Problems which arise during the Estonian Employees’ Unions’ Confederation’s (TALO’s) wage negotiations are often the usual problems which arise during the collective negotiations of the public sector; the main question is who is the employer in the public sector – the one who concludes the employment contract or the financer? This is a background analysis of the long-term wage contract between TALO and the Estonian government.

It gives an overview of TALO’s membership and explains how the public sector’s wage negotiations are carried out. The research analyses what are the different options for wage indexation both time-wise and regionally, and how it can affect the productivity of the workers and their future wage demands. Reaching a collective agreement requires sufficient information so there is also an overview of the existing data and the possible enhancements for data collection.


According to the current Estonian legislative framework, the Government’s role as the employer is unregulated when concluding collective agreements and it is the same for all employees’ groups. Since all institutions represented by TALO can be regarded as the public sector according to some criteria, in those cases the government functions as the employer. Questions arise when employees’ groups are removed from the negotiations and the reason given is that the Government of Estonia is not their employer.

The employee’s groups and institutions they belong to, who all take part in the negotiations between the government and TALO, are generally quite well specified, although it might vary how representative the trade unions are.

It is also controversial to conclude wage contracts in institutions where similarly to the governmental bodies the goverment appointed wage grid applies. In these kinds of institutions, negotiations over wages should be negotiations over wage rates, but if only some institutions agree upon the lowest wage limits during negotiations, it creates a contradiction. Certain employees taking part in negotiations outside their employees’ group can also be pointed out as a problem.

Regional differentiation of wages in Estonia would be justified if the desire was to pay employees equal real wage, but it is difficult to find an indicator that would adequately reflect the difference in wages’ purchasing power regionally. On the other hand, equal pay all over Estonia would ensure higher real purchasing power in rural areas which could be a justified regional policy measure.

Wage growth with different index schemes


Indexing the wages to the Consumer Price Index (CPI) over the years should be regarded as keeping the real purchasing power of the wages unchanged. On the one hand, implementing a long-term wage rise mechanism might reduce the employees’ insecurity and therefore compensate for relatively lower wage levels. On the other hand, indexing wages to the Consumer Price Index and Gross Domestic Product (GDP) could over time make the wages lag behind the national average wage. A situation can also occur where the real wage is not in compliance with the productivity growth, therefore indexation should not hinder the reorganisation to increase efficiency.

See also

Eesti Vabariigi valitsuse ja TALO vahel 2001. a sõlmitud kokkulepe palgakorralduse kohta Riigi Teatajas