Estonia
Knowledge Base
Frequently asked question, important data and information on EOR.
General information
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Labor Law
Laws that regulate Labor Relationship
• Employment Contracts Act
• Law of Obligations Act
• Labour Dispute Resolution Act
Onboarding guide
Requirements for a labor contract
• Name, personal identification code or registry code, place of residence or seat of the employer and the employee
• Start date
• Job description
• Official title if this brings about a legal consequence
• The agreed remuneration payable for the work (wages), the procedure for payment and the time of falling due of wages (pay day), also taxes and payments payable and withheld by the employer
• Other benefits if agreed upon
• The working time of the employee
• The place of performance of work
• The duration of annual leave
• Reference to the terms for advance notice of cancellation of the employment contract
• Reference to a collective agreement if a collective agreement is applicable with regard to the employee
Pre-hire Medical exam
No, medical examinations are not required to onboard a new hire in Estonia.
Types of contracts
• Indefinite-term contract
• Fixed- term contract
• Temporary
• Seasonal
Probation Period
Should not exceed 4 months in case of indefinite contracts and must not exceed half of the contract period in case of a temporary contract. The notice during the trial period is 15 days and must be given in writing.
Are offer letters mandatory in the country?
Are digital signatures in labor contracts valid?
Permitted.
Mandatory onboarding documents
Copy of Passport or ID.
Statutory benefits
Annual Bonus
Annual bonus is not mandatory, however it is customary to pay bonuses to award employees. The conditions of the award of the bonus and its calculation are usually determined in a written bonus plan. Employers may also provide for a collective bonus system for the benefit of their employees linked to a number of predetermined company objectives.
Additional bonus
Doesn’t apply.
Leaves (medical, maternity, paternity, etc.)
• Sick Leave: In case of sickness, the employee can be allowed up to 182 calendar days of paid sick leave (with a maximum of 250 days per year). The gross wage during this period is 70% of his or her last years` average salary. The employer pays the wage from the 4th to 8th day of sickness and the state pays the wage starting the 9th day.
• Maternity leave: A female employee is granted 100 days of pregnancy and maternity leave, which may commence at least 70 days before the estimated birth date of the child and last for 30 days after the birth. The maternity benefit is paid by the state. It is recommended for pregnant employees to discuss taking maternity leave with their employer at least 30 calendar days before the start of maternity leave. Once maternity leave has commenced, it has to be used consecutively.
• Paternity leave: A father has the right to paternity leave of 30 calendar days. This may be taken in one part or in several parts during the period of time from 30 days before the estimated date of birth until the child attains three years of age.
• Parental leave: A mother or a father shall be granted parental leave at her or his request for raising a child of up to 3 years of age. The parental benefit is paid by the state. Together the maternity benefit and the parental benefit are paid for a period of 575 days. If a child has a disability, the parents have an additional leave of one day per month until the child turns 18.
• Adoptive parent leave: An adoptive parent of a child under 10 years of age has the right to adoptive parental leave of 70 calendar days, effective for 6 months from the date of entry into force of the court judgement approving the adoption. There is a right to obtain compensation for such a period in accordance with the Health Insurance Act. The leave has to be taken for at least 7 days each time.
• Childcare leave: Childcare leave will be granted to both employed parents separately and on a per-child basis. Each parent is entitled to a total of 10 days of parental leave per child below 14 years old (i.e. a total of 20 days for two parents). Childcare leave does not expire each year and is valid until the end of the calendar year in which the child reaches 14 years old.
• Carer’s Leave: An adult employee has the right to up to five working days of leave per calendar year for caring for an adult with a profound disability (carer’s leave) if he or she is: the spouse or registered partner, a parent, a sibling, the guardian or the appointed caregiver. Carer’s leave is compensated for according to the minimum wage established on the basis of subsection 29 (5) of this Act.
Annual Leave (days per year)
An employee is entitled to annual paid leave in the amount of at least 28 calendar days. National holidays and public holidays are not included in the vacation duration calculations. Annual holiday should be used within the calendar year. Annual holiday is granted only by agreement of both parties.
At least 14 calendar days of holiday shall be used by an employee successively. The employer has the right to refuse to divide annual holiday into parts shorter than seven days.
How do vacation days expire?
An unused part of holiday shall be transferred to the next calendar year but expires without compensation within one year of the end of the calendar year for which the holiday was calculated
Official Holidays
•1 Jan New Year’s Day
•24 Feb Independence Day
•7 Apr Good Friday
•9 Apr Easter Sunday
•1 May Spring Day
•28 May Whit Sunday
•23 Jun Victory Day
•24 Jun Midsummer Day
•20 Aug Independence Restoration Day
•24 Dec Christmas Eve
•25 Dec Christmas Day
•26 Dec 2nd Day of Christmas
Working on holidays and Sundays
Paid at 100% extra on top of the regular wage.
Number of Working hours
It is presumed that a full-time employee works 40 hours during a 7-days period, 8 hours per day. Certain flexible options exist for applying summarized working time calculation within a specified period up to 4 months. Overtime is normally permitted upon an agreement between the parties; however, certain limits must be observed.
The averaged working time must not exceed on 48 hours per a period of seven days over a calculation period of up to four months, unless a different calculation period has been provided by law.
Overtime
An employer shall compensate for overtime work by time off equal to the overtime, unless it has been agreed that overtime is compensated for in money. If compensated for overtime work in money, an employer shall pay an employee 1.5 times the wages.
Social Security (what does it cover)
• Health Insurance
• Unemployment Insurance
• Family Benefits
• Disability and Incapacity Benefits
• Old Age and Survivor’s Pension
Payroll
Salary payment currency
Euro (EUR)
Can salary be paid in a different currency other than the local currency?
No, salary cannot be paid in a different currency other than the local currency in Estonia.
Payment frequency
An employer shall pay wages to an employee once a month, unless a shorter term has been agreed upon for payment of remuneration.
VAT percentage
20%
Income Tax
Estonia has a proportional (i.e. flat) tax rate of 20%, which applies to all items of income derived by a resident taxpayer. From 2018 onwards, dividends that have been subject to the reduced rate of 14% at the level of the distributing Estonian company will have WHT of 7% levied. Certain pension payments are subject to 10% income tax. For more information see https://taxsummaries.pwc.com/estonia/individual/taxes-on-personal-income
Tax Payer Identification Number
Tax Identification Number – Isikukood
Offboarding
Voluntary resignation
Extraordinary cancellation of employment contract by employee:
• An employee may cancel an employment contract extraordinarily with good reason, in particular, if taking into account all circumstances and mutual interests, continuance of the contract cannot be reasonably demanded.
• An employee may cancel an employment contract extraordinarily due to a fundamental breach of the employer’s obligation.
• An employee may cancel an employment contract extraordinarily due to a reason arising from the employee, in particular if the employee’s state of health or family duties do not allow him or her to perform the agreed work and the employer does not provide him or her with suitable work.
• An employee may cancel an employment contract only within a reasonable time after he or she learnt or should have learnt of the circumstance serving as the basis for the cancellation.
Contract termination
Ordinary cancellation of employment contract:
• An employee may ordinarily cancel an employment contract entered into for an indefinite term atany time.
• An employee may not ordinarily cancel a fixed term contract.
• It is presumed that cancellation is ordinary, unless the employee proves that cancellation is extraordinary.
• An employer may not cancel an employment contract ordinarily.
Justified Dismissal
1. The employer must cancel an employment contract within a reasonable time after they learnt or should have learnt of the circumstance serving as the basis for the cancellation.
2. An employer may extraordinarily cancel an employment contract with good reason, as outlined below and by adhering to the terms for advance notice if the employee has:
• for a long period been unable to perform his or her duties due to his or her state of health which does not allow for the continuance of the employment relationship (decrease in capacity for work due to state of health, which is presumed if the situation continues for over four months). Before cancelling the contract, the employer shall, if possible, offer other work to the employee unless the changes cause disproportionately high costs for the employer
• for a long period been unable to perform his or her duties due to his or her insufficient work skills, non-suitability for the position or inadaptability, which does not allow for the continuance of the employment relationship (decrease in capacity for work). Before cancelling the contract, the employer shall, if possible, offer other work to the employee unless the changes cause disproportionately high costs for the employer
• in spite of a warning, disregarded the employer’s reasonable instructions or breached his or her duties;
• in spite of the employer’s warning been at work in a state of intoxication;
• committed a theft, fraud or another act bringing about the loss of the employer’s trust in the employee;
• brought about a third party’s distrust in the employer;
• wrongfully and to a significant extent damaged the employer’s property or caused a threat of such damage;
• violated the obligation of maintaining confidentiality or restriction of trade.
3. An employer may extraordinarily cancel an employment contract if the continuance of the employment relationship on the agreed conditions becomes impossible due to a decrease in the work volume or reorganization of work or other cessation of work (lay-off). Before cancellation due to lay-off, an employer shall, where possible, offer other work to the employee, unless the changes cause disproportionately high costs for the employer;
4. Upon cessation of the activities or bankruptcy of employer;
5. Upon cancellation of an employment contract, the employer shall take into account the principle of equal treatment.
6. Upon cancellation of an employment contract due to lay-off, the employees’ representative and an employee who is raising a child under three years of age have the preferential right of keeping their job.
Unjustified Dismissal
The compensation paid for an unjustified dismissal in Estonia is up to three months of the employee’s average salary. The amount of compensation is determined by the court or labor dispute resolution body, taking into account the employee’s seniority, position, and other factors.
If the employee is pregnant, an employee representative, or entitled to take maternity leave, the compensation can be up to six months of average salary.
The court or labor dispute resolution body can also award additional amounts, taking the circumstances of the dispute into account.
Upon terminating an employment contract due to a lay-off, an employer shall pay an employee compensation of one month’s average wages. An employee also has the right to receive an insurance benefit under the Unemployment Insurance Act.
Severance amount depends on years of service:
• 5 years or less – 1 month
• 5-10 years – 2 months
• More than 10 years – 3 months
Employer can pay severance in lieu of giving notice.
Upon terminating a fixed-term employment contract for economic reasons, an employer shall pay employees compensation equal to the salary due for the remainder of the contract.
If an employee terminates the employment contract extraordinarily because the employer has committed a fundamental breach of the contract, the employer shall pay the employee compensation of three months’ average wages.
Minimum Notice Period
The amount of notice that an employer must give to an employee depends on the period of employment. If the employee has worked for:
• less than one year, the employer must give a minimum of 15 calendar days’ notice;
• one to five years, the employer must give a minimum of 30 calendar days’ notice;
• five to ten years, the employer must give a minimum of 60 calendar days’ notice;
• ten year or more the employer must give the employee a minimum of 90 calendar days’ notice.
Employees who wish to terminate the employment contract must give the employer a minimum of 30 calendar days’ notice.
Employment contracts may be cancelled during the probationary period by giving no less than 15 calendar days’ notice. An employee does not have to notify the employer of extraordinary cancellation if, considering any and all circumstances and mutual interests, it cannot be reasonably demanded that the performance of the contract be continued until the expiry of the agreed term or term of advance notice.
Immigration
Visa process
To apply for an Estonian work visa, you have to meet these conditions:
• Your employer has to register your employment with the Estonian Police and Border Guard Board beforehand.
• You must have a valid work contract.
• You must have the required qualification for the requested work position.
• You must be in good health condition.
The application process for an Estonian work visa is as follows:
1. Your employer registers your employment in Estonia.
2. You apply for a work visa at the Estonian embassy in your country.
3. After entering Estonia, you apply for a residence permit.
Visa documents
Here are all the requirements for an Estonian work visa:
• Valid Passport. Your passport must be valid at least three months after the return date, and it must have two blank pages. Include a copy of previous visas (if any), and make sure that the passport is in good condition.
• Two passport-size photos. The photos must be taken within the last six months. They must be in color and taken on a light background.
• Application form. Fill out the application form online. Select the long-stay D visa option, and make sure you fully complete it with all the correct information. After you fully complete it, print a hard copy and sign it at the end.
• Fee payment. After filling out the application form, you must make the payment for your visa application. The payment can be made in the consulate/embassy when you submit the documents. Attach the receipt of the payment to other requested documents.
• Health insurance. A document proving that you have valid health insurance. Your health insurance must be valid within the whole Schengen area and a coverage of €30.000. After entering Estonia, Estonian health insurance will cover you.
• Proof of accommodation. Document proving that you have a place to stay while being in Estonia. This document can be a rental agreement or contract, a letter of invitation, etc.
• Cover letter. The cover letter must serve as an introduction letter for the embassy. Therefore, you must include the purpose of your visit to Estonia in detail.
• Criminal record. This document must be released from your home country’s police authorities, and it must prove that you have a clean criminal record.
• Work contract. The work contract must explain the type of work you will be doing in Estonia. It must include the salary, the duration of your work, etc. This document proves that you have a job waiting in Estonia.
• Personal qualification documents. These documentsprove that you are qualified for the job you have applied too. It includes: ◦ A diploma of your educational level ◦ Your CV ◦ Your driving license (if applicable), etc. Note: You must translate the documents into Estonian or English language. The documents must be original or notarized. Keep in mind that the Estonian embassy may request any additional documents; submit everything they request, since any missing documents can lead to your visa refusal.
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