Ain Käpp: changes to the Employment Contracts Act will bring more certainty

Making labour law more flexible and modernising the recruitment of foreign workers are indispensable steps to help attract new people to the labour market, explains Ain Käpp, head of the Central Confederation of Employers’ labour market working group and member of the council, on ERR’s opinion pages. In addition, a more flexible law will increase the rights of part-time workers.

Demographic trends mean that around 6,000 people lose their jobs every year. This means that fewer and fewer people will have to support more and more people – paying pensions, salaries for doctors, teachers, people defending the state, etc. out of their wages or taxes on their business income. This is not just a concern for Estonia, as much of the developed world is struggling with ageing societies and a shrinking working age population. This problem will not solve itself, nor will anyone come to our rescue.

As the growth of prosperity, the ability to protect ourselves and to contribute to necessary public services depends on the jobs created and the tax revenues generated by business, every step and every decision that brings more people into the labour market is essential. This is exactly what the government’s plans to make labour law more flexible and to modernise the recruitment of foreign workers will help to do. Unfortunately, there are myths and misconceptions about both.

For example, immigration and labour migration are often confused in public debates in Estonia. Employers think of recruiting foreign workers as controlled and temporary labour migration, not as indiscriminate bringing of people or granting them citizenship and voting rights. At the end of a work permit or contract, the person leaves.

International success stories are international

Our rules on recruiting foreign workers have already been among the toughest in the developed world because of the cap on numbers and wage demands, and have therefore limited the competitiveness of the economy. For example, the immigration limit (0.1 per cent of the population, or about 1,300 people a year) was set in the 1990s and was understandable then, but it is now out of date, and the government’s raising it two or three times is therefore a necessary step with the times.

Scaring society into making this change is unjustified and irresponsible. However, this important relief for businesses is a splash given the size of the Estonian labour market, which is around 700 000 people. Our labour market and our society can cope with it.

What’s more, in recent years, we have welcomed and integrated nearly 40,000 Ukrainian war refugees into local businesses, helping in a wide range of sectors such as agriculture, construction, services and industry. In addition to them, tens of thousands of people from abroad work in Estonia, helping businesses to develop and succeed internationally, while filling the country’s coffers with taxes. The experience of companies that have succeeded around the world tells us unequivocally – if we want to be internationally successful, we have to be international.

In a crisis, workers have been kept

The labour market is skewed towards the employee due to labour shortages. As a result, companies have kept people on despite the recession and the decline in capacity. For example, according to Eesti Pank , the volume of industrial production has fallen by almost a fifth, while the number of employees has fallen by only 6%. The painful lesson of previous crises is still there – it is very difficult to recruit good people back after they have left. For the same reason, wages have risen despite the long recession, at the expense of competitiveness and productivity.

Employers are also making an effort to find and keep good people in the workplace. There are now several generations of people in the labour market, from grandparents to grandchildren, all with different expectations of work and careers. There is a desire to work fewer and shorter hours, on a project basis and for a number of companies/organisations, on a part-time basis, or even if the company has a short-term job to offer.

More security and justice

Until now, employment contract law has not allowed for flexibility to address these specific needs and conditions, and has therefore been based on contracts of obligations, such as employment contracts or contracts of agency. However, these deprive the individual of a number of benefits, such as limits on working time and rest periods, the right to annual leave, minimum wages or guarantees on termination. Therefore, the changes increase the rights of part-time workers.

More flexible regulation will also help to include those who cannot or do not want to work full-time, for example because of caring for a loved one, studying, working another job or reduced working capacity. The change does not impose anything, but gives the opportunity for more flexibility for those who want and need it.

In addition, a contract is bilateral and, to be concluded, both the employee and the employer must agree on all the terms or there is no agreement. So there is also an unfounded fear that the workload or pay may become unpredictable.

Change will not be the last

Keeping up with the law on time is inevitable, and the state has already taken several steps in this direction – for example, by sharing responsibility between employer and employee in the case of teleworking, or by introducing the concept of an autonomous worker who is responsible for organising his or her own working time.

It is therefore safe to predict that this year’s changes will not be the last. Many people, especially young people, want to work as both a main job and a side job, rather than being tied to one organisation for the long term. To this end, the procedures for concluding fixed-term employment contracts should be simplified, as employment contracts are also predominantly based on contractual obligations.

The article was published in the ERR opinion pages.