No. 18




Calculation of Parental Benefit for Persons Employed during Parental Leave

16 December 2008


RiTo No. 18, 2008

The current scheme for calculating parental benefits for working parents is poor, as it creates situations where the benefits may become reduced by several thousand kroons if the beneficiary earns only one extra kroon. The problem becomes deeper as wages and benefits increase.

A new model is needed, one that would provide more even results. Calculation of parental benefits for working parents should not create a situation where a parent has no motivation to work or where any income over the useful limit is paid out “under the table”, after the end of the parental benefit or in some other manner. Thus, above all, the scheme for calculating the parental benefit is based on the principle that income should not, in any case, be reduced while the person is receiving parental benefits, because if total income were to decrease while the person is working, there would be no incentive for people to work.

The drop in parental benefit should be even and the rate at which the benefit is reduced should depend on how much parental benefits a person is receiving. For those who go to work and are receiving a smaller allowance, the size of the allowance drops at a slower rate, in order to encourage them to work more and better provide for parents with lower incomes and their families.

Full article in Estonian