Payroll and HR
Administration in Estonia

Estonia – Payroll and HR administration services

Global Expansion Plus provides payroll and HR administration services in Estonia. Use our solutions to take care of your people in Estonia. We make sure that your people are being taken care of, and your entity is safe from violating local legislation. The Labor Code and Law on Labor Agreement govern the Estonian labor relationship.

Hiring and onboarding employees in Estonia

If you are hiring a foreign employee, you need to consider obtaining the work permit first. Please see below. Once you agreed on the job offer with your future employee, you need to start the onboarding process.

Onboarding Process

The Law on Labor Agreement of Estonia covers the onboarding process in Estonia. Upon concluding a labor agreement shall be registered with Labor Officials of Estonia. The registration creates a tax obligation by the employer and employee.
The onboarding process starts with a signed job offer and continues to the signing of an employment agreement. An employer is required to provide an induction to the job and health and safety rules and the workplace.

Probation Period

An employer can agree with an employee the maximum trial period that can is four months. In a fixed-term contract concluded for up to eight months, the length of the trial period shall not exceed half of the contract duration. For instance, the trial period of a six-month contract cannot exceed three months.

Health and Safety

The employer must ensure for the workforce such working conditions that are comfortable and safe. Requirements for work conditions are contained in the “Labor Protection Law” of Estonia. Following the requirements mitigates the risks of damage to the health and safety of the people.

Work permits and Visas in Estonia

Visa Types

  • Visa Type A. Airport Transit. This visa is for the passing from the international airports situated in the Schengen Member States.
  • Visa Type C. Short-term visa. This visa is issued for a short term stay in the Schengen zone for 90 days within a period of 180 days.
  • Visa Type D. Long-stay visa. This visa is provided to the foreign citizens that plan to obtain a work permit in Estonia.
If your main destination is Estonia, the visa should be provided by the Estonian consular services. The short term visa for the transit purposes can be obtained by the consular services of any Schengen Member States.
The following documents are submitted alongside with application for visa:
  • An international travel document;
  • A filled in the application forms;
  • A colored 35x45mm photo in pdf format;
  • Insurance policy recognized in the Schengen zone;
  • Support documents that prove the financial stability of the applicant and intention to return to the country of origin.

Work Permit

Work permit for European Union citizen.

If a foreigner is a citizen of the EU and citizens of Iceland, Liechtenstein, Norway, or Switzerland, he/she enter Estonia without a visa. If the employee also wants to work in Estonia for more than three years, you just need to register as an Estonian resident and taxpayer in the Register of the Population Estonia during the first three months of your stay.

Work permit for Non-European Union citizen.

A foreign citizen of a non-EU country needs to obtain a Visa -D for a period of six months. Before an applicant applies to a visa D, the employer needs to register in the Estonian Police and Border Guard Board.

If a foreign citizen intends to work in Estonia for a period longer than six months, he/she needs to apply for the temporary residence permit. After staying in Estonia under the temporary residence for a period of five years, the foreign citizen can apply for permanent residence.

Working hours and leaves in Estonia

Working hours and overtime

Estonian Labor Code established a 40 hours workweek unless a shorter workday is agreed between the parties. A standard workday is eight hours. An employer can compensate over time by providing paid leave for the employee or by compensating at 1.5 rates at a minimum. Estonian Labour Code prescribes at least 11 hours of daily rest time and 48 hours of weekly rest time.

Vacation leave

The guarantied annual holiday is 28 calendar days unless agreed on a more extended holiday by the employment agreement. The yearly leave of the minor workers and employees with a disability is 35 days.

Sick leave

An employee is eligible for the sick leave compensation starting from the fourth day of sickness. An employer compensates for the ill leave day at a rate of 70% from the fourth day to the eighth day of illness. Social Security Fund compensates 70% of the average salary starting from the ninth day of sickness. In case of illness happening to a pregnant woman, compensation begins from the second day. Social Security Fund pays for caring for a sick child, 80% of the average income of an employee.

Maternity and paternity leave

Maternity leave is provided for 126 calendar days (70 days before childbirth and 56 days after delivery), with complicated or at the birth of 2 or more children, it is extended by 14 days. In regions affected by nuclear testing, maternity leave is 170 days with normal childbirth and 184 days with complicated or more than one birth.
Childcare leave lasts until the child is three years old. At the same time, one of the parents can take parental leave by mutual agreement.

Holidays in Estonia 2020

  • 01 January 2020 - New Year's Day
  • 24 February 2020 - Independence Day
  • 10 April 2020 - Good Friday
  • 12 April 2020 - Easter Sunday
  • 01 May 2020 - Spring Day
  • 10 May 2020 - Mother's Day
  • 31 May 2020 - Pentecost Sunday
  • 23 June 2020 - Victory Day
  • 24 June 2020 - St. John's Day
  • 20 August 2020 - Independence Restoration Day
  • 8 November 2020 - Father's Day
  • 24-25 December 2020 - Chrismas
  • 26 December 2020 - Boxing Day

Remuneration & Benefits in Estonia

In 2020 the minimum wage would be EUR 584 per month. The agreement provides that the minimum hourly wage will be EUR 3.48 per hour in 2020. In 2021, the minimum wage will increase to 40 percent of the national average salary.

Employee termination and severance in Estonia

Under the Estonian Competition Authority, an employer can terminate employment following the statutory prior notice requirements.
There must be a basis for the termination of an employment contract. The basis may be:
  • liquidation – the enterprise terminates its activities in full;
  • bankruptcy – a court has declared the employer's bankruptcy;
  • redundancy – the employer is unable to provide work for the employee. The preferential rights of the enterprise's employees must be taken into consideration for making someone redundant, and the employee must be notified of the redundancy insufficient time.
The Estonian Competition Authority provides a list of eligible reasons for termination of employment by the employer, which fall within two categories: grounds relating to the employee personally and economic reasons.

Payroll related taxes in Estonia

Employee taxes

Employees are paying Personal Income Tax of 20%, the tax is calculated on the gross salary minus social payments. Social payment in Estonia are followings:
  • 1,6% of unemployment insurance;
  • 2% of pension funds;

Employer taxes

Employers are paying to two funds:
  • Social Security Contribution at 20% of gross salary;
  • Health Insurance of 13% of the gross wage;
  • Unemployment Insurance at 0.8% of a gross wage;
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