Unemployment Fund proposes leaving insurance contribution rates unchanged

The Unemployment Insurance Fund (Töötukassa) office on Tartu's Vaksali Street,
The Unemployment Insurance Fund (Töötukassa) office on Tartu's Vaksali Street, Source: Aili Vahtla/ERR

The supervisory board of the Unemployment Insurance Fund is to propose to the Estonian government to leave the unemployment insurance contribution rate unchanged at 2.4 percent of a person's pay for the next four years.

The current rate of 2.4 percent consists of 1.6 percent paid by the employee and 0.8 percent paid by the employer.

"While it would be good to lower the rate of the unemployment insurance contribution during the crisis, the temporary compensating of remuneration to employees at companies experiencing difficulties will not allow us to do so at this time," Unemployment Insurance Fund supervisory board chairman Peep Peterson said in a press release on Wednesday.

"The Unemployment Insurance Fund's reserves are sufficient, and we can be confident that the Unemployment Insurance Fund has enough money to fulfill its obligations," Peterson added.

Total expenditures of the unemployment insurance system are estimated to grow significantly in 2020 due to the emergency situation arising from the coronavirus pandemic and the resulting deterioration of the economic situation.

The rise in expenditures will be caused primarily by an increase in the numbers of recipients of unemployment insurance benefits, while expenditures on active measures will be boosted by the temporary wage compensation measure.

According to Peterson, of the €838 million that used to be in the fund's reserves, less than €400 million will be left by the end of the year.

"Quite a significant portion of the reserves will be depleted this year already, whereas costs will remain higher than before in the couple of years to come due to the economic situation," he noted.

With a contribution rate of 2.4 percent of a person's pay, the unemployment insurance system's income will total €202 million and outlays €261.3 million in 2021.

Considering all of the incomes and outlays related to unemployment insurance, the assets of the Unemployment Insurance Fund are estimated to decrease by €59.3 million in 2021.

The estimated net value of the fund's assets as of the end of 2021 is to be €333 million, compared with €838.1 million at the end of last year.

Unemployment insurance was first introduced in Estonia in 2002. The contribution rate was highest from 2009-2013, when it stood at 4.2 percent, 2.8 percent of which was payable by the employee and 1.4 percent by the employer. Since 2015, the rate in force has stood at 2.4 percent.


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Editor: Aili Vahtla

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