What Should I Know About Hiring in Estonia?
Employing new staff from Estonia might help your business grow, but there are a few things to think about before you start hiring talent from this Northern European country.
Estonia is not only one of the most technologically proficient countries in the world, but it has also drawn a considerable number of foreign talent in recent years due to lax visa requirements. Together with the country’s highly trained workforce (86% of whom speak at least one foreign language), they provide a large pool of potential candidates from whom corporations can pick when expanding their worldwide teams.
If an employee’s position is temporary, their employment contract in Estonia may be either fixed-term or permanent. No matter the type of work, the Estonian Employment Contract Act mandates that employment contracts be in writing and contain at least the following essential information: identification of all parties, date of commencement (and employment duration for temporary contracts), workplace, job description, duties, and responsibilities, basic salary as well as other compensation or benefits and payment details, working hours, total number of holidays, notice periods for termination, and any other information that may be required by law.
Why Is Estonia a Good Choice for Finding Remote Employees?
Hiring remote employees from Estonia allows companies to gain access into the country’s highly educated, tech-savvy, and inventive workforce. However, employing from this country has its drawbacks.
They do, however, provide substantial worker protection. Workers’ benefits, minimum pay, paid time off, working hours, and misclassification are all spelled out in detail.
Overtime pay, employment taxes, and social contribution obligations for employees and companies in Estonia can make keeping compliant as a foreign company difficult. This post will teach you all you need to know about hiring and paying remote employees in Estonia without breaking any of the country’s numerous labour laws.
How Can Native Teams Help You Hire in Estonia
If you want to start hiring people from Estonia, you can employ Estonians using an employment contract written in the employee’s native language. The contract must identify the location of employment, duties, working hours, and holidays, as required by law. Employees must get their contract within three months after starting their new job. Native Teams can help you employ your new team members through our employer of record services and as well as handle payroll, taxes, benefits and overall compliance of your Estonia team.
Hire your first Estonian employee with Native Teams.
Legal Requirements for Hiring in Estonia
To calculate the salary and taxes in Estonia please click here.
The Estonian Trade Union Confederation (EAKL) and the Estonian Employers’ Confederation have agreed to raise the country’s minimum monthly wage to €654 by 2022. The hourly pay will rise to €3.86 per hour.
Contributions & Taxes
How much are the contributions & taxes?
Employers operating in Estonia (including non-residents with a permanent establishment [PE] or workers in Estonia) must pay a social tax of 33% on certain payments to persons (with 20% used to fund public pension insurance and 13% used to fund public health insurance). Employer social tax is not capped and mostly applies to wages, directors’ fees, service fees, and fringe benefits provided to individuals. The taxation period is one calendar month.
Individuals registered as sole proprietorships must also pay a social tax of 33% on their net company revenue (capped). Sole proprietorships are required to make quarterly social tax advance payments in predetermined amounts, which are credited against the final yearly social tax due.
Employers must contribute 0.8%, while employees must contribute 1.6%. (collected by employers through payroll withholding). The contributions mostly relate to individual wages and service costs.
In Estonia, corporate income tax is collected upon distribution of profits rather than upon their realisation. The usual tax rate for 2021 is 20% (20% of the net dividend divided by 80%).
Social taxes are collected at a rate of 33% (20% for social security and 13% for health insurance). Aside from the social tax, an unemployment insurance tax of 0.8% on gross wage is required (an extra 1.6% is deducted from the employees’ pay).
Estonia has a 20% proportionate (flat) tax rate that applies to all items of income earned by a resident taxpayer. Dividends subject to the lower rate of 14% at the level of the distributing Estonian firm will be subject to WHT of 7% beginning in 2018.
What is the payroll cycle?
In Estonia, the payroll cycle is normally monthly, with payments due on the same day of the month and no later than the final working day of the month.
Is there 13th salary in Estonia?
A 13th-month pay is not required in Estonia. However, bonuses are popular and are frequently distributed on a yearly basis.
What are the main Labour Rules?
Probation period rules
In Estonia, the working relationship is mainly based on an employment contract. An employee’s probation term often lasts 3-4 months, and your employment contract is typically ended for an indefinite duration.
Employees have the ability to resign at any moment, for any cause. The employee must provide written notice of resignation to the employer and provide 30 calendar days’ prior notice.
Monday through Friday, 9 a.m. to 5 p.m., with a 30-minute to one-hour lunch break. The lunch break is not part of the working day. The usual working week is 40 hours.
Leave and Benefits
Leave and Benefits rules
There are 12 public holidays in Estonia for which the employees are entitled to a day off:
- New Year’s Day
- Independence Day, anniversary of the Republic of Estonia
- Good Friday
- Easter Sunday
- Spring Day
- Victory Day
- Midsummer Day
- Day of Restoration of Independence
- Christmas Eve
- Christmas Day
- Boxing Day
Employees are entitled to 28 calendar days of paid vacation each year. National and public holidays do not count against vacation days. By March 31st, the employer must have compiled a holiday schedule for each calendar year.
Employees are entitled to up to 182 calendar days of paid sick leave each year. From the fourth through the eighth day of absence, employers are responsible for covering sick leave costs; starting on the ninth day, the state pays. Sick pay is set at 70% of the employee’s average wage from the previous year.
Maternity leave & Paternity leave
Women are entitled to 140 days of maternity leave which must start between 30 and 70 days before the due date.
Fathers are eligible for up to 30 working days of paternity leave, which can begin 30 days before the due date and conclude when the child reaches three. Paternity leave is paid for by the state based on income.
The state pays for parental leave up until the kid is three and it is permitted. Together, the paid maternity and parental leave benefits are limited to 575 days.
Other leave (marriage, bereavement, exam leave)
An employee may be granted extra leave kinds, upon approval between the employer and employee, for the following reasons, depending on the rules of the Collective Agreement/Employment Contract:
Adopter’s leave: Based on the employee’s average pay, everyone who adopts a kid under the age of 10 is eligible to paid time off.
Childcare leave: Depending on the child’s age, parents may take paid leave (pay is equal to the minimum wage):
Up to two younger children may take three days off.
3 or more young children—6 days of leave
The mother or father of a kid with a disability may take an extra day off from work each month until the child reaches the age of 18. Additionally, this leave is paid according to the minimum wage.
Study leave: In accordance with the Adult Education Act, an employee is entitled to 30 days of paid study leave. The employee’s typical monthly wage is paid for 20 of the 30 days.
Health Security & Private Insurance
The mandated universal healthcare system in Estonia is financed through payroll taxes and general budget.
* Native Teams can support you in finding the best private insurance in the country. Contact us and we will send a comparison of insurance packages and prices*
Relocation and Work Permits
Native Teams can be your Employer of Record and apply for your work permit in the country. You will be able to upload all the needed documents in our app. Native Teams will support you by giving you regular updates on the progress until you get your work and residence permit.
How long is the Visa / Work Permit process?
Usually, it takes 2 to 4 weeks to get a work permit, depending on the authorities and provided documents.
Which documents do you need?