Estonia could cut unemployment insurance contribution rate from 2028

The Estonian Unemployment Insurance Fund’s council has proposed keeping the unemployment insurance contribution rate unchanged in 2027 and reducing it from 2028, ERR reported. The change would leave around 48 million euros more in the hands of Estonian people and companies.

Under the proposal, the rate would remain at 2.4 percent in 2027, with employees paying 1.6 percent and employers 0.8 percent. From 2028 to 2030, it would fall to 2.1 percent, consisting of a 1.4 percent employee contribution and a 0.7 percent employer contribution.

The fund forecasts that total unemployment insurance revenue will reach 386.6 million euros in 2027 if the rate remains at 2.4 percent. Expenses are expected to total 371.8 million euros, allowing reserves to grow by around 15 million euros.

Kaia Vask, chair of the fund’s council and the Estonian Trade Union Confederation, said improved economic and labour market conditions had made the reduction possible.

She said the system must provide adequate protection for people who lose their jobs while remaining financially sustainable. The council had also considered reducing the rate in 2027, but additional costs resulting from an unemployment insurance reform that came into force this year would not have allowed it to prepare a positive budget.

Gert Tiivas, chairman of the fund’s management board, said its financial outlook had strengthened because the organisation was operating more efficiently. The fund has cut operating costs and begun ending the financing of less efficient services, he said.

The number of unemployed people is also continuing to decline, while labour market conditions remain strong, Tiivas said. The fund is continuing to work to help unemployed people return to work as quickly as possible and to use unemployment insurance funds more efficiently and purposefully.

Unemployment insurance funds come from employee and employer contributions and are used to finance unemployment insurance benefits and other benefits provided for by law. The contribution rate is set by the government on the proposal of the fund’s council.

Estonia’s unemployment insurance system began operating in 2002. The rate was highest from 2009 to 2012, at a combined 4.2 percent, with employees paying 2.8 percent and employers 1.4 percent. It has stood at 2.4 percent since 2015.