Laws and Policies in Estonia

Employment Contracts in Estonia

Employment is governed mainly by the Employment Contracts Act.

Contract Requirements

• Employment contracts must be in writing.
• Must include at least:
  • Job title & main duties
  • Place of work (or remote work conditions)
  • Working time (full-time or part-time)
  • Salary and payment date
  • Benefits and probation period
  • Holiday entitlement
  • Notice periods
• Contracts can be:
  • Indefinite-term (default)
  • Fixed-term (allowed but more strictly regulated)

Probation Period

• Up to 4 months unless otherwise agreed (cannot exceed 4 months by law).

Your EOR makes sure contracts are compliant, clear, and aligned with Estonian law and local practice.

---

Working Hours in Estonia

• Standard working time:
  • 8 hours per day
  • 40 hours per week
• Overtime:
  • Allowed only by mutual agreement.
  • Must be compensated with time off or additional pay.
• Rest periods:
  • At least 11 hours of uninterrupted rest in each 24-hour period.
  • At least 48 hours rest in a 7-day period (or 36 hours depending on arrangement).

Flexible/remote working is common in Estonia, especially in IT and knowledge work.

---

Employee Leave in Estonia

Annual Leave

• Minimum 28 calendar days of paid annual leave per year (longer than many EU countries).

Sick Leave

• First 3 days: typically unpaid.
• Days 4–8: paid by employer.
• From day 9 onward: paid by the Estonian Health Insurance Fund, up to statutory limits.

Maternity Leave

• 140 days of maternity leave.
• Maternity benefit is generally paid by the state/Health Insurance Fund, based on previous income.

Paternity Leave

• Fathers are entitled to 30 days of paternity leave, with state benefits payable.

Parental Leave

• Estonia has generous parental benefit until the child is around 18 months (or longer depending on scheme), paid by the state, with job protection in place.

Public Holidays

Employees are entitled to paid days off on national public holidays (e.g., New Year’s Day, Independence Day, Easter, Christmas, etc.).

---

Employee Benefits in Estonia

Statutory Benefits

Through payroll and social taxes, employees are covered by:

• Health insurance
• State pension insurance
• Unemployment insurance
• Parental and sickness benefits

Employer Social Costs (approximate structure)

• Employer pays a social tax on top of gross salary (covers health & pension).
• Unemployment insurance contributions are split between employer and employee.

(Exact rates adjust over time, but total employer cost is significantly above gross salary—your EOR will calculate the correct current rates.)

Common Extra Benefits

To stay competitive, especially in tech and professional roles, employers often add:

• Private health/top-up insurance
• Sports / wellness compensation
• Training & education budget
• Extra paid days off
• Home office/remote work support

An EOR can help design a package that is fully compliant and market competitive.

---

Payroll & Tax in Estonia

Payroll Currency

• All salaries are paid in Euro (EUR).

Personal Income Tax

• Estonia uses a flat income tax system (a single rate on taxable income, with some exempt amount at lower incomes).
• Employers must withhold income tax at source and remit it to the Tax and Customs Board.

Social Taxes & Contributions

Typically include:

• Social tax (employer-paid, funds health and pension)
• Unemployment insurance (employer + employee shares)
• Mandatory funded pension (for eligible employees, employee share withheld)

Payroll Cycle

• Most common: monthly payroll.
• Employers must provide payslips and pay all withholdings and contributions on time.

Your EOR in Estonia takes care of:

• Registration with tax/social authorities
• Monthly calculations & filings
• Payments of net salary and all statutory contributions

---

Employment Laws & Compliance in Estonia

Key principles under the Employment Contracts Act and related laws:

• Written contracts are mandatory.
• Working time, rest, and vacation rules are precise and enforced.
• Employees enjoy strong protection around discrimination, safety, and fair treatment.
• Foreign employees need right to work (EU citizens can work freely; non-EU need permits).
• Employers must follow GDPR and local data protection rules for employee data.

Termination & Notice

• Notice period typically depends on length of service (e.g., 15–90 days range).
• Redundancy and economic dismissals must follow legal procedure and may involve support/consultation.
• Severance may be due in certain cases (e.g., redundancy), especially if required by law or collective agreements.

Wrongful termination can lead to claims for compensation or reinstatement, so compliant handling is essential—an EOR protects you by following all local procedures.