Employer’s insolvency is considered to be the following:

• the declaration of bankruptcy of the employer,
• termination of the bankruptcy proceedings due to the lapse of time pursuant to § 29(1) of the Bankruptcy Act,
• failure to appoint an interim administrator under § 15 subsection 4¹ of the Bankruptcy Act,
• dismissal of the bankruptcy petition pursuant to § 27 subsection4¹ of the Bankruptcy Act.

The trustee in bankruptcy or an interim trustee shall submit the application for insolvency benefit to the Estonian Unemployment Insurance Fund.

An employee is entitled to apply for bankruptcy compensation if, after filing the bankruptcy petition, they do not have the means to pay the interim administrator's fee and the court has failed to appoint an interim administrator under § 15 subsection 4¹ of the Bankruptcy Act or has failed to examine the bankruptcy petition under § 27 subsection 4¹ of the Bankruptcy Act. You can apply for insolvency benefits after the court has declared the employer insolvent, and compensation can be applied for those employees whose employer has been declared insolvent by the court based on the bankruptcy petition.

When applying for compensation, the employee must attach documents to the application proving that the employer has been declared insolvent and the basis and amount of the employee's claim. If the application is submitted by a bankruptcy trustee or provisional bankruptcy trustee, the application must be accompanied by a statement from the employee confirming the amount of the claim. If the employer is declared bankrupt or the bankruptcy proceedings are terminated due to a failure to act, the employee must apply to the bankruptcy trustee or the provisional bankruptcy trustee for bankruptcy compensation. The employee must also provide the trustee with all documents at his disposal in support of the claim.

Amount of the bankruptcy benefit

The amount of benefit is calculated by the type of loss of earnings and is subject to the following limits:

• unearned wages (before the employer was declared insolvent) are compensated up to the amount of the employee's gross earnings for the last three months of employment, but not more than three times the average gross monthly wage in Estonia in the quarter before the employer was declared insolvent;
• unpaid holiday pay (before the employer was declared insolvent) is compensated up to the amount of one month's holiday pay, but not more than one month's average gross monthly wage in Estonia in the quarter before the employer was declared insolvent;
• benefits not received on termination of the employment contract (before or after the employer was declared insolvent) are reimbursed up to the amount of two months' gross earnings of the employee, but not more than one month's average gross earnings in Estonia in the quarter before the employer was declared insolvent. 

Determination and payment of bankruptcy benefit

The Unemployment Insurance Fund decides whether or not to award benefits no later than 30 days after the date of submission of the application and all the necessary documents. 

For good cause, the Unemployment Insurance Fund may extend the time limit for examining an application by 14 days, but must inform the applicant immediately and give reasons. Where compensation is awarded, the amount of compensation shall be paid to the employee’s bank account no later than on the fifth calendar day following the date of the decision. 

If the compensation paid by the unemployment insurance fund does not cover the whole of the employee’s claim, the employee retains the right to claim the remainder through bankruptcy proceedings