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Legislative amendments to the adjustment of daily allowance

The Government has prepared several reforms affecting the adjustment of the earnings-related daily allowance. The reforms have been approved by Parliament and will take effect on 1 January 2023. The proposed legislative amendments will have the greatest effect on unemployment benefits for part-time employees and laid-off personnel. There will also be some minor improvements to the unemployment benefit for people in creative fields.

End of the specific adjustment period and converted income

The specific adjustment period and related converted income were temporarily removed at the onset of the coronavirus pandemic. The temporary reform was intended to expedite and simplify the processing of earnings-related daily allowance applications during busy times.

Based on the experiences gained during the coronavirus pandemic, it was not considered necessary to reinstate the specific adjustment period. Consequently, the adjustment period will not be reduced in the future, even if the period includes days for which the applicant is not entitled to a daily allowance or is entitled to a full daily allowance. As before, the adjustment will consider all the paid earnings during the period, even if they are paid for days when the person was not entitled to a daily allowance.

Consideration of working time with shorter workdays

An adjusted daily allowance cannot be paid if the number of working hours exceeds 80 per cent of the maximum working time of a full-time employee. The Government’s bill proposes comparing the working time of a person on a partial lay-off, implemented with a shorter workday, with the maximum working time in the entire adjustment period rather than the current maximum weekly working time. The adjustment period is either four weeks or one month, depending on the salary payment periods observed in the employment relationship.

The number of working hours will continue to be compared on the basis of payments. In other words, the working time will be examined in the adjustment period in which a wage was paid according to the number of working hours. The number of working hours will be examined in the same way after the reform, irrespective of whether an adjusted daily allowance is paid on the basis of part-time work or a lay-off with a shorter workday.

This change addresses a major shortcoming – one that our members have sent us a lot of feedback about and that we have written a lot about.

Deferral of income earned for a period of more than one month

According to the Employment Contracts Act, wages should generally be paid in two-week or one-month periods. However, employers sometimes pay wages for periods longer than one month under exceptional circumstances. In such cases, the earned income is divided so that it affects the adjustment of earnings-related daily allowance in the same months in which it was earned. The Government bill is intended to clarify the application of the law.

Under the amended legislation, earned income will only be deferred if the employer has deviated from its normal wage payment period. The earned income will be divided between months, irrespective of whether wages are paid on one or more paydays in the same month. Furthermore, the Government bill clarifies the application procedure by also requiring the working hours on which the earnings are based to be divided so as to apply to the same number of months as those in which the income was earned. Therefore, the division of working hours may affect the consideration of working time referred to above, for example.

Extraordinary assessment of working time

If the number of working hours exceeds 80 per cent of the maximum working time of a full-time employee, the employee is not entitled to an adjusted daily allowance. Under some exceptional circumstances, it may be difficult to estimate the overrun of working hours, especially if the employer also has no accurate records of the actual working time. In such cases, the 80-per-cent limit on working time is, in principle, considered to have been surpassed.

According to the Government bill, the party paying the unemployment benefit will be afforded greater discretion in the situations mentioned above. A person may be entitled to an adjusted unemployment benefit if the nature or circumstances of the work make it clear that the number of working hours did not exceed the 80-per-cent limit. However, the employee must still be a part-time worker be eligible for an adjusted unemployment benefit. For example, a reduction in the earnings of a full-time worker is not a basis for paying an adjusted daily allowance.

End to the adjustment of royalties

At present, royalties have been able to affect the adjustment of daily allowances over a very long period. Royalties are usually paid about twice a year, and they are divided so that they affect the adjustment of the daily allowance in the same number of months for which they were paid. The Government has now proposed an end to the adjustment of royalties, which will positively affect the earnings-related daily allowance, especially for people working in creative fields. The reform could also slightly accelerate the processing of applications for earnings-related daily allowances.