Thursday, July 2, 2009

Estonia: unemployment insurance fee increase to 4.2%

The government approved increasing unemployment insurance fee to 4.2% (3% currently) from the 1st of August until the 31st of December so that the Unemployment Fund could cover their higher expenditures due to the economic downturn and new layoff rules, Aripaev reports.

Therefore employees have to pay 2.8% (instead of 2%) of their salary and employer adds 1.4% (1% before). According to the forecast the unemployment benefits will amount to EEK 1,867 bln, which is shared between 57,475 people.

The Unemployment Fund’s expenditures will be more than EEK 3 bln this year, according to the Ministry of Finance’s spring forecast. If employee would pay 2 pct and employer 1, then the fund would collect EEK 1.5 bln as payments. That would mean that the Unemployment Fund would have to take EEK 1.5 bln from their reserves.

At the same time, the unemployment rate in Estonia kept increasing since the beginning of the year to 15.6% in May (14% in April and 12.4% in March) and the pace is dangerously accelerating.

With the new Employment Contracts Act coming into force (yesterday) and making layoffs less costly, many predict a drastic increase of the unemployment rate.

According to a survey, 20% of the companies were waiting for the 1st of july to fire some employees!

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