Estonia
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Why work in
Estonia
?
Grow your team in
Estonia
Employers in Estonia must establish a local legal entity and leverage local resources to ensure compliance with employment regulations, payroll management, tax obligations, and benefits administration. The intricacies of employment laws in Estonia require employers to navigate a complex landscape to ensure compliance. By partnering with local experts, businesses can streamline their operations and effectively manage their workforce, ensuring adherence to Estonian employment regulations and optimizing their business operations.
With Gloroots' global Employer of Record (EoR) service, you can let Gloroots handle the heavy lifting of payroll, tax, benefits, and compliance, allowing you to concentrate on what matters most: your employees and company growth.
Risks of misclassification
Estonia treats contractors, sole proprietors, self-employed individuals and full-time workers differently and there are significant risks associated with misclassificatiThe issue of "employee misclassification" also exists in Estonia and refers to the incorrect categorization of workers by employers. It occurs when an employer wrongly classifies a worker as an independent contractor, depriving them of the employment rights and benefits that should be provided to a regular employee, even if the worker performs duties similar to those of a permanent employee.
Partnering with a PEO/EOR in Estonia can assist in properly distinguishing worker classifications and preparing accurate employment agreements. By entrusting employment-related responsibilities to knowledgeable professionals, businesses can focus on their core operations while maintaining compliance with Estonian labor regulations.
Employing in
Estonia
When employing in Estonia, it is crucial for businesses to acquaint themselves with Estonian employment and labor laws to ensure compliance and fair practices. This entails understanding aspects such as minimum wage requirements, working hours, employee benefits, statutory leaves, and contractual obligations. Additionally, proper payroll management and adherence to termination procedures are essential. By staying informed about these laws, businesses can foster a positive work environment, uphold employee rights, and avoid potential legal issues. Seeking guidance from legal or HR experts well-versed in Estonian labor regulations is recommended to navigate these requirements effectively.
If you do not have the in-house compliance and payroll experts to do this, engage with Gloroots’ Estonia EOR.
Legal aspects of employing in
Estonia
Working hours
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Payroll
The Employment Contracts Act is the source of all employment regulations. Employers need to prepare contracts, pay employees, plan work hours according to the stipulations in this Act.
Employment Contract
Employment contracts in Estonia can be either permanent or fixed-term, based on the nature of the work. The Estonian Employment Contract Act requires employment agreements to be in writing.
Essential information that must be included in employment contracts:
- Identification of both parties involved.
- Start date of employment (and duration for temporary contracts).
- Workplace location.
- Clear job description, duties, and responsibilities.
- Basic salary and details of other compensation or benefits.
- Payment details, including frequency and method of payment.
- Working hours.
- Total number of holidays.
- Notice periods for termination of employment.
- Reference to any applicable collective agreements.
This might sound overwhelming, but it doesn't have to be. Gloroots eliminates these barriers for you. With Gloroots' Employer of Record offering, hiring and managing employees globally is a piece of cake.
Get an overview of what you need to know when hiring in Estonia. Contact us.
Working Hours
In Estonia, the regular workweek usually comprises 40 hours, with employees working 8 hours per day for five days a week.
Overtime
Any work that surpasses an employee's regular working hours is classified as overtime and necessitates mutual agreement between the employer and employee. In such cases, employees who are required to work overtime are entitled to either extra time off or compensation at a rate of 150% of their normal hourly wages. It is important to note that working beyond a maximum of 48 hours per week, including overtime, is not permitted.
Minimum Wage:
As of January 2023, the minimum wage in Estonia increased to EUR 725 per month or EUR 4.30 per hour.
Maternity Leave and Paternity Leave
Female employees in Estonia have a maternity leave entitlement of 140 calendar days, which can be extended to 154 days for multiple births. 70 days of their maternity leaves can be taken before the expected due date. During this period, female employees are paid from the Estonian health insurance fund.
As of 1 July 2020, fathers are eligible for up to 30 calendar days of paid paternity leave. During this period, the employer continues to pay the father's regular salary and can later seek reimbursement from the state.
Adoptive parents are granted 70 calendar days of leave for each adopted child as long as the child is under the age of ten.
Annual leave
Every employee in Estonia is entitled to a minimum of 28 calendar days of annual leave.
Sick Leave
If an employee is unable to work due to illness or injury, they are eligible for sickness benefits starting from the fourth day of absence. From the fourth to the eighth day, the employer is responsible for providing the employee with their regular pay.
For any additional days of sickness, up to a maximum of 182 calendar days, the health insurance fund covers 70% of the employee's normal wages.
Tax
INCOME TAX
The individual income tax rate is 20%.
Other Taxes and Social Security contribution
Separation
Termination Process
An employment relationship can be terminated in situations involving severe employee misconduct, voluntary resignation by the employee, or as specified in the employment agreement when the relationship comes to an end.
Notice Period
The length of advance notice for terminating an employment relationship varies based on the employee's duration of service with the employer. The notice should be provided in writing and adhere to the following guidelines:
Severance Pay
For fixed-term employees, if their contract is terminated prematurely, the employer must pay them the wages they would have received for the remaining duration of the contract.
For permanent employees, the conditions that trigger severance pay are as follows:
- In cases of redundancy, the employee is entitled to six months' salary
- Employees with a tenure of five to 10 years receive an extra month of gross salary, while those employed for 10 years or more are entitled to two additional months of gross salary.
Probation Periods
The duration of a probation period in Estonia can be up to four months, for permanent employees.
For fixed term employees, the probation period cannot exceed half of the total term of the employment contract. For example, if the employment contract is for 12 weeks , the probation period cannot exceed six weeks. However, even for fixed term employees, this period cannot last for more than 4 months.
If an employer wishes to terminate an employment contract during the probation period, they must provide at least 15 days' notice before the termination takes effect.
