will take effect with new Act:

  • No permission is needed for collective dismissals. Employer can demand employee to work less and pay less for it during 3 months per year. No more rights to send an employee to forced vacation.
  • Principles in what order and who can be dismissed will change. Biggest change concerns notice period and severance payments.
  • Overtime is compensated with free time, not extra pay unless it is agreed otherwise. Salary must be paid to employee who has not been able to work due to personal reasons. Bonus is based on company's result, what is shown in annual report.
  • From 1 June 2009 employers will pay 1% unemployment insurance and employees 2% of the salary. Previously the rates were 0,3% and 0,6%.
  • In sick leave there are 3 waiting days on employee's own cost, then employer pays next 5 sick days and from day 9 Haigekassa pays. The level of compensation is 80 %. Not concerning with parent, who is sick with children.
  • Confidentiality clauses are for free, no more compensation for it. Contractual penalties are claimed if so is agreed, as well as compensation for full damage.
  • Employer can claim training costs, if employee terminates an employment contract within 3 years from training.
  • 4 months probation time to all employees
  • Vacation is based on the calendar year and can be saved max. 1 year.
  • No more labor inspector's permission is needed for internal working regulations
  • Workbook (tööraamat) is not needed anymore.
  • Employment contracts must be archived for 10 years.

All benefits from new Act will be valid automatically, if employer wants use it's benefits, probably old contracts must be amended

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