The application can be submitted through the self-service of the Estonian Unemployment Insurance Fund before the start of the employment relationship.

With the wage subsidy, a person registered as unemployed with the Estonian Unemployment Insurance Fund who has

• been registered as unemployed for more than 12 consecutive months;
• 16-24 years old (inclusive) and has been registered as unemployed for at least six consecutive months;
• 16–29 years old (inclusive) with absent or short-term work experience. Read more about the terms and conditions: My First Job.
• Has been registered as unemployed for at least 12 months during a 15 month period and whose registration as unemployed has meanwhile been terminated due to taking up employment (§ 8 subsection 4 point 3,4,5 of the Labor Market Measures Act) or being in conscript, alternative or reserve service (§ 8 subsection 4 point 11 of the Labor Market Measures Act); also applies to the registered unemployed aged 16–24.
• released from prison during the 12 months preceding their registration as unemployed, regardless of the period of their registration as unemployed.
• disadvantaged for health reasons and has been registered as unemployed for at least six consecutive months (this condition also applies for unemployed persons who are studying).

The wage subsidy cannot be used to employ a person studying full-time or in vocational training in a full-time form of study, including a person who is on academic leave. This condition does not apply to the My First Job service and in the case of an unemployed student who is disadvantaged for health reasons.

The wage subsidy is not paid if the unemployed person is a member of the management or control body of a legal person in private law applying for the wage subsidy, a partner in a limited partnership or general partnership or if they own more than 50% of that company.

A natural person, a legal person in private law, and an agency of a local government unit, including a city or rural municipality government, may apply for the wage subsidy. The wage subsidy cannot be applied for by state agencies and legal persons in public law or other persons not mentioned in the previous sentence. Neither is the wage subsidy available to a self-employed person upon employing themselves.

NB: The contract under public law concerning the wage subsidy is concluded before the beginning of the employment relationship.

How to apply for the wage subsidy?

An application for the wage subsidy is submitted through e-töötukassa. The application must be submitted at least seven working days before the start of the planned employment relationship.

The person submitting the application must be a member of the management board, an authorised person or, in the case of a local government authority, the head of said authority. In e-töötukassa, a member of the management board can also authorise persons not on the B-card to submit an application.

You can submit your application via e-töötukassa (you must be logged in to the portal as an employer to submit the application) by clicking on the following link: wage subsidy application.

The wage subsidy application must be submitted at least seven working days before the start of the planned employment relationship so that the Estonian Unemployment Insurance Fund can review the application. Your application will be reviewed as soon as possible and if everything meets the conditions of the wage subsidy, a contract under public law will be prepared. Applications will be processed in the order in which they are received, and if the application is submitted one or two days before the expected start of the employment relationship, the Estonian Unemployment Insurance Fund may not take a decision on your application as quickly. If the employment relationship begins before the conclusion of the wage subsidy contract, your application will be rejected. A written decision to reject the application will be sent to you.

If it is not possible to apply via e-töötukassa or if you have any questions about the wage subsidy, then you can contact your county department – the contact details of all offices of the Unemployment Insurance Fund can be found on the Unemployment Insurance Fund website.  NB! Please send questions about the wage subsidy in Tallinn and Harju County to tallinn.palgatoetused@tootukassa.ee.

How much and on what basis is the wage subsidy paid?

The wage subsidy can be applied for by concluding both an open-ended and a fixed-term employment contract. The amount of the subsidy is 50% of the employee’s wage cost (gross wage).

A fixed-term employment contract must be concluded for at least six months or, when applying for the ‘My first job’ subsidy, for at least one year – you can read more about the latter .

The wage subsidy is paid in the event of an employment relationship for an indefinite period for six months as of the person’s employment. In the event of a fixed-term employment contract, the wage subsidy is paid for half the term of the employment relationship, but no longer than six months.

In the case of a person with health-related obstacles and the My First Job service, the wage subsidy is paid upon entry into an employment contract for an unspecified term for 12 months as of the moment the person commences work. In the event of a fixed-term employment relationship, the wage subsidy is paid for half the duration of the employment relationship, but no longer than 12 months.

The amount of the subsidy is 50% of the employee’s wage cost (gross wage), but not more than 50% of the employee’s expected monthly wage established in the contract under public law entered into for payment of the subsidy, or more than the minimum wage established on the basis of subsection 29 (5) of the Employment Contracts Act. In the event of ‘My First Job’, the amount of the subsidy is at most twice the minimum wage.

The wage subsidy is paid on the basis of the fees declared to the Estonian Tax and Customs Board and for the calendar months when, according to the data of the unemployment insurance database, the employee has been paid fees based on which unemployment insurance premiums have been made and transferred to the bank account of the Tax and Customs Board.

The wage cost specified in the employee’s contract under public law includes the employee’s wage and all other remuneration paid for employment, including remuneration paid for financial results and performance remuneration, from which an unemployment insurance premium is withheld on the basis of the Unemployment Insurance Act. 

What to focus on before concluding a contract?

An employer can apply for wage subsidy once to employ the same person.

Upon applying for the wage subsidy, the employer cannot have any tax arrears that exceed a total of 100 euros (all tax and payment types and interest included), except if these have been deferred. Additionally, they must not have any records in the criminal records database or subject to a liquidation or bankruptcy proceedings. The management contract is also not concluded in cases where the employer has significantly violated the management contract or procurement contract concluded with the Estonian Unemployment Insurance Fund, or if there are circumstances that may cause the employer's permanent insolvency or termination of operations, including if the employer has not submitted an annual report, the deadline for submission of which has arrived.

In order to pay the wage subsidy, a contract under public law on the wage subsidy is entered into with the employer. The employer can then hire the employee.

The contract under public law for the wage subsidy sent to the employer must be signed as soon as possible, but certainly before the start of the employment relationship.

If the employment relationship begins before the conclusion of the contract under public law for the wage subsidy, the employer’s application will be rejected.

The wage subsidy constitutes state aid, in particular de minimis aid, and the wage subsidy must not exceed the de minimis threshold established for the undertaking or activity supported by the wage subsidy. More information on state aid can be found here. Before concluding a contract under public law for the wage subsidy, the Estonian Unemployment Insurance Fund checks the state aid registers for the amounts of de minimis aid granted to you during the current and the last two years to ensure that the limit is respected.

When will the wage subsidy received have to be paid back?

The wage subsidy must be repaid in full if a fixed-term employment relationship of indefinite duration or more than one year is terminated at the initiative of the employer before the end of the year or an employment contract of less than one year before the expiry of the term.

Under the My First Job service, the employer reimburses the wage subsidy in full if the employment relationship is terminated at the employer’s initiative before the end of the two-year period or an employment relationship with a term of at least one year is terminated prematurely at the employer’s initiative.

In the case of a person with health-related obstacles, the employer shall return the wage subsidy in full if the employment relationship is terminated at the initiative of the employer before two years have passed as of the entry into the employment contract or an employment relationship with a term of at least six months is terminated prematurely at the employer’s initiative.

The Estonian Unemployment Insurance Fund recovers the wage subsidy in full if the employer terminates the employment contract at the initiative of the employer, unless the employment contract with the employee has been terminated on the basis of § 86 (1), § 88 (1) or § 89 (2) point 2 of the Employment Contracts Act. 

As part of the "My first job" service, the wage subsidy must be returned in full if the employer terminates the employment contract at the initiative of the employer, except if the employment contract with the employee has been terminated on the basis of § 88 (1) of the Employment Contracts Act. This means that the employer will return the wage subsidy if the employment contract is terminated, for example due to layoffs. The wage subsidy does not have to be reimbursed if the employment contract is terminated at the initiative of the employee or by agreement of the parties.