Insolvency and bankruptcy imply the end of the activities of an employer. However, the rights of the employees have to be respected and outstanding wages, holiday pay and benefits upon termination of the contract still have to be paid.
The unemployment insurance scheme provides for partial coverage of the employer’s obligations in case of bankruptcy or insolvency:
- outstanding wages are compensated to a maximum of three times the monthly wage of the employee, or to three times the Estonian average monthly wage, whichever is the lowest;
- outstanding holiday pay is compensated to a maximum of one month, but limited to the Estonian average monthly wage;
- benefits connected to the termination of the employment contract are compensated for up to twice the monthly wage of the employee, but limited to the Estonian average monthly wage.
The Estonian average monthly wage that is taken into account is the average gross wage of the previous quarter, as published by the Estonian Statistical office.
In addition to these arrangements, employees can still receive redundancy benefits.
Claims from employees are brought together by the one who handles the bankruptcy, and declared to Töötukassa. On the basis of this information, Töötukassa makes a decision within ten days after all the information is received, and pays out the compensation to the employees within five days after that decision.