Payroll and Benefits Guide Estonia
Last updated: May 03, 2023
Employer Payroll Contributions
* There is usually a minimum obligation for the social tax to be paid 215.82 EUR monthly, even if there were no salary payments to employee.
Total Employment Cost
Employee Payroll Contributions
|1.60% – 3.60%||Total Employee Cost|
|2.00%||Compulsory Pension for those born after December 31, 1982|
Employee Income Tax
* The tax-free minimum of which no deduction of income tax takes place is up to 654 EUR in a month but decreases depending on the total income amount. When the annual gross income exceeds 25,200 EUR or 2100 EUR per month, the exemption is zero.
In Estonia, the national minimum wage is 725 EUR per month and 4.30 EUR per hour.
MINIMUM WAGE (PER MONTH)
The payroll cycle in Estonia is generally monthly, and payments must be made on the same day of the month and no later than the last working day of the month.
In Estonia, a 13th-month salary is not mandatory. However, bonuses are common and often paid annually.
The standard work week in Estonia consists of 40 hours a week, typically 8 hours a day for a five-day work week.
All work above the standard working hours a week is paid as overtime and regulated by employment contracts/collective agreements. When an employee is requested to work overtime or work on holidays, there are no maximums in relation to the number of hours allowed except in the case of minors.
Paid Time Off
In Estonia, the annual leave entitlement differs depending on the job role and employment contract/collective bargaining agreement in place. According to Section 55 of the Employment Contracts Act, an employee’s annual paid leave is 28 calendar days, unless the employee and the employer have agreed on a longer annual leave or unless otherwise provided by law.
For example, government officials are entitled to 35 days of annual leave, and academic and research staff receives 56 days of paid leave.
There are 12 public holidays.
Employees in Estonia are entitled to up to 182 calendar days per year. Day 1 to 3 is unpaid leave, day 4 to 8 is paid by the employer, and day 9 to 182 is paid by health insurance at 70% pay.
The current sick leave compensation scheme where employees receive payment from the second day of sickness is extended to June 30th, 2023.
Pregnant employees are entitled to 140 days of maternity leave in Estonia, which can start at the earliest 70 days before the due date and has a minimum of 30 days.
Maternity leave is compensated at one 100% of average earnings calculated based on employment in the previous calendar year with no upper limit on payments. The minimum wage of 654 EUR per month is paid to mothers who had not worked in the last calendar year but then worked before the child’s birth.
The health insurance contributions fund the payment of maternity pay at a rate of 100% of the employee’s average earnings based on the previous year’s earnings. The minimum wage is paid to mothers who had not worked during the previous calendar year but worked before the child’s birth.
Childcare allowance will no longer be granted to children born after 31, August 2019, however, the payment of child allowance and other family allowances will continue.
PAID MATERNITY LEAVE (DAYS)
Fathers are entitled to 10 working days of paternity leave taken within two months of the due date. After the birth, the father is entitled to 2 months’ paternity leave. Pay is based on the average wage of the employee. The father is entitled to 100% of their regular wages, however, this is capped at three times the minimum wage.
With effect from 1st April 2022, parents will be able to take up to two months of parental leave at the same time and they will both receive parental benefits at this time. Parents of premature babies and multiple births will be given an exception and the total duration of the payment of parental benefits will not be reduced by more than 30 days.
This will ensure that these families can stay at home with their children in any case until the children reach 18 months of age. A parent can also claim parental benefit until the child is three years old.
Childcare leave will be granted to both parents separately and on a per-child basis, which will solve the issue of using childcare leave in blended families.
Both parents will have their individual right for the leave and benefit and can both separately claim paid parental leave of 10 days per child until the end of the calendar year in which the child reaches 14 years of age.
In conjunction with this, the parental leave benefit will be increased to half of the average wages of the parent.
Depending on the collective agreement/employment contract terms, an employee may be allowed additional leave types approved between the employer and employee for the following:
- Adopter’s leave: a person who adopts a child under the age of 10 is entitled to paid leave based on the employee’s average salary.
- Childcare leave: a mother or father can take paid leave (pay is equal to the minimum wage) and varies based on the age of the child:
- Up to 2 children under the age of 14 – 3 days of leave
- 3+ children under the age of 14- 6 days of leave
- For parents with a disabled child- the mother or father can take off an additional day of work each month until the child reaches the age of 18. This leave is also compensated based on the minimum wage.
- Study leave: an employee has the right to 30 days of study leave as prescribed in the Adult Education Act. Twenty of the 30 days are compensated at the rate of the employee’s average salary.
Employers can terminate a fix term contract for the following reasons – business, personal, or workers misconduct. It requires notice and a written explanation for the termination. If the reason is misconduct, a warning needs to be given and the employee gets a chance to explain actions.
In Estonia, the notice period is stipulated by the service that the employee has worked at a single organization as follows:
Less than one year – 15 days’ notice
1-5 years of employment- 30 days’ notice
5-10 years- 60 days’ notice
10+ years- 90 days’ notice
It is also possible to give pay in lieu of notice.
If an employer terminates employment during the probation period, the employer must give 15 days’ written notice.
In case the employee resigns he must give 30 days’ notice.
In cases of termination of the employment contract due to redundancy, the employer must pay compensation of one month’s salary payment (calculated on the employee’s average wage across the previous six months).
Employees with employment service of between 5 to 10 years are entitled to an additional one month’s salary from the unemployment insurance fund (Töötukassa); if the employees’ service is ten years or more, the employee is entitled to an additional one month’s salary from the unemployment insurance fund.
Probation periods cannot be more than four months.
Business visitors to Estonia typically use a Schengen C Visa unless they are visa exempt based on their nationality or a treaty. The Schengen Area limits stay to 90 days in 180 days. The visa can be obtained at their nearest Estonian consular post or a Schengen member state consular post representing Estonia.
The main work authorization category is the Residence Permit for Employment, suitable for foreign workers with skills not locally available. Estonia also offers a short-term employment program for work activities for up to 12 months and a digital nomad visa for remote work for up to 12 months.
The standard rate of VAT in Estonia is 20.00%
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Public Holidays Calendar
|Sunday||Jan-1||New Year’s Day|
|Sunday||May-28||1st Sunday of Pentecost|
|Sunday||Aug-20||Day of Restoration of Independence|