Number of layoff notices on rise, aid measure won't help tourism sector

Meresuu Spa Hotel in Narva-Jõesuu.
Meresuu Spa Hotel in Narva-Jõesuu. Source: ERR

The Unemployment Insurance Fund has received more initial layoff notices in the first four days of this week than all of last week combined. Tourism sector businesses have begun setting the tone, as the state's two-month aid measure is too short and too expensive for them.

The number of layoff notices as well as the number of employees to be laid off is on the rise — last week, a total of 18 companies filed initial layoff notices for 261 jobs.

Aid measure expensive for tourism sector

Tourism sector businesses have already begun setting the tone in these layoff notices. For example, V Spa, which operates in Tartu, announced layoffs for 11 positions, while Vihula Manor Hospitality, which runs a spa hotel in Lääne-Viru County, announced 20 layoffs.

Vihula Manor Country Club and Spa director Heigo Vare told ERR that layoffs will broadly affect some half of its employees, and the number may increase even further.

"It's likely that some half or a bit fewer employees will remain," he said.

Vare added that the company plans to apply for the aid measure being offered by the state to help support the wages of its remaining employees. This is of little help to the tourism sector, however, where revenue dropped 100 percent, which is why companies are opting for layoffs instead.

"This isn't a very friendly measure, as if there are 50-60 people working and we pay each one the €150 plus €219 in social tax required of companies, that is still €2,000 in monthly wage expenses," he explained. "For a small company like us, that is still a significant expense. That is what forced us to do this."

The two-month measure will also be too short in span for the tourism sector, as it will also be losing out on the sector's typical high season — summer. While they do have some bookings for summer, accommodation establishments aren't optimistic.

"Cancellations continue coming in right now," Vare said regarding summer bookings. "This is the case all over Estonia."

Echoing Vare is Kalle Kuusik, managing director of Spa Tours OÜ, the owner of Grand Rose Spa Hotel in Kuressaare, Meresuu Spa Hotel in Narva-Jõesuu and Viimsi Spa just outside of Tallinn.

"Almost everything has been canceled for summer," Kuusik said. "There are still a few bookings left, but those are likely those who don't yet know what will happen."

People are unsure of what the future will bring, but after losing their jobs, they also no longer have money for expensive vacations or, in many cases, vacation days left, as many employers have placed their employees on annual leave in the current situation.

This summer will also in all likelihood not see any foreign tourism either, as regular air and ship traffic is not expected to be restored anytime soon.

Kuusik's company employs 500 people, all of whom are currently sitting at home, without work. While they should be getting paid, the company is currently seeing no revenue whatsoever. Next week is payday, but there is no money with which to pay wages.

No response from ministry, government

The Estonian Hotel and Restaurant Association (EHRL) has contacted both the Ministry of Finance and the Prime Minister's Office with a request to extend the length of the state aid package as well as waive employer requirements to pay at least €150 plus social tax on each employee each month. They have yet to receive a response.

The association has also asked for clarification on the terms and conditions of the state aid package so that it would be aware of how applications for the aid would begin on April 1; in response, both the Ministry of Finance and the Government Office sent back nothing more than a link to the Unemployment Insurance Fund homepage, which lists the same general information available everywhere else.

As the tourist sector remains in the dark, discontentment continues to swell.

"Payday is next week, but nobody has told me what I'm supposed to pay them with," Kuusik said. "We have applied for specific cash injections for businesses that have been forced to close early. We haven't seen a single cent of these cash injections."

According to the managing director, the company's Saaremaa employees are terrified that it will come to layoffs.

"It would have been a huge help if the state hadn't imposed a required fee on the company's side," Vare said.

EHRL managing director Maarika Liivamägi said that two months is not long enough for the hotel and restaurant sector, stressing that once the pandemic ends, the tourism sector won't recover overnight.

"Not everyone will for some strange reason immediately begin traveling to or within Estonia," Liivamägi said. "The wage relief measure definitely needs to be extended. We also sought a tax exemption for the sector, and extended deadlines for the aid measure until the end of the 2020-2021 season in some cases. It will take some time for the sector to recover."


Download the ERR News app for Android and iOS now and never miss an update!

Editor: Aili Vahtla

Hea lugeja, näeme et kasutate vanemat brauseri versiooni või vähelevinud brauserit.

Parema ja terviklikuma kasutajakogemuse tagamiseks soovitame alla laadida uusim versioon mõnest meie toetatud brauserist: