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Average Remuneration Calculation and Payment

Viimati uuendatud: 02.01.2018


Average remuneration calculation principles

Average remuneration is calculated either based on workday or calendar day.

Months that the calculation is based on

The average remuneration calculation is based on remuneration earned and become collectable to the employee during the 6 months preceding the month when the calculation is done.

Remuneration becomes due on the remuneration day when it must be transferred to the employee’s bank account. The remuneration day must be written in the employee’s contract of employment.

Calculation need occurrence month is the month when a calculation need triggering event occurred, such as the start date of an illness. When calculating the vacation pay, the calculation need occurrence month is the month when the employee has their last but one workday prior to the vacation.

For example, if the medium remuneration must be calculated for the employee in August and the July’s remuneration has become collectable, the calculation shall be based on remuneration earned in February, March, April, May, June and July. In the case July’s remuneration has not become collectable yet, the calculation shall be based on remuneration earned in January, February, March, April, May and June.

Fees that the calculation is based on

The accrual method must be followed when calculating the average remuneration, meaning that remuneration earned by the employee shall be used as the calculation basis. For example, when paying for an additional fee, the time for which the additional fee is earned is relevant (not the time when the additional fee is paid out).

Lack of obligation to re-calculate the average remuneration

In a situation where the average remuneration has been paid out to the employee but they have earned remuneration during the months that the average remuneration calculation is based on that the employer refuses to pay out after paying the average or fixed-size remuneration, the employer must not re-calculate the already paid medium remuneration. For example, if the employee has earned performance pay for the first half-year, which shall be paid out at the end of the second half-year, and the employee has been on a vacation on the first half-year, the vacation pay that was paid out to the employee must not be re-calculated.

Calculation of the average remuneration in the case of new employees

If the employee has been employed at the company for a short time and the remuneration day has not arrived yet, the average remuneration is not calculated and the employee is paid the agreed remuneration. For instance, the employee has been employed for a month and the first remuneration date has not arrived yet (meaning that the employer does not have the obligation to calculate the remuneration). The employee will take an academic leave starting from the following month and is paid average remuneration as agreed in the contract of employment for the academic leave days. If the employee has been employed for over 1 but less than 6 calendar months, only those months shall be used in the calculation for which remuneration has already become collectible.

Calculation of the average remuneration if the employee has not been paid remuneration for a long time

If the employee has not been paid remuneration in 6 months (for example, the employee has had a long vacation or sick leave), the average remuneration to be paid out to the employee is the remuneration agreed in the contract of employment.

If remuneration has not been paid for more than 12 months (e.g., employee has been on a child care leave), the employee’s remuneration must be adjusted with an index. Index = relation between the minimum remuneration applicant at the month when the need arises to calculate the average, and the minimum remuneration as set by the Government of the Republic and applicant at the month when the long leave began. For instance, employee’s child care leave began in 2014. To find the average remuneration of 2016, the index is calculated as follows: 500 euros (minimum remuneration in 2018) : 355 (minimum remuneration in 2014) = 1.41. The employee’s contractual remuneration is multiplied with this index, resulting in an indexed remuneration, according to which the average remuneration is calculated.

Paying the agreed remuneration instead of the medium remuneration

When calculating the vacation pay, a situation can occur when there is no need to calculate the medium remuneration. If the employee has received an unchanging and fixed remuneration during the 6 months preceding the calculation month, the medium remuneration is not calculated for the vacation pay and the employee is paid a fixed-amount remuneration. The medium remuneration is also not calculated when an equal-size extra is always added to the monthly remuneration (e.g., extra pay for employment years in the public service). The employer must also not calculate the medium remuneration if the employee has been on a vacation during the six preceding calendar months, or when the employment relationship has been paused for some other reason stated in the Employment Contracts Act (e.g., employee has been on a vacation or sick leave) and has received only an invariable-size remuneration during this period.

Paying workday-based medium remuneration

Workday-based medium remuneration is calculated when the event, for which the medium remuneration is paid, lasts in working days (e.g. additional monthly free day for raising a child with a disability).

For calculating the average workday remuneration, the salaries of six months are first added up and then divided by the calendar workdays of the same period. The number of workdays shall be reduced by those days when the employee was not paid any remuneration (employee was on a sick leave, vacation, recruitment, participated in a strike, legally represented other employees, etc.).

For calculating the medium hourly salary, the workday remuneration is divided by the number of agreed daily working hours (in the case of full-time employment, 8).

To calculate the average weekly salary, the medium workday remuneration is multiplied by the number of calendar workdays per week (in the case of full-time employment, 5).

To calculate the average monthly remuneration, the medium workday remuneration is multiplied by the average number of workdays in 1 calendar month.

Calendar day-based medium remuneration payment

Calendar day-based medium remuneration is calculated if the event for which the average remuneration is paid occurs in a calendar day (e.g. academic leave, vacation, sickness benefit paid by the employer, etc.).

To calculate the average calendar day remuneration, the salaries of six preceding months are first added up and then divided by the number of calendar days in the same period. National and public holidays are not included in the calendar days when calculating the annual vacation pay and additional vacation pay for civil servants.

The number of calendar days is decreased by the number of days for which the employee was not paid remuneration in the case of refusal to work (employee was on a sick leave, vacation, recruitment, participated in a strike, legally represented other employees, etc.).

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