Payroll & Employment Guide Estonia

Employment contracts in Estonia are regulated by the Employment Contracts Act (ECA), which requires them to be in written form. Contracts must also include essential employment terms such as job description, salary, working conditions, and others.

Notice periods: From 15 to 90 days.

Termination of employment: Termination can occur through mutual agreement, resignation, or dismissal by the employer.

Employers who hire in Estonia must provide mandatory employment benefits in compliance with the country’s labour laws. Many of them also offer extra benefits to stay competitive in the job market. Understanding both of them is essential to attracting and retaining talent.

• Mandatory benefits: Health insurance, pension contributions, and unemployment insurance.
• Common perks: Meal vouchers, transport reimbursements.
• Leave policies: Paid annual leave, sick leave, maternity/paternity leave, parental leave.

Estonia has a very transparent and efficient tax system where employers are responsible for withholding personal income tax, unemployment insurance contributions, and mandatory social tax from employees’ salaries. In addition, specific rules apply to VAT, business income, and other earnings.

Personal income tax rate: 20%

VAT: 20%

Tax allowances: Basic exemption, Pensioners’ exemption, Employment expenses, Business travel expenses.

Salaries in Estonia must be paid at least once per month, unless otherwise agreed in the employment contract. Employers are required to provide a detailed payslip with each payment, outlining the gross salary, deductions, and net amount received.

Salary payment deadline: On the last working day of each month.

Taxes and contributions payment deadline: By the 10th of the month following the payroll run.

Payroll declarations deadline: By the 10th of the month following the payroll run.

Payroll currency: EUR

Estonia’s labour regulations are governed by the Employment Contracts Act and other related laws, which cover aspects such as employment contract types, wages, working conditions, termination, and others. Employers must adhere to all the labour law rules to ensure full legal compliance.

Total employment cost:

• Employer social tax: 33%
• Employer unemployment insurance contribution: 0.8%

Minimum wage: EUR 886 per month.

Probation period: Up to four months.

With EOR services, you can legally employ individuals in Estonia without setting up your own legal entities. Your EOR will take over all the legal responsibilities as an official employer, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

PEO services provide HR and administrative support while you remain the legal employer for your employees in Estonia. As such, they’re beneficial for employers who already have legal entities in the country but need support to manage:

• HR and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams provides payroll calculators that are adapted to 85+ countries’ local labour laws, including Estonia. Using them, you can easily estimate net/gross salaries, contributions, and other mandatory deductions in the country.