How to hire employees in Estonia

Estonia stands out as an ideal destination for businesses looking to access top-tier talent in a rapidly changing global environment. Renowned for its technological prowess and forward-thinking initiatives, Estonia boasts a diverse pool of skilled professionals across various sectors, from IT and engineering to digital innovation.

With its rapidly evolving tech ecosystem and a strong focus on pioneering solutions, Estonia presents an increasingly attractive opportunity for enterprises seeking expertise in areas like software development, cybersecurity, and advanced digital solutions. The country's workforce combines technical proficiency with entrepreneurial spirit, offering enticing prospects for organizations venturing into emerging markets.

Moreover, Estonia's labor market offers cost-effective options for businesses, enabling access to highly skilled professionals at competitive rates. This affordability, coupled with Estonia's strategic location and robust digital infrastructure, positions the nation as a premier destination for companies looking to establish or expand their global presence.

Estonia's reputation for technological innovation, talented workforce, and economically advantageous labor market makes it a strategic choice for enterprises aiming to leverage talent and foster growth across diverse industries.

What you need to know before hiring employees in Estonia

Job market in Estonia

When strategizing on effective hiring practices in Estonia, several key trends offer valuable insights for recruitment and compensation strategies:

• Estonia’s Global Ranking on Wellbeing and Inequality (GRWI) is 0.818, indicating its standing in relation to global wellbeing and inequality measures, which offers insights into the country's socio-economic landscape.
• Estonia has witnessed a notable decrease in its unemployment rate, which currently stands at 5.57%, indicating a positive trend in the labor market.
• The distribution of employment across economic sectors in Estonia highlights a significant emphasis on the service sector, with 68.26% of employees engaged in this domain in 2021. This underscores the growing importance of service-oriented industries, presenting ample opportunities for talent acquisition and development initiatives.
• Furthermore, Estonia boasts impressive rankings in ICT infrastructure, positioned at 43 globally. This underscores the nation's proficiency in digital technologies and infrastructure development, making it an attractive destination for companies seeking to leverage advanced technological capabilities in the midst of ongoing urbanization efforts, which signify opportunities for talent acquisition and technological advancement, particularly in urban centers where the concentration of skilled professionals is higher.

These insights illuminate Estonia's evolving economic landscape and its readiness to accommodate modern workforce dynamics. With a significant presence in the service sector, coupled with advanced ICT infrastructure and ongoing urbanization efforts, Estonia presents an attractive destination for companies seeking skilled professionals to thrive in the global job market.

Estonia Hiring Trends

In 2024, Estonia's hiring landscape reflects a nuanced trajectory, characterized by fluctuations yet maintaining a foundation of opportunity for employers to engage with a dynamic pool of talent and stimulate organizational growth.
Despite a slight decrease in active job postings, it signifies more of a recalibration than a significant downturn in hiring activity, allowing employers to refine their recruitment strategies effectively.
With 223 new jobs posted in January 2024, marking a 3.72% increase from the previous month, there's evident growth and demand for talent across diverse sectors, highlighting the resilience of the Estonian job market.
From October 2023 to January 2024, a positive trend in the closure of job positions suggests companies' proactive approach to streamlining operations and optimizing their workforce, providing opportunities for job seekers and employers alike.
Estonia's commitment to advancing its ICT infrastructure positions it as a hub for innovation, offering promising opportunities for employers and employees to thrive in an environment conducive to technological advancement.

In navigating Estonia's dynamic hiring landscape, employers should embrace adaptability, innovation, and inclusivity in their recruitment efforts, fostering a positive workplace culture and aligning with the evolving aspirations of the modern workforce for sustained success.

• Estonia's Tech-Savvy Workforce: Estonia's highly skilled labor market, especially in digital services, IT, and creative industries, position it as a hub for innovation and technological advancement.
• Strategic Location for Business: Estonia's strategic geographical location makes it an ideal gateway for companies aiming to expand into European and global markets.
• Digital Nomad Friendly: Estonia's welcoming policies for digital nomads, including e-Residency and startup visas attract global talent and entrepreneurs.
• Ease of Business Operations: The streamlined processes for starting and operating a business in Estonia, including digital governance and e-services, simplifies administrative tasks and compliance.
• Access to European Markets: Estonia, being part of the EU, offers access to a single market and facilitates easier trade and investment opportunities across Europe.
• Innovative Ecosystem: The vibrant startup ecosystem in Estonia, supported by a strong network of accelerators, incubators, and venture capital, fosters growth and collaboration.
• R&D and Tax Incentives: Government incentives for research and development, as well as favorable tax policies benefit businesses focusing on innovation and growth.
• Multilingual Workforce: The multilingual capability of Estonia's workforce, with high proficiency in English and other languages, caters to international business needs.
• Sustainable and Green Technologies: Estonia's focus on sustainable development and green technologies appeals to businesses committed to environmental stewardship.
• Cultural Compatibility: The cultural compatibility and ease of doing business with Estonians, known for their straightforward communication and high work ethic makes it easy and smooth to operate.

How to hire employees from Estonia

1. Set up an entity in the country

Establishing a legal entity in Estonia is a strategic move for businesses seeking to establish a solid presence and foster long-term growth within the country's vibrant market.

Choosing to form a legal entity allows for direct management of operations and offers stability and compliance advantages. The process involves selecting an appropriate business structure, such as an OÜ (Private Limited Company) or AS (Public Limited Company), and completing registration with relevant authorities like the Estonian Commercial Register or Tax and Customs Board.

Navigating this process requires understanding local regulations and business practices, seeking expert guidance, and engaging with local advisors for a smooth establishment.

2. Hire independent contractors

Engaging independent contractors in Estonia involves entering into agreements with individuals or businesses for specialized tasks or projects. This arrangement provides significant flexibility, particularly suited for short-term assignments or project-based requirements. However, accurately classifying workers is essential to sidestep legal complexities and potential penalties. Furthermore, it's important to note that contractors may not demonstrate the same level of commitment or loyalty as full-time, in-house employees, a consideration worth weighing in this hiring approach.

3. Partner with an EOR in the country

Partnering with an Employer of Record (EOR) service such as Gloroots provides a seamless entry point into Estonia's market, circumventing the complexities associated with establishing a legal entity. This strategy reduces liabilities and offers cost-efficiency. By collaborating with an EOR, businesses can rest assured of compliance with Estonian labor laws, tax obligations, and regulations, thereby mitigating legal risks and ensuring a smooth and compliant business operation.

Employment Laws You Must Know Before Hiring in Estonia

Maintaining compliance with Estonian regulations is crucial when hiring in the country to mitigate risks. Non-compliance can result in legal penalties and operational disruptions. Proper classification of workers, adherence to contracts, and compliance with tax obligations are essential. Partnering with experts like Glorious can provide guidance, ensuring a compliant hiring process.

Key Aspects of Estonian Labor Law

Working Hours:

In Estonia, the regular work week comprises 40 hours, usually spread over five days with 8 hours per day.

Overtime:

‍Employees are not permitted to work more than an average of 48 hours per week over a span of four months. Overtime compensation is required at a rate of 150% of the usual salary or can be offset with extra time off.

Minimum Wage:

‍The current minimum wage in Estonia stands at 820 EUR per month.

Payroll laws in Estonia

Payroll in Estonia typically operates on a monthly cycle, with payments due on the same day each month, no later than the last working day. While not obligatory, Estonia does not mandate a 13th-month salary. However, bonuses are frequently provided and are usually distributed annually.

Employment benefits in Estonia

Leave Policies in Estonia

1. Paid Time Off:

Under Section 55 of the Employment Contracts Act, employees in Estonia are entitled to 28 calendar days of annual paid leave, unless agreed otherwise between the employee and employer, or as stipulated by law. Certain groups, such as government officials and academic staff, may receive extended leave periods, with officials entitled to 35 days and academic/research staff receiving 56 days.

Regarding public holidays, those occurring on weekends are typically not carried over. There are 9 public holidays in Estonia.

2. Sick Days:

In Estonia, employees can take up to 182 calendar days of sick leave per year. The first 3 days are unpaid, followed by days 4 to 8 paid by the employer. From day 9 to 182, payment is covered by health insurance at 70% of the employee's salary.

3. Maternity Leave:

In Estonia, pregnant employees are entitled to 140 days of maternity leave, starting at least 70 days before the due date. Maternity leave is compensated at 100% of the employee's average earnings from the previous year, with no upper limit. Mothers who didn't work the previous year receive the minimum wage. Health insurance funds cover maternity pay. Childcare allowance ends for children born after August 31, 2019, but other family allowances continue.

4. Paternity Leave:

Fathers in Estonia receive 10 working days of paternity leave to be taken within two months of the due date, followed by an additional 2 months of leave after the birth. Paternity leave pay is calculated based on the employee's average wage, capped at three times the minimum wage, with the father entitled to 100% of their regular wages.

Filing tax in Estonia

Income Tax:

Income tax in Estonia is applied at a flat rate of 20%. However, there is a tax-free minimum of up to 654 EUR per month, with this exemption decreasing as total income amounts increase. Once the annual gross income exceeds 25,200 EUR or 2,100 EUR per month, the exemption becomes zero. For more information, please refer to our detailed guide.

Other Tax and Social Security Contributions:

In Estonia, both employers and employees make payroll contributions, contributing to the nation's social security system. Employers typically allocate 33.80% towards employment costs, encompassing social tax, pension, and health insurance. Meanwhile, employees contribute between 3.60% and 5.20% of their salary, depending on factors like age and income level. These contributions ensure comprehensive social protection and support for both employers and employees, fostering a stable and secure working environment. For more information, please refer to our detailed guide.

Business culture in Estonia

Meeting & Greeting Etiquette in Estonia:

• Estonians exhibit a formal demeanor, which may appear reserved or distant to those from more informal cultures; however, this shouldn't be misinterpreted.
• As relationships develop, communication tends to become more relaxed.
• Shake hands with all individuals present at meetings.
• It's considered impolite to greet someone while seated.
• Handshakes should be firm and confident.
• Maintain eye contact while shaking hands.
• Allow women to initiate handshakes.
• Address businesspeople by their professional title and surname.
• If no professional title is available, use "Härra" for men and "Prova" for women.
• Wait for an invitation before transitioning to a first-name basis.

Business Card Etiquette:

• Business cards are exchanged casually.
• Present your business card clearly to the recipient.
• Treat received business cards with respect.
• Translating the reverse side of your card into Estonian is appreciated.

Top sectors to hire from in Estonia

Agricultural Sector

Employing approximately 2.69% of the workforce, the agricultural sector holds a minor yet notable presence in Estonia's employment landscape, encompassing activities such as farming, forestry, and fishing.

Industry Sector

Comprising a substantial 29.05% share of the workforce, the industry sector is a significant contributor to employment in Estonia, incorporating activities such as manufacturing, construction, and mining.

Service Sector

Dominating the employment landscape with a commanding 68.26% share, the service sector is the primary source of job opportunities in Estonia, spanning a wide array of services including retail, trade, and public administration.

Top cities to hire from Estonia

Tallinn:

Emerging as a thriving tech hub in Northern Europe, Tallinn boasts a burgeoning pool of tech talent, particularly software engineers and IT specialists. Its flourishing startup ecosystem, bolstered by government support and access to venture capital, positions it as an enticing destination for accessing innovative talent and capitalizing on the evolving Northern European tech landscape.

Tartu:

Tartu is rapidly gaining prominence as a leading tech hub in Estonia, celebrated for its vibrant workforce and attractive incentives for tech companies, including tax breaks and financial support. The city is home to esteemed universities and tech hubs, cultivating a skilled pool of tech professionals who remain at the forefront of technological advancements.

Hire in Estonia compliantly with Gloroots

In Estonia, Gloroots serves as an Employer of Record (EOR), offering a streamlined solution to these complexities. Our EOR platform streamlines the onboarding process for candidates, ensuring smooth operations initiation while adhering to both local regulations and global standards. Customized to cater to businesses of all sizes, our platform simplifies payroll management, benefits administration, and tax compliance, eliminating the need to establish a local entity. This allows companies to focus on effectively building a remote workforce in Estonia. For further information on how Gloroots can support your hiring needs in Estonia, feel free to reach out to us.

Frequently Asked Questions

1. How much does it cost to hire an employee in Estonia?

In Estonia, hiring expenses typically include the employee's basic salary, benefits, contributions to social insurance, and any applicable taxes. Additionally, employers may incur costs related to recruitment advertising, signing bonuses, and onboarding procedures. These hiring costs can vary based on factors such as the employee's skill set, experience level, and the specific location of the job within Estonia. Understanding these variations is essential for effective budgeting and financial planning in the Estonian job market.‍

2. Where can I hire employees from Estonia?

Major cities like Tallinn, Tartu, Narva, and Pärnu are prominent hubs for sourcing talent in Estonia, particularly for roles in technology, finance, and engineering. Employers often engage in campus recruitment, attend job fairs, and utilize online job portals such as CV.ee, Work in Estonia, and LinkedIn to attract potential candidates. These cities, known for their diverse workforce and economic opportunities, serve as ideal locations for businesses seeking to build a skilled and diverse team in Estonia.

3. How to find talent in Estonia?

Finding talent in Estonia's dynamic job market involves utilizing various resources and strategies. Here are some effective ways to source skilled professionals in Estonia:some text

• LinkedIn: A widely used platform for professional networking and job searches, LinkedIn offers tools for posting job openings, searching for candidates, and connecting with industry professionals in Estonia.
• CV.ee: One of Estonia's leading job portals, CV.ee hosts a large database of job seekers and offers features such as resume-building tools and job matching services for employers.
• Work in Estonia: An official platform promoting career opportunities in Estonia, Work in Estonia provides job listings, relocation information, and employer resources for businesses looking to recruit talent from both local and international pools.
• Indeed: A global job search engine, Indeed's Estonia-specific site aggregates job listings from various sources, simplifying the hiring process for employers and job seekers alike.
• Networking Events: Participating in networking events, industry conferences, and professional associations can help employers connect with potential candidates and build relationships within Estonia's job market.
• University Collaborations: Collaborating with universities for campus recruitment programs and internships can provide access to talented graduates and students seeking employment opportunities.
• Recruitment Agencies: Partnering with local recruitment agencies can assist employers in identifying and hiring qualified candidates, especially for specialized roles.
• Employers can also consider engaging the services of an Employer of Record (EOR) like Gloroots to streamline the hiring process and ensure compliance with local employment regulations and practices.

4. What is the minimum salary for employees in Estonia?

• The national minimum wage in Estonia is 584 euros per month.