Background for Estonia

Between 2012 and 2022, Estonia’s GDP substantially increased, by 31.9%, well above the EU average for the same period (15.29%). During this time, total unemployment decreased from 9.9% to 5.6% (a drop of 4.3 percentage points). The largest decrease was in unemployment for men (4.8 percentage points). Employment figures for all categories increased between 2012 and 2022, and showed a remarkable improvement compared with the EU average: the youth employment rate increased by only 0.6 percentage points in the EU27, while it increased by 3.8 percentage points in Estonia. However, while all employment figures steadily increased up to 2018, 2019 saw a slight decline in these figures (except for women). In 2020, GDP decreased by 3.2% compared with 2019, less than the 6.2% decrease in the EU27.

The Employment Contracts Act (Töölepinguseadus) regulates employment relations in the private sector, and the Civil Service Act (Avaliku teenistuse seadus) governs the public sector. In 2009, the new Employment Contracts Act was implemented, and in 2013 the new Civil Service Act came into effect. Since 2014, all forms of employment (paid or voluntary) have had to be registered in the employment register.

Industrial relations are regulated by the Trade Unions Act (Ametiühingute seadus), the Employees’ Trustee Act (Töötajate usaldusisiku seadus), the Collective Labour Dispute Resolution Act (Kollektiivse töötüli lahendamise seadus) and the Collective Agreements Act (Kollektiivlepingu seadus).

The current industrial relations system in Estonia was developed at the beginning of the 1990s. Although much has changed over the decades, only a few amendments have been made to the legislation on collective bargaining and collective dispute resolution. For example, since 2007, Estonia has had a dual channel of employee representation: employees can be represented by a trade union and/or an employee trustee.

In Estonia, collective bargaining has always been decentralised, as it mostly takes place at company level. At sectoral level, collective agreements exist in only two sectors: transport and healthcare. At national level, minimum wages are usually negotiated annually between the Estonian Trade Union Confederation (Eesti Ametiühingute Keskliit, EAKL) and the Estonian Employers’ Confederation (Eesti Tööandjate Keskliit, ETKL). It was agreed in 2017 that for 2019–2022 the national minimum wage increase would be calculated annually based on labour productivity and economic growth. The minimum wage of cultural workers is negotiated annually between the Estonian Employees’ Unions’ Confederation (Teenistujate Ametiliitude Keskorganisatsioon, TALO) and the Ministry of Culture (Kultuuriministeerium). It covers all cultural employees with higher education who are working in public authorities, state-owned private foundations and public law agencies in a position of their specialty requiring higher education, but is also recommended for the private sector’s cultural field.

Today, the level of trade union membership in Estonia is one of the lowest in the EU.

Social dialogue in general is functioning in Estonia (e.g. the social partners are involved in policymaking and are members of the supervisory bodies of the main organisations related to working life). Although there are occasions when the social partners are not fully satisfied with their level of engagement with the government or with the extent to which their proposals are taken into account, overall their involvement is generally good and their voice is heard.

In 2018, following an invitation from the Prime Minister, the national-level social partners and the government re-established tripartite social dialogue by gathering to discuss topics relevant to labour, tax and social policy. A similar meeting took place in 2020. These meetings have served their purpose well, but regular meetings with the Minister for Social Affairs have also been established.

COVID-19 did not have a substantial impact on industrial relations. Meetings continued to be held, and scheduled negotiations took place. Social dialogue was strong during the pandemic: in cooperation with the social partners, some of the most important crisis mitigation measures (i.e. temporary wage subsidies, a reduction in employees’ own contributions to sickness benefit) were developed, which proved to be successful and showed the will of the social partners to cooperate and compromise, and the importance of social dialogue.