Estonia Employer of Record

If a lack of speed or local expertise are among your top concerns when expanding to or employing workers in Estonia, an employer of record may be the best option for achieving your global growth objectives.

An employer of record, sometimes known as an international PEO, enables you to quickly hire and onboard workers in Estonia ―often in as little as two weeks―without having to take on the cost and risk of establishing a local entity.

Learn about the hiring, employment, payroll and benefits requirements for workers in Estonia and how our employer of record service, EOR, and local HR experts can help you manage your international employment needs.

The principal law regulating the employment relationship is the Employment Contracts Act. Other important statutes include the Equal Treatment Act, the Trade Unions Act, and the Occupational Safety and Health Act.

Estonian employment law is rather liberal and offers flexibility in agreeing to terms and conditions of employment. The principle of protection of employees as the economically weaker party is applied, however, and any agreement between employee and employer that is disadvantageous to the employee or not in compliance with labor law may be voided.

As you look to hire employees in Estonia, here are some standard regulations you’ll need to know to create a compliant contract, as well as how an employer of record and PEO can provide support for your unique HR needs.

Full-time weekly employment is 40 hours, generally five eight-hour days. All additional work hours are considered overtime. Total working time, which includes regular working time plus overtime, cannot exceed 48 hours per seven days over a calculation period of four months.

Employees must be granted a break for at least 30 minutes after six hours of work. Employees also are entitled to daily rest time of 11 hours between shifts and weekly rest time of 48 consecutive hours per seven-day period.

As you consider the appropriate salary to offer new employees, keep in mind:

As your employer of record in Estonia, we can provide you with resources and insights about employee compensation, so you are better equipped to make a competitive employment offer.

Bonuses may be at the discretion of the employer or provided for in employment contracts or collective bargaining agreements. If the bonus has been agreed between the employer and the employee—for example, in the employment contract—the employee has the right to demand the bonus.

The probation period in Estonia is for a maximum of four months.

The employment contract can be terminated upon agreement between the parties at any time, and either party can terminate the contract with 15 days’ notice during a probationary period of four months from the date of commencement of employment. The probationary period does not have to be specified in the employment contract unless the employer and the employee agree to a period shorter than four months.

The employer must give employees advance notice of termination of employment for breach of contract or inability to perform required duties as follows:

The employer also may pay compensation in lieu of notice.

An employee has the right to cancel an employment contract for an indefinite term at any time with 30 days’ notice. Employment contracts entered into for specified terms can only be terminated for cause.

Upon cancellation of an employment contract due to layoff, an employer must pay an employee compensation of one month’s average wages. If the employer gives the employee less than the required notice of termination, the employee is entitled to the wages that would have been paid had proper notice been given.

If the employment contract is for a specified term, the employer must pay the employee any wages the employee would have been entitled to until the expiration of the contract.

When negotiating terms of an employment contract with a candidate in Estonia, here are some of the statutory benefits and paid leave requirements to keep in mind, as well as how an employer of record can support your company’s benefits strategy.

An expectant mother has the right to paid pregnancy and maternity leave of 140 calendar days. She is entitled to maternity leave of at least 70 calendar days before childbirth. If an expectant mother starts using pregnancy and maternity leave less than 30 days before the estimated date of birth, pregnancy and maternity leave is shortened by the unused leave. The leave is paid by the social security system.

The minimum amount of annual leave for employees who have worked for the company for at least a year is 28 days. Employees who have worked six months but less than a year are entitled to prorated vacation. The timing of annual leave is mandated by the employer, taking into account the requests of the employee and the interests of the company.

Employees have to take one period of annual leave no less than 14 consecutive calendar days in length. Employers can refuse to allow employees to take leave in increments shorter than seven days. The annual leave payment must be made no later than the penultimate working day before commencement of the leave. Any unused annual leave may be carried over into the next year.

These are the following public holidays in Estonia:

When the holiday falls on a Saturday or a Sunday, the following Monday is a regular working day in Estonia.

The working day before New Year’s Day, Independence Day, Victory Day, and Christmas Eve is three hours shorter than the regular working day.

Temporary changes to Estonia’s sick leave payment requirements were extended to June 30, 2023. Employers must pay the second through fifth days of leave instead of the fourth through eighth. The temporary policy did not change the amount that must be paid, which is 70 percent of the employee’s average salary.

The employee’s illness must be certified by a physician, and the employee must inform the employer of the necessary absence and its probable duration.

Under the social insurance system, the legal retirement age is 63 and will rise by three months a year from January 1, 2017, until reaching 65 in 2026. To qualify for a pension, an employee must have at least 15 years of service. Earlier retirement is allowed under certain conditions but may result in decreased benefits.

Employees born after 1982 are also required to participate in the mandatory individual account system. As under the social insurance system, the minimum retirement age is 63 and will rise by three months a year until reaching 65 in 2026, but only five years’ service is required to qualify.

Employees are required to contribute 2 percent of earnings to their accounts but not contribute to the social security system. The employer contributes 16 percent of gross payroll to the social insurance system and 4 percent to individual accounts.

In addition to healthcare benefits, employees in Estonia are entitled to pension, which is funded by government tax revenues, as well as workers compensation, which is covered through mandated employer insurance.

Employer social costs will cover a large portion of employee benefits in Estonia, but we can consult with you about supplemental coverage options, such as additional pension contributions or life insurance if needed.

Updated: August 01, 2024

We write and validate all local employment contracts, streamlining the onboarding process for you and your Estonian employees—all you have to do is provide relevant information and review and approve the employment agreement. As your employer of record in Estonia, we will:

The entire onboarding process for the employee is often completed in as little as two weeks.

With over a decade of service, we are the longest-serving employer of record and PEO provider in the international market. Organizations around the world rely on EOR, our employer of record solution, to expand and hire in 170+ countries around the world, quickly and compliantly.

We’ve seen just about every global employment circumstance imaginable—and with our extensive knowledge of local law and culture, we know what it takes to get employment right in Estonia. We provide written contracts in the local language, salaries in the local currency and HR support in your employees’ time zone.

Additionally, as a global payroll provider we support payroll administration—including payments, filings and other calculations— all around the world and can accommodate the payroll outsourcing needs of any size organization.

Whether you’re looking to hire as part of a strategic expansion or to meet specific talent needs, our global solutions advisors can walk you through your international hiring options so you can make the right choice for your organization. Contact us today.