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Termination and Severance Policies

Learn about the legal processes for employee termination and severance in Estonia

Notice period

In Estonia, minimum notice periods for employment termination are mandated by law. The required notice period depends on the employee's length of service.

Notice Period Based on Length of Service

  • Less Than One Year: Employees with less than one year of service require 15 calendar days' notice before termination.
  • One to Five Years: For employees who have completed between one and five years of service, the notice period increases to 30 calendar days.
  • Five to Ten Years: Employees with over five years but less than ten years of service are entitled to 60 calendar days' notice.
  • Ten Years or More: Employees with ten or more years of service receive the longest notice period of 90 calendar days.

Important Points to Note

  • The notice period applies to both employers and employees initiating termination.
  • Unless a different notice period is stipulated within the employment contract, the legal minimums outlined above apply.
  • In exceptional circumstances, employers might be able to terminate employment without notice due to severe employee misconduct. However, such cases require justification and adherence to specific legal procedures.

Severance pay

In Estonia, severance pay entitlements are structured in a two-tiered system.

Severance Pay from the Employer

In the event of redundancies, employers are obligated to pay employees a severance equivalent to one month's average salary.

Unemployment Insurance Benefits

Employees with a minimum of five years of employment history may be eligible for additional severance pay from the Estonian Unemployment Insurance Fund (Töötukassa). The amount of this benefit typically ranges from 1-2 months' average salary, depending on the length of service. Specifically, employees with a service length of 5-10 years are entitled to 1 month's salary, while those with over 10 years of service receive 2 months' salary.

Important Notes

It's important to note that entitlement to benefits through the Unemployment Insurance Fund may come with additional eligibility criteria and may be subject to certain limitations. The key labor law references for these entitlements are the Estonian Employment Contracts Act (Töölepingu seadus) and the Estonian Unemployment Insurance Act (Töötuskindlustuse seadus).

Termination process

The termination process in Estonia is governed by the Employment Contracts Act. This process can be broken down into different types of termination and the necessary process and documentation required.

Types of Termination

  • Termination by Employer
    • Ordinary Termination: An employer can terminate a contract with a valid reason such as employee performance or redundancy.
    • Extraordinary Termination: An employer can exceptionally terminate a contract without notice due to a severe breach by the employee, such as gross misconduct. Strict requirements and justification apply in such cases.
  • Termination by Employee:
    • Ordinary Termination: Employees can resign by providing the legally required notice period.
    • Extraordinary Termination: Employees can terminate their contract without notice if the employer commits a severe breach or causes an immediate danger to the employee's health or safety.
  • Mutual Agreement: Employer and employee can mutually agree to terminate the employment contract at any time.

Process and Documentation

  • Written Notice: Termination in Estonia must be communicated in writing, stating the reasons (if applicable) and the termination date.
  • Dispute Resolution: If a disagreement arises, Estonian law provides mechanisms for dispute resolution, including mediation and labor courts.
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