Employer of Record in Estonia

Businesses can only operate smoothly in Estonia if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Estonia below, to avoid any compliance issues.

Employment Contract Requirements

In Estonia, employment contracts may take the form of either permanent or fixed-term arrangements, provided that the temporary nature of the work is demonstrable. Irrespective of the employment type, the Estonian Employment Contract Act stipulates that written agreements must encompass, at a minimum, the following essential details:

• Identification of both contracting parties
• Commencement date
• Comprehensive job description, inclusive of duties and responsibilities
• Basic salary, along with any additional compensation or benefits, and specifics regarding payment

Onboarding Process

We can help you get a new employee started in Estonia quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Estonia

The standard work week consists of 40 hours, typically distributed as 8 hours per day over a five-day work week.

Overtime in Estonia

Any work conducted beyond the standard 40 hours per week is considered overtime. The regulation and compensation for overtime are typically outlined and governed by the terms specified in employment contracts or collective agreements.

Probation Period in Estonia

The probationary periods for employment in Estonia are limited to a maximum duration of four months.

Fiscal Year in Estonia

1 January- 31 December is the 12-month accounting period that businesses in Estonia use for financial and tax reporting purposes.

Payroll Cycle in Estonia

The payroll cycle in Estonia is usually monthly, with employees being paid on or before the last date of the month.

Minimum Wage in Estonia

The minimum wage for employees in Estonia is typically 4.86 EUR per hour, amounting to ~820 EUR per month for a typical 40 hour work week.

Bonus Payments in Estonia

Employers aren't required to give a 13th-month salary, but it's common to receive annual bonuses.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 33.8% on top of the employee salary in Estonia.

Employee Payroll Tax Contributions

In Estonia , the typical estimation for employee payroll contributions cost is around 1.6% - 3.6%%.

Individual Income Tax Contributions

In Estonia, there's a flat tax rate of 20%, along with a tax-free minimum of up to 654 EUR per month. However, this exemption decreases as income rises, and it reaches zero when the annual gross income exceeds 25,200 EUR or 2100 EUR per month.

Pension in Estonia

Estonia's pension system consists of three pillars: the State Pension (Pillar I) based on solidarity, the Compulsory Funded Pension (Pillar II) with a 20% employer contribution, and the Supplementary Funded Pension (Pillar III) for optional pension enhancement. State pensions are available to individuals aged 63 and nine months with 15 years of service, offering various options including early-retirement and deferred pensions.

Mandatory Leave Entitlement in Estonia

The annual leave entitlement in Estonia is 28 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Estonia

Employees have the right to take national holidays off. These holidays include:

Paid Time Off in Estonia

All employees are entitled to a minimum of 28 calendar days, which is equivalent to four weeks, of paid annual leave.

Maternity Leave In Estonia

Female employees are entitled to 100 calendar days of maternity leave. Up to 70 days can be taken before the due date, and during this period, maternity benefit will be paid by the Social Insurance Board. the maternity benefit is determined and paid based on the mother's actual taxable income during the reference period.If the mother's income subject to social tax in the reference period was equal to or less than the minimum wage , the maternity benefit is paid at the rate of the minimum wage, which in 2024 is 820 euros per month, with a daily rate of 27 .33 euros

Paternity Leave In Estonia

Fathers are entitled to a benefit of 30 calendar days which can be used up to 30 calendar days before the estimated date of birth of the child until the child turns 3. The amount of compensation depends on the social tax paid in the reference period.

Sick Leave In Estonia

Employees are entitled to up to 182 calendar days of leave per year due to illness. The breakdown of the leave period is as follows:

• Days 1 to 3: Unpaid leave.
• Days 4 to 8: Paid by the employer based on average wage in the last six months.
• Days 9 to 182: Paid by health insurance at 70% of the daily income, based on social tax payments made during the previous calendar year.

Parental Leave In Estonia

In Estonia, both mothers and fathers can take parental leave until their child is three years old. However, only one parent at a time can take childcare leave. Parental leave benefits are paid for a duration of up to 475 days.

Study Leave

Employees have the right to 30 days of study leave as per the Adult Education Act, with 20 of these days compensated at the rate of the employees average salary.

Childcare Leave

Child leave is granted to both employed parents separately and on a per-child basis. Each parent is entitled to 10 days of parental leave per child aged 14 and under.

Termination Process in Estonia

In Estonia, employers have the authority to terminate a fixed-term contract for various reasons, including:

• Business needs
• Employee misconduct
• Is permanently incapacitated by accident or ill health; unable to perform job duties
• Personal reasons

Notice Period in Estonia

The duration of notice an employer must provide to an employee before terminating the working relationship depends on the length of the employee's service:

• Less than 1 year of employment: At least 15 calendar days' notice.
• 1 to 5 years of employment: At least 30 calendar days' notice.
• 5 to 10 years of service: At least 60 calendar days' notice.
• 10 or more years of service: At least 90 calendar days' notice.

Severance in Estonia

If an employee's contract is terminated due to redundancy, the employer must provide severance pay, equal to one month's salary based on the average earnings of the past six months. Additionally, employees with 5 to 10 years of service receive one extra month's salary from the unemployment insurance fund, and those with 10 or more years of service get an additional month's salary from the same fund.