Redundancy in Estonia: notice, compensation and the Unemployment Insurance Fund

By Ero Liivik, lawyer (jurist) at Erovik Law Office · Updated 2 November 2026

Redundancy in Estonia (koondamine) means that your employer ends the employment contract because the work has decreased, been reorganised or otherwise ended, not because of anything you did. The employer must give 15 to 90 days’ notice, depending on how long you have worked there, and pay one month’s average wages; after five years with the employer, the Unemployment Insurance Fund adds one or two months’ wages. If you believe the redundancy is not genuine, you have 30 calendar days from receiving the notice to challenge it.

Key points

• Redundancy needs a real decrease, reorganisation or end of the work (§ 89 of the Employment Contracts Act (TLS)).
• The employer must offer other work where possible; employee representatives and employees raising a child under three have a preferential right to stay (TLS § 89(3), (5)).
• Every employee made redundant receives one month’s average wages from the employer (TLS § 100(1)).
• After at least five years with the same employer, the Unemployment Insurance Fund (Eesti Töötukassa) adds one or two months’ average wages (§§ 14¹–14² of the Unemployment Insurance Act (TKindlS)).
• Agreeing to end the contract instead costs you these statutory payments and the income-based unemployment benefit (TLS § 100(1); TKindlS §§ 6(2), 14¹).
• A redundancy must be challenged within 30 calendar days of receiving the notice (TLS § 105).

What counts as redundancy

An Estonian employer cannot terminate a contract at will (TLS § 85(5)). Redundancy means that continuing the employment on the agreed terms has become impossible because the work has decreased, been reorganised or otherwise ended (TLS § 89(1)). It also covers terminations when the employer’s activity ends, when it is declared bankrupt and when bankruptcy proceedings end by abatement (raugemine) (TLS § 89(2)). Redundancy concerns the job, not the person: if the work has not really decreased, changed or ended, there is no legal ground for it.

• A sale of the business is not redundancy. If the business continues the same or similar activity, the contracts pass unchanged to the buyer, and nobody may be dismissed because of the transfer, except in bankruptcy (TLS § 112).
• Reduced pay is an alternative. If unforeseen economic circumstances beyond its control prevent the employer from providing the agreed work, it may, under strict conditions, cut pay for up to three months within a 12-month period, not below the minimum wage (TLS § 37). If you then resign with five working days’ notice, you receive the same compensation as on redundancy (TLS § 37(5); TKindlS § 14¹).

What the employer must check before giving notice

• Other work. The employer must offer other work where possible, with training or changed working conditions if the cost is not disproportionate. This does not apply if its activity ends, it is declared bankrupt or bankruptcy proceedings end by abatement (TLS § 89(3)).
• Preferential right. Employee representatives and employees raising a child under three have a preferential right to stay, with the same exceptions (TLS § 89(5)). The selection must also respect equal treatment (TLS § 89(4)).
• Protected employees. A pregnant employee, a woman entitled to maternity leave and anyone on paternity, adoption or parental leave cannot be made redundant unless the employer’s activity ends (including in a bankruptcy in which it ends) or bankruptcy proceedings end by abatement (TLS § 93(1)). This protection applies only if the employee informs the employer before receiving the notice or within 14 calendar days after it (TLS § 93(3)).
• Employee representatives. Before dismissing one, the employer must ask the opinion of the employees who elected them or of the trade union (TLS § 94).
• Form and reasons. The notice and its reasons must be in a form that can be reproduced in writing, such as an e-mail; an oral notice is void (TLS § 95(1)–(2)). Missing reasons do not invalidate the notice but may make the employer liable for damage (TLS § 95(3)).

Notice periods and redundancy pay

Length of employment with the employer	Minimum notice (TLS § 97(2))	From the employer (TLS § 100(1))	From the Fund (TKindlS § 14²)
Less than 1 year	15 calendar days	1 month’s average wages	Nothing
1 to less than 5 years	30 calendar days	1 month’s average wages	Nothing
5 to less than 10 years	60 calendar days	1 month’s average wages	1 month’s average wages
10 years or more	90 calendar days	1 month’s average wages	2 months’ average wages if more than 10 years

With exactly ten years, you get 90 days’ notice but only one month from the Fund. A collective agreement may set different notice periods (TLS § 97(4)). If the notice is too short, you receive your average daily pay for each working day missing (TLS § 100(5)), and during the notice period you are entitled to reasonable time off to look for a new job (TLS § 99). If a fixed-term contract is ended early for economic reasons, the employer pays the wages you would have earned until the end of the term, except in bankruptcy, abatement or force majeure (TLS § 100(3)).

The employer’s payment is based on your average wages from the six calendar months before the month of the event, leaving out days of reduced pay under TLS § 37 (Government regulation on the payment of average wages, §§ 2(2), 3(2)). The Fund calculates its benefit from the nine months before your last three months of work (TKindlS § 14²(2)). The employer must apply to the Fund within five calendar days after the employment ends; if it does not, you can apply yourself (TKindlS § 14³). The Fund can also pay to a bank account abroad, at your expense (TKindlS § 14⁴(4)).

Unpaid wages and money for unused holiday also fall due when the contract ends (TLS §§ 71, 84(1)); see our guide to holiday pay in Estonia. If the employer is insolvent, the Fund covers unpaid termination compensation within limits (TKindlS § 20).

Unemployment benefit after redundancy

If you register as unemployed, the income-based benefit (sissetulekupõhine töötuskindlustushüvitis) requires at least 12 months of insured work in the previous 36 months, and the base-rate benefit (baasmääras töötuskindlustushüvitis) eight months (TKindlS §§ 6(1), 6¹(1)). After five to ten years with the employer, the right to the benefit starts only 30 days after the employment ends; after more than ten years, 60 days (TKindlS §§ 6(4), 6¹(6)). The income-based benefit is 60% of your earlier average daily wage for the first 100 days and 40% afterwards, within a cap and a floor (TKindlS § 9).

Collective redundancy

A collective redundancy (töölepingute kollektiivne ülesütlemine) means making redundant, within 30 calendar days, at least 5 employees where the business has on average up to 19, 10 where it has 20 to 99, 10% where it has 100 to 299, or 30 where it has 300 or more (TLS § 90(1)).

The employer must first consult the employees’ trustee (usaldusisik) or, if there is none, the employees. It must give them information on the reasons, the numbers and job titles affected, the selection criteria and the timing in a form that can be reproduced in writing, and send a copy to the Fund at the same time (TLS § 101). After the consultation, it notifies the Fund (TLS § 102(1)). The terminations take effect when the notice period ends, but not earlier than 30 calendar days after the Fund received the notification; the Fund may shorten this or extend it to up to 60 days (TLS § 103). A company that fails to inform and consult can be fined up to 32,000 euros (TLS § 128(2)).

Challenging a redundancy

If there was no real redundancy, or the employer broke the rules above, the termination may be void (TLS § 104(1)). You must then file an application with the Labour Dispute Committee (töövaidluskomisjon) or a claim in court within 30 calendar days of receiving the notice; a letter to the employer is not enough. If you miss the deadline and it is not restored, the contract ends on the date in the notice (TLS § 105). The same 30 days apply to challenging a valid termination as contrary to good faith (TLS § 106).

• If the termination is void, the contract continues, and you can claim lost wages, which may be reduced by what you earned elsewhere (TLS §§ 107(1), 108).
• Either party may ask for the contract to be ended from the date the notice would have ended it. The employer then pays three months’ average wages, or 12 months’ for a pregnant employee, one entitled to maternity leave or an elected employee representative; the amount can be adjusted (TLS §§ 107(2), 109).

The committee hears disputes with employers registered in Estonia, operating through an Estonian branch or registered as non-resident employers (§ 2(1) of the Labour Dispute Resolution Act (TvLS)). There is no state fee, each party bears its own costs, and an application is, as a rule, reviewed within 45 calendar days (TvLS §§ 15, 16(1), 38(1)). Proceedings, including the minutes, are in Estonian; a hearing may be held in another language only if the parties and the committee members agree. If you do not speak Estonian and have no Estonian-speaking representative, you must find your own interpreter, and the committee does not cover the cost (TvLS § 13¹). See also our unpaid salary guide.

Typical mistakes

• Employees: signing a “redundancy package” that is legally a termination agreement; negotiating past the 30-day deadline; not telling the employer about a pregnancy within 14 days of the notice.
• Employers: calling it redundancy when the work has not really decreased or changed; not offering vacant positions; missing the collective-redundancy threshold when dismissals are spread over several weeks; giving notice orally. See also our guide to dismissing an employee in Estonia.

Frequently asked questions

How much redundancy pay will I get in Estonia?

One month’s average wages from the employer, plus one month’s from the Fund after five to ten years with that employer, or two months’ after more than ten. A higher amount can be agreed.

Can I be made redundant while on parental leave?

Only if the employer’s activity ends (including in a bankruptcy in which it ends) or bankruptcy proceedings end by abatement (TLS § 93(1)). If you are raising a child under three, the employer must also prove a lawful ground for any termination (TLS § 92(2)).

My employer offers a termination agreement instead. Should I sign?

Under an agreement (TLS § 79) there is no statutory redundancy compensation, no Fund redundancy benefit and no income-based unemployment benefit; only the base-rate benefit may remain if you meet its conditions (TLS § 100(1); TKindlS §§ 6(2), 6¹, 14¹). Consider signing only if the agreed payment makes up for this.

How Erovik Law Office can help

For employees, we check whether a redundancy is genuine, calculate what you are owed and prepare applications to the Labour Dispute Committee or court. For employers, we help plan redundancies, including collective ones, draft notices and negotiate settlements. Because of the 30-day deadline, contact us as soon as you receive a notice. See our employment law services, fees and contact page, and the overview of termination of employment in Estonia.

This guide reflects Estonian law in force on 1 November 2026. It is general information, not legal advice for your situation.