The negotiations on the minimum wage between the two organisations started in June this year. The agreement to raise the monthly minimum pay by €40 and the hourly minimum by 20 cents was reached at the end of the summer, the Baltic News Service reported.

The national minimum wage in Estonia is a legal requirement, which means no employer may pay an employee less for a full-time job. The arrangement is sought privately between the employers and employees' association of the country and enforced by the state.

"The minimum wage must be linked to the productivity of labour. The good news is that according to the forecast by the Bank of Estonia, productivity should grow next year. This makes an increase possible of the minimum wage, this time to €540," president of the Estonian Employers' Confederation, Toomas Tamsar, said on Monday.

Minimum wage still too close to subsistence minimum, says Peterson

Chairman of the Estonian Trade Union Confederation, Peep Peterson said that during the month that passed since the agreement was reached, the unions have had feedback from several people indicating that it is very difficult for a anyone to cope with the minimum wage, at least in the capital city of Tallinn.

Peterson said that the unions understand that life with the minimum wage is difficult, but that for the negotiation of sectoral minimum wages employees needed to demonstrate "serious interest." This option has been discussed with security staff and retail employees in mind, he added.

Since 2017 the agreement of employers and unions has been that the basis of any increase of the minimum wage has to be twice the rate of the forecast productivity increase for the year that is being negotiated.

The upper limit of this rate of growth is twice the forecasted real economic growth, while the minimum is set at a mininum 40% of the average gross wage as forecast in the Bank of Estonia's summer outlook, the BNS wrote.

According to the most recent forecast, labour productivity will grow by 4% next year. Twice this rate makes 8%, and based on that the minimum wage will be raised to €540 a month.

For an increase to 40% of the average gross wage, the minimum would have to be increased by approximately 10.8% to €554 euros. Twice the real GDP growth forecast for next year amounts to 7.2%, which would require raising the minimum wage to €536 a month.

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