The rise, 7 percent on the current figure, will make the hourly minimum wage stand at €3.44, according to a Trade Union Confederation (EAKL) press release Monday.

Representatives of the EAKL and the Employer's Confederation (ETTK) struck the deal, as a culmination of negotiations which began in June, though the rise has to be approved by the government.

A period of consultation until Sept. 27 allows interested parties to send feedback to both organizations.

EAKL chair Peep Peterson said that minimum wage hike will help reduce poverty, bringing the minimum rate of salary slowly closer to the national average wage, itself set to rise by 6.4 percent in 2020, according to Bank of Estonia data.

"For years, trade unions have been aiming for a situation in which the minimum wage would be at least 40 percent of the average wage," Peterson said, according to BNS.

"With net wages, this has also been achieved thanks to the income tax reform that came into effect last year, but when it comes to gross wages, we are still several dozen euros behind the goal," he continued, adding that while Estonia's minimum wage may be among the highest in Central and Eastern Europe, so too are prices.

Arto Aas, head of the ETTK, said it was natural for minimum wages to increase in line with the rapid growth of average wages. At the same time, in addition to wage growth, efforts must also be made to increase labor productivity, he said.

"Salary growth must be sustainable. It should not reduce the capacity to invest, innovate and develop smarter products and services. Too rapid a rise in wages can lead to a loss of business competitiveness and an increase in unemployment," Aas said.

"All this was taken into account during the discussions, and the agreement is a sensible compromise between the desires of employees and the possibilities open to employers," he added.

In 2017, employers and unions concluded an agreement to establish the minimum wage based on a multiplier of two times the rate of increase in productivity during the year in which the rate is agreed.

The upper limit of the rate of growth is further two times the forecast real economic growth, and the lower limit, at least 40 percent of the forecast average gross wages, based on the Bank of Estonia summer economic forecast, according to BNS.

The current minimum wage figure is €540, with a minimum hourly rate of €3.21. The rate has almost doubled since 2010, when it stood at €278 per month.

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