Understanding Employment Norms in Estonia: A Comprehensive Guide
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Hiring in Estonia ? Read on to find out the employment norms (like taxes, payroll and benefits) and EOR (Employer on Record) norms in Estonia.

Employment Norms in Estonia

Estonia, located in Northern Europe, is a member country of the European Union. It has become one of the fastest-growing economies in the European Union with a highly skilled workforce. It has been lauded for its pro-business policies. The country has a high standard of living and offers a competitive business environment, making it an attractive location for both companies and individuals. EOR services help potential employers in ensuring legal compliance and cover employee management (payroll, taxes, benefits, etc.).

General Information:

  • The currency used in Estonia is the Euro (EUR)
  • Tallinn is the capital of Estonia,
  • Estonian is the official language. Contracts must be drafted in Estonian to be considered legal. English and Russian are commonly spoken.
  • As of 2021, Estonia's GDP was reported to be $37.19 billion
Estonia has a well-developed and flexible labor market. The laws in Estonia are regulated by the Employment Contracts Act and the Collective Agreements Act.
Estonia map

Table of Contents

  • Agreements
  • Onboarding Process
  • Visa
  • Minimum Wage
  • Payroll Cycle
  • Annual Bonus
  • Health Benefits
  • Working Hours and Overtime
  • Leaves
  • Social Security
  • Taxes for Employers
  • Taxes for Employees
  • Probation
  • Termination
  • Severance Pay
  • Employees or Contractors
  • Final Words


  • In Estonia, the employment contract must be in writing and must include details such as the job description, working hours, and remuneration.
  • Collective agreements are agreements between employers or their organizations and trade unions or employee representatives. These agreements regulate the terms and conditions of employment, including wages, working hours, and holidays.
  • The maximum duration of a fixed-term employment contract is two years. The employer can extend this period to three years only in specific cases.
  • Employers must provide employees with written notice of their dismissal, and the notice period should be by the terms of the employment contract.
  • All contracts and agreements must be in Estonian to be legal. Other languages can be used only in certain special cases if both parties agree to use the same language.
Onboarding Process

Onboarding Process

While there are no established laws regarding the onboarding process in Estonia, best practices would include -
  • The new employee must first be registered with the Estonian Tax and Customs Board and obtain an identification code before beginning to work.
  • The employer must provide the employee with a written copy of the agreement (within seven days of beginning work) which states the terms of their employment, including their job description, working hours, remuneration, notice period, severance pay, etc.
  • Some mandatory documents to be submitted for onboarding include a valid passport or ID card, a residency permit (if applicable), and a tax card.


Business visa:

  • The following are some of the requirements for a business visa -
    • Letter from the employer
    • Invitation letter from an Estonian company
    • Business bank statement
    • Proof of financing the trip
  • In addition to the above, certain other documents for processing and application are required as per the country the individual is from and other circumstances.

Work visa:

  • Citizens of countries who are not in the EU (European Union) or the EEA (European Economic Area) require work visas. Other documentation is required for those from the EU or EEA.
  • The following are the requirements for a work visa -
    • Employment contract from the employer
    • Valid passport, application form and application fee receipt
    • Medical insurance
    • Biometrics
  • A residence permit (temporary or long-stay as applicable) is also required.

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Minimum Wage

Minimum Wage

The minimum wage in Estonia as of 2023 onwards is EUR 725(gross) per month.
Payroll Cycle

Payroll Cycle

In Estonia, the payroll cycle is typically monthly. However, employers can also choose to pay their employees on a bi-monthly or weekly basis, depending on their agreement with the employee.
Annual Bonus

Annual Bonus

There is no mandatory annual bonus in Estonia. However, it is common practice to give the salary of an additional month (thirteenth month) as an annual bonus. This can be negotiated during the agreements.
Health Benefits

Health Benefits

Employers are required to provide employees with health insurance that covers -
  • medical care
  • hospitalization
  • prescription drugs
Working Hours and Overtime

Working Hours and Overtime

  • Work hours:A typical work day consists of 8 hours making a 40-hour work week. The maximum number of hours is 48 hours per week.
  • Break: A 30-minute break must be given for 6 hours of consecutive work. In a week,
  • Overtime: If the employee works for more than the agreed upon time with mutual agreement of both parties, the employee is entitled to overtime pay of 1.5 times the wage or a paid time off. An employee is allowed to spend just 8 hours a week as overtime.


Sick Leaves

  • Employees are entitled to paid sick leave starting from the second day of illness with the employer paying from the second to the fifth day of the leave and the Health Insurance Fund paying from the sixth day.
  • The employee can get up to 182 days of sick leave (extended up to 240 days in certain cases, such as tuberculosis).
  • Day 1 goes unpaid, from day 2 to day 5 employees receive 70% of their average salary of the last 6 months paid by the employer. The payment from day 6 onwards is made through EHIF, which is Estonian Health Insurance Fund.

Maternity leaves:

  • Employees are entitled to 100 calendar days of maternity leave with a maximum of 70 days taken before childbirth. The remaining days can be taken after childbirth. Employees are paid through Social Insurance Board.

Paternity leave:

  • Fathers are entitled to 30 days of paternity leave which must be taken within two months of the birth of the child. Employees receive 100% of their salary paid through the Social Insurance Board.

Parental leave:

  • Both parents are allowed to take parental leave of 60 days. The salaries are paid through Social Insurance.

Other leave:

  • Adoption leave: Parents are allowed to take adoption leave to spend time with their adopted child.
  • Childcare leave: Employees who have children, below 14 years of age, can take 6 paid leaves in a month. Parents who have a disabled child can take extra paid-offs, till their child turns 18.


  • Employees are entitled to a minimum of 28 days of paid annual leave.

Public Holidays (for the Calendar year 2023)

  • New Year's Day (January 1)
  • Independence Day (February 24)
  • Good Friday (April 7)
  • Easter Sunday (April 9)
  • Spring Day (May 1)
  • Whit Sunday (May 28)
  • Victory Day (June 23)
  • Midsummer Day (June 24)
  • Day of Restoration of Independence (20 August)
  • Christmas Eve (December 24)
  • Christmas Day (December 25)
  • Second Day of Christmas (December 26)

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Social Security

Social Security

Estonia has a social security system that provides health insurance, pension insurance, and unemployment insurance. Only employers contribute towards health insurance while both employers and employees contribute towards unemployment and pension insurance. The state also contributes to the social security system.
Taxes for Employers

Taxes for Employers

Employers in Estonia are required to pay social tax (which includes mandatory funded pension contributions and health insurance) and unemployment insurance.
  • social tax is 33% (social security - 20% + health insurance - 13%) of the employee's gross salary
  • unemployment insurance contribution - 0.8% of the employee's gross salary

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Taxes for Employees

Taxes for Employees

Employees in Estonia are subject to income tax, social tax, and mandatory funded pension contributions.
  • The income tax rate is a flat 20%
  • The mandatory funded pension contribution is 2% of the employee's gross salary (for those born after December 31, 1982).
  • Unemployment insurance - 1.6%


In Estonia, the probation period for new employees is up to four months. The Employer needs to give a 15 days notice period, before terminating an employee during probation.

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  • Employment in Estonia can be terminated by either the employer or the employee. Termination can be done with or without notice, depending on the circumstances.
  • Employers must have a valid reason for terminating the contract. Some of the reasons for termination are-
    • Mutual agreement of termination
    • Expiry of a fixed-term contract
    • Death of employee or employer (in some cases)
    • cancellation
  • The notice period (wherever applicable) according to employment duration is as follows.
    • Less than one year - at least 15 days
    • One to five years - at least 30 days
    • Five to ten years - at least 60 days
    • Ten years or more - at least 90 day
Severance Pay

Severance Pay

  • In Estonia, employees are entitled to receive severance pay if they have been employed for at least one year and are terminated due to redundancy or restructuring.
  • The amount of severance pay is based on the employee's length of service.
Employees or Contractors

Employees or Contractors

  • In Estonia, the legal definitions of employees and contractors are based on the degree of control exercised by the employer over the work performed by the individual.
  • An employee is someone who is on the payroll and enjoys certain benefits. Employees usually accrue taxes. The employer is also required to withhold and pay taxes on the employee's behalf.
  • Contractors are those who work on a period-to-period basis and are not on a payroll. They are paid as per the contractual agreement. Contractors don't enjoy certain employment benefits. Contractors may be required to be enrolled in the social security scheme and have different social security taxes.
  • Misclassifying an employee as a contractor can result in fines and penalties for the employer.
Final Words

Final Words

Estonia has a well-established legal framework to ensure the protection of employees' and employers' rights. The country offers a flexible labor market and an attractive business environment making it an excellent destination for both foreign and domestic businesses seeking to establish themselves in Northern Europe. EOR services assist employers with the legal framework and employee management allowing employers to focus on business goals.

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