6 significant amendments to the law in relation to foreign labour
Nearly 30 amendments to the Aliens Act enter into force on May, 24, with several amendments also having a significant impact on employers who employ foreigners from third countries or who plan to employ foreigners. For example, the requirement for the salary of a top specialist will decrease, a special rule will apply to Ukrainian citizens who worked in Estonia before the start of the war, the requirements for temporary employment agencies will change and new measures will be added to call employers to order.
1. The remuneration requirement for a top specialist is reduced
The most positive change for companies is the reduction of the salary criterion for a top specialist. If currently, according to the Aliens Act, a top specialist has to be paid at least twice the Estonian average salary, then from May, 24 this requirement will decrease to 1,5 times the average salary. This means that all foreigners to whom the employer pays at least 1,5 times the average salary in Estonia are top specialists within the meaning of the Aliens Act. The positive effect of the change is that in the future a top specialist will be able to apply for a temporary residence permit to work outside the immigration quta, if the employer pays the foreigner at least 1,5 times the Estonian average salary.
In previous years the Chamber has repeatedly proposed to reduce the requirement for the salary criterion for top specialists, and we consider the implementation of this change to be the most positive change in the Aliens Act in the last few years.
2. Short-term employment is restricted to full-time employment
An amendment to the Aliens Act enters into force on May, 24, according to which short-term employment may be registered only for full-time employment. As an exception, the requirement to work full-time does not apply to a teacher, academic, researcher or youth worker. There is currently no legal requirement for full-time employment. The purpose of the amendment is to prevent cases where the employer uses part-time work to deviate from the salary criterion.
The Chamber supports the principle that there must be legal clarity regarding the salary criterion for foreigners and that cases where part-time work is misused to deviate from the salary criterion must be avoided. At the same time, we see that the soon-to-be-introduced amendment may unreasonably restrict the employer’s and the foreigner’s ability to agree on working hours that satisfy both parties. For example, if a foreigner wants to work in Estonia for a short time from Monday to Thursday 8 hours a day, the employer agrees and the foreigner’s salary for part-time work is 2,000 euros, the soon-to-be-introduced amendment will no longer allow the parties to enter into such agreement. The Chamber proposed to the Parliament of Estonia not to make this amendment to the law, but the Parliament of Estonia did not support this proposal.
3. A foreigner must be paid an average salary regardless of the agreed working hours
The Aliens Act also includes a requirement that if a foreigner works on the basis of a temporary residence permit intended for work, the employer must pay the foreigner at least the Estonian average salary regardless of the workload agreed in the employment contract. The purpose of the amendment is to avoid a situation where the parties justify not paying the average salary on a part-time job basis.
The Chamber was opposed to this change, because upon the entry into force of the amendment, a situation may arise where the foreigner is no longer able to work for several different employers. For example, if a foreigner works for one employer with a workload of 0,9 and receives at least the Estonian average salary and workload of 0,1 for another employer, then the other employer should also pay at least the Estonian average salary for part-time work. Such solution is not reasonable.
4. Changes related to temporary agency work
If at present the temporary employment agency must have a deposit in the amount of at least ten per cent of the foreigner’s one-month salary fund, then from May, 24 the employer must have a guarantee in the amount of foreigner’s one month’s salary. Thus, the guarantee requirement increases tenfold.
At the same time, compliance with the guarantee requirement becomes more flexible. In the future, in addition to a credit institution located in Estonia, an insurer located in Estonia and an insurer or credit institution located in a Contracting State of the European Economic Area may also provide a guarantee. If currently only a deposit is valid as a guarantee, then in the future the guarantee can be both a deposit and a guarantee.
We welcome the fact that the Chamber’s earlier proposal to make the deposit requirement for temporary agency workers more flexible has been taken into account. However, the Chamber did not approve an increase in the guarantee. We proposed to the Parliament of Estonia not to include the amendments related to the change of the terms and conditions of temporary employment in the law, but this proposal was not taken into account.
5. Changes related to the war in Ukraine
On May, 24 will also enter into force an amendment to the Aliens Act, providing a legal basis for entry into Estonia and temporary stay in Estonia for a foreigner who may be granted temporary protection and for a Ukrainian citizen who stayed in Estonia before February, 24 2022 if they have no other legal basis for staying in Estonia.
If a Ukrainian citizen worked in Estonia on the basis of registration of short-term employment before February, 24 and his or her period of employment in Estonia expires, the Ukrainian citizen may continue to work in Estonia upon entry into force of the amendment and is not subject to short-term employment requirements. In such case, the Employment Contracts Act or the Law of Obligations Act and the conditions provided therein shall apply to his or her employment. As an exception, the obligation of the foreigner’s employer to pay the foreigner at least 0,8 times the average salary of the respective activity will apply. When calculating the average gross monthly salary of an economic activity, the letter code of the Estonian Classification of Economic Activities (EMTAK) must be used.
6. New measures to bring employers to order
A number of amendments to the Aliens Act will also enter into force, which will help the Police and Border Guard Board to deal more effectively with companies that do not comply with the requirements of the law and thus gain a competitive advantage. For example, a provision is added to the law that gives the Police and Border Guard Board the right to issue a precept to an employer if the employer fails to fulfil its obligation to pay to the foreigner the remuneration provided for in the Aliens Act. A precept may be issued retroactively for the entire period of employment when the employer did not pay the foreigner the required remuneration. If the employer fails to pay the remuneration by the deadline specified in the precept, the foreigners’ right to work in Estonia expires from the following day. If the employer fails to comply with the precept within the specified time, the Police and Border Guard Board has the right to impose on the employer a penalty payment of up to 32,000 euros. There is currently no such option in the law.
In addition, several other amendments to the Aliens Act will enter into force, which will help prosecute companies that violate the law, and their board members.
2 positive changes will enter into force at the beginning of 2023
The Aliens Act adds a residence permit for a term of up to two years, which can be applied for by a foreigner who has worked in Estonia for at least nine months immediately before applying for a residence permit and whose employment continues with the employer who registered the short-term employment. Such residence permit is exempt from the immigration quota. Thus, in the future, a foreigner will be able to work in Estonia for a short time for three years. First, a foreigner can work in Estonia for one year on the basis of registering for short-term employment, and then he/she can apply for a two-year residence permit for short-term employment that does not go under the immigration quota.
On January 1, 2023, several positive changes will take effect for growth companies too. In future, growth companies will be able to pay a foreigner a salary of at least 80% of the Estonian average salary. In addition, residence permits issued to foreign workers in a growth company do not go under the immigration quota. In case of such residence permit, the permission of the unemployment fund is also required.
If you have any questions about changes to the Aliens Act, please contact the Estonian Chamber of Commerce and Industry´s lawyers at juristid@koda.ee.
See also: Aliens Act as of 24.05.2022
