Employment, Estonia, EU – Baltic States, Legislation, Markets and Companies

Interior Minister Andres Anvelt said in a press release that the objective of the immigration quota is foremost to protect Estonia's own labor market. "At the same time, we need foreign top-level specialists to enliven the economy and create additional jobs for our people. The government based its decision-making on the maximum involvement of our people in the labor market and reducing regional unemployment," Anvelt said.

According to the forecast, up to 300 top specialists from third countries are to start work in Estonia this year.

The bill will exempt top-level specialists from the immigration quota. At present they are unable to come to Estonia for several consecutive years due to the immigration quota being filled. A top-level specialist in the meaning of the legislative amendment is an alien with professional training to whom the employer in Estonia must pay at least two times the national gross average wage, spokespeople for the government said.

The bill would introduce an A2 language proficiency requirement for aliens who have lived in Estonia on a fixed-term residence permit for at least five years and wish to seek a new residence permit or extend the existing one. That requirement would apply only to the people who get their first residence permit here after the amendments have stepped into effect on July 1 this year.

"A person living in Estonia for a long time must learn the language and through that better integrate with the Estonian society. We have established all language learning opportunities in our country and there will be new ones added in the future," the minister said.

To alleviate cyclical labor shortages, the bill would extend the maximum term of short-term employment from the current nine months to one year.

The explanatory remarks accompanying the draft legislation say that as a result of these changes the number of foreigners in short-term employment in Estonia is expected to grow by 2,500, to whom 124 top-level specialists living in Estonia on a fixed-term residence permit will be added.

If 2,500 new workers are registered as short-term employees working here for one year and the required average gross wage is paid to all of them, Estonia will get some 12.6 million euros additionally in social tax per year. The average gross monthly wage in the fourth quarter of 2017 was 1,271 euros, of which the employer pays 33 percent or 419 euros per month in social tax. Thus it originates from the calculation logic of the Interior Ministry that the state in one year receives approximately 12.6 million euros in tax income solely through the social tax paid by the employers. In addition to that, foreign employees also consume services and buy food locally.

According to the 2017 economic forecast of the Ministry of Finance, GDP per an employed person is on average 34,400 euros per year and the tax income of the state budget altogether approximately 12,000 euros per year per an employed person. If 124 top specialists are added during 2018 with the amendment of the Aliens Act, then according to the calculations of the Interior Ministry, a total of 3 million euros per year in tax income is added.

Namely, the tax income from a top specialist is higher than the Estonian average -- they work with a temporary residence permit and they are paid double the average gross monthly wage. According to the Interior Ministry's calculation, 124 top specialists will bring in an additional 3 million euros per year in tax income.

An immigration quota of 0.1 percent of the permanent population of Estonia was implemented in the 1991 Immigration Act in order to limit immigration. An immigration act on the same basis was implemented in the 1993 Aliens Act.

The immigration quota from earlier does not include people who come to Estonia to study, work in positions in the information and communication technology field, startups or in relation to research activity and people who come to Estonia for enterpreneurship in relation to startups and large investments. Also, the quota does not include people working in Estonia on a short-term basis, citizens of the European Union, the United States and Japan.

The immigration quota was filled both last year and the year before regardless of distinctions -- in December 2016 and July 2017. Based on that, the interior minister made a proposal to the government to change the immigration quota to avoid the situation in which the quota regulation becomes an obstacle in bringing in workforce from outside the European Union.

The government decided not to raise the immigration quota and rather alleviate immigration restrictions with other means -- by extending the maximum time of working in Estonia on a short-term basis and to exclude top specialists from the quota.

The government also supported a proposal, according to which foreigners are obligated to have Estonian language skills on the A2 level when extending their residence permit. By the time of extending the residence permit, a foreigner will have been living in Estonia for five years, during which they had the opportunity to learn Estonian both in an acclimatization program offered by the state as well as independently, the Interior Ministry said at the beginning of February.

On average, altogether 1,740 temporary residence permits for working have been issued per year since 2014. Year over year, this has increased to 2,273 permits in 2017.

The number of short-term work registration decision rose drastically last year. While in 2015 and 2016, approximately 1,800 short-term employees were registered both years, then last year, the Police and Border Guard Board registered 7,584 short-term employees.

The Police and Border Guard Board is forecasting 10,000 short-term work registration applications for 2018, which is 2,416 more than in 2017. It is likely that the extension of the time period allowed for short-term work will increase the registration of short-term work of up to one year, as it allows to use foreign employees with a temporary residence permit in fields that are sensitive to the cyclicality of economic development, and reduces the need for applying for a temporary residence permit for work possibilities lasting up to a year.