Employer of Record in Estonia

Brain Source International helps you save time and reduce costs by allowing you to hire in Estonia without establishing an entity. Our Employer of Record (EOR) solution handles onboarding, payroll, immigration, and benefits so you can hire your employees faster and grow your business compliantly.

What is an Employer of Record in Estonia?

An Employer of Record (EOR) in Estonia is a strategic partner that acts as the legal employer for your employees residing in Estonia. The EOR takes on all employment responsibilities and liabilities on your behalf, handling payroll, benefits, taxes, and regulatory compliance.

By partnering with an EOR, you can hire employees in Estonia without the need to establish a local entity or navigate complex labor laws.

Employer of Record (EOR) in Estonia: Key Aspects of the Estonian Labour Code

General Information

• Currency: Euro (EUR)
• Payroll Frequency: Monthly
• Capital: Tallinn
• Fiscal Year: 1 January – 31 December

Minimum Wage

General: In Estonia, the national minimum wage is set at 820 EUR per month. This amount is the statutory minimum that employers are required to pay their employees, ensuring a basic standard of income across the country.

Payroll

Payroll Cycle: In Estonia, the payroll cycle is typically monthly. Employers are required to make payments on the same day each month, ensuring that wages are paid no later than the last working day of the month.

13th Salary

In Estonia, a 13th-month salary is not mandatory. However, it is common for employers to provide annual bonuses as part of the compensation package. These bonuses are typically based on individual or company performance and are often paid at the end of the year.

Taxation

Working Hours

General: In Estonia, the standard work week consists of 40 hours, typically structured as 8 hours per day over a five-day work week.

Overtime: In Estonia, working time cannot exceed an average of 48 hours per week over a period of 4 months. Any overtime must be compensated either by paying at a rate of 150% of the regular salary or by providing additional time off.

Leave

Annual Leave (Vacation):

According to Section 55 of the Employment Contracts Act in Estonia, employees are entitled to 28 calendar days of annual paid leave. This is the statutory minimum, though employees and employers can agree on longer leave periods. Specific groups, such as government officials and academic or research staff, are entitled to more leave: government officials receive 35 days, while academic and research staff get 56 days of paid leave.

Public Holidays

Public holidays that fall on the weekend are usually lost.

Sick Days

In Estonia, employees are entitled to up to 182 calendar days of sick leave per year. The sick leave compensation scheme is structured as follows:

• Days 1 to 3: Unpaid leave.
• Days 4 to 8: Paid by the employer.
• Days 9 to 182: Paid by health insurance at 70% of the employee’s average salary.

The scheme allowing payment from the second day of sickness was extended until June 30, 2023.

Maternity Leave

In Estonia, pregnant employees are entitled to 140 calendar days of maternity leave. The leave can start as early as 70 calendar days before the due date and must last for a minimum of 30 days.

Maternity Leave Compensation:

• Maternity leave is paid at 100% of average earnings, calculated based on employment in the previous calendar year, with no upper limit on payments.
• If the employee had not worked in the previous calendar year but worked before the child’s birth, the minimum wage of 654 EUR per month is paid.
• The health insurance contributions fund the payment of maternity pay at the rate of 100% of the employee’s average earnings based on the previous year’s earnings.

Childcare Allowance:

• As of August 31, 2019, childcare allowance is no longer granted for children born after this date. However, the payment of child allowance and other family allowances will continue.

Paternity Leave

In Estonia, fathers are entitled to the following paternity leave:

Compensation: Paternity leave is paid based on the average wage of the employee. Fathers are entitled to 100% of their regular wages during this leave, but the payment is capped at three times the minimum wage.

Duration: 10 working days of paternity leave, which must be taken within two months of the due date. After the birth, fathers are entitled to an additional 2 months of paternity leave.

Parental Leave

Starting from April 1, 2022, the following changes have been made to parental and childcare leave in Estonia:

Parental Leave: Parents can now take up to two months of parental leave simultaneously, with both receiving parental benefits during this period. For parents of premature babies and multiple births, the total duration of parental benefits will not be reduced by more than 30 days, ensuring that families can stay at home with their children until they reach 18 months of age. Parental benefits can be claimed until the child is three years old.

Childcare Leave: Both parents are entitled to individual childcare leave per child. Each parent can claim up to 10 days of paid childcare leave per child until the end of the calendar year in which the child turns 14. The parental leave benefit during this period will be increased to 50% of the parent’s average wages.

Other Leave

In Estonia, additional leave types that may be granted depending on collective agreements or employment contracts include:

Adopter’s Leave: Individuals who adopt a child under the age of 10 are entitled to paid leave based on their average salary.

Childcare Leave:

For up to 2 children under the age of 14: 3 days of leave, paid at the minimum wage.

For 3 or more children under the age of 14: 6 days of leave, paid at the minimum wage.

For parents with a disabled child: An additional day of leave per month until the child reaches 18 years of age, also paid at the minimum wage.

Study Leave: Employees are entitled to 30 days of study leave as per the Adult Education Act. Out of these 30 days, 20 days are compensated at the employee’s average salary.

Would you like to know the approximate cost of employment in Estonia?

1) What is the employer of record in Estonia?

In Estonia, an Employer of Record (EOR) service enables companies to hire employees on their behalf without establishing a legal entity in the country. The EOR assumes all employment-related legal responsibilities, such as adhering to local labor regulations, handling payroll, managing taxes, and administering employee benefits. This approach allows companies to operate in Estonia while reducing their legal and administrative workload.

2) What is the EU employer of record?

A European Employer of Record (EOR) serves as the official employer for your team within the EU, streamlining workforce management. They manage HR functions such as payroll, taxes, and legal compliance across different countries. This enables you to hire top talent in Europe without needing to establish a local entity in each country.

3) What is the employer of record for foreign employees?

An Employer of Record (EOR) opens access to global talent by becoming your legal employer abroad, managing payroll, taxes, and compliance requirements. Without the need to establish a local entity, you can concentrate on hiring the best talent worldwide, while the EOR handles HR complexities in each country.

4) What is the difference between eor and PEO?

EORs act as the legal employer for your international team, managing HR tasks and ensuring compliance. They are ideal for rapid hiring and short-term projects without the need to establish a local entity. PEOs, in contrast, work through a co-employment model, sharing some HR responsibilities with you. While PEOs usually require a local entity and may suit long-term needs, they offer slightly less control over employees compared to EORs.

5) What does an employer of record do?

An Employer of Record serves as the legal employer for your international workforce, fully managing HR responsibilities. This includes ensuring compliance with local labor laws, handling payroll and taxes, and administering employee benefits.