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The Employer has the right to reduce wages down to an existing official minimum wage.

The Estonian Government has declared an emergency situation concerning with the spread of coronavirus since March 12, 2020. The economic environment has changed drastically, and many employers find themselves in a position where they are faced with dramatic drop in demand and are looking for ways to reduce labor costs. Looking at long-term solutions redundancies are the answer, short-term however it is possible to temporarily reduce the wages of existing personnel down to official minimum wage.

Under the section 37 of the Employment Contract Act, an employer has the right to reduce wages for up to 3 months within a 12-month period, down to a reasonable amount, but not below the minimum wage established by the Government (EUR 3.48/hour or EUR 584/ month) if and when the employer is not able to provide the employee with the agreed amount of work due to economic circumstances beyond his/her control and if payment of the agreed wage would be unreasonably burdensome for the employer.

Before the reduction of salaries, the employer shall inform and consult with the employee´s representative or a trustee according to law and procedures provided for in the Employees´ Representatives Act.

The employer must give at least 14 calendar days´notice of the salary reduction. The trustee or employee must give their opinion within 7 days of receiving notification from the employer.

In the event of unilateral reduction in earnings, the employee has the right to terminate the contract of employment, in which case the employer is required to compensate the employee with salary payment equal to one month´s average, and the employee is entitled to unemployment Insurance benefits.

In case of a temporary reducion in remuneration, an employee, from the moment of salary reduction, shall be entitled to refuse the work in proportion to the amount of the reduction.

 

Under the section 37 of the Employment Contract Act, an employer has the right to reduce wages for up to 3 months within a 12-month period, down to a reasonable amount, but not below the minimum wage established by the Government (EUR 3.48/hour or EUR 584/ month) if and when the employer is not able to provide the employee with the agreed amount of work due to economic circumstances beyond his/her control and if payment of the agreed wage would be unreasonably burdensome for the employer.

Before the reduction of salaries, the employer shall inform and consult with the employee´s representative or a trustee according to law and procedures provided for in the Employees´ Representatives Act.

The employer must give at least 14 calendar days´notice of the salary reduction. The trustee or employee must give their opinion within 7 days of receiving notification from the employer.

In the event of unilateral reduction in earnings, the employee has the right to terminate the contract of employment, in which case the employer is required to compensate the employee with salary payment equal to one month´s average, and the employee is entitled to unemployment Insurance benefits.

In case of a temporary reducion in remuneration, an employee, from the moment of salary reduction, shall be entitled to refuse the work in proportion to the amount of the reduction.


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