Each labour market has some peculiarities. It may be tricky for foreigners to understand fully the payment methods, the taxes and other benefits related. In TalentUp we are starting a series of different blog articles, one for each country. This article analyses the labour market in Estonia.

General data about the Estonian labour market

Payroll taxes in Estonia

There is usually a minimum obligation for the social tax to be paid 192.72 EUR monthly, even if there were no salary payments to employees.

Once contributions are paid, employees need to pay an income tax that is established at a 20% flat rate.

The tax-free minimum of which no deduction of income tax takes place is up to 500 EUR in a month but decreases depending on the total income amount.

Contingencies from self-employees

Example of net salary in Estonia

As a reference, we use the average salary of a software engineer. In Estonia, on average, software engineers earn annually 39,100€.

The employer contributes 13,215.8€ to social security and the employee fro 625.6€ to 1,407.6€.

After paying the income tax, the employee has a net salary of around 30,590€ coming from a gross salary of 39,100€. 

Unemployment regulation in Estonia

To claim unemployment insurance benefits in Estonia there are requirements:

Employers can terminate a fix term contract for the following reasons – business, personal, or worker misconduct. It requires notice and a written explanation for the termination. If the reason is misconduct, a warning needs to be given, and the employee gets a chance to explain their actions.

The notice period depends on the years worked:

Different kinds of leaves in Estonia

Estonian employees are entitled to 28 calendar days of paid leave and there are 12 public holidays. However, the employee and the employer can agree on a longer annual leave or unless otherwise provided by law.  For example, government officials are entitled to 35 days of annual leave, and academic and research staff receives 56 days of paid leave.

The Estonian sick paid leave consists of 70% of the regular wage, for up to 182 calendar days. An employer must pay an employer for their sickness until the 9th day of sickness. The health insurance pays any sick leave in excess of 9 days.

Paid parental leave

The maternity leave consists of 100% of the previous year’s regular wage and it lasts for 140 days, which can start at the earliest 70 days before the due date and has a minimum of 30 days. The minimum wage of 584 EUR per month is paid to mothers who had not worked in the last calendar year but then worked before the child’s birth.

When a child is born, an allowance of 320 EUR is granted; if triplets are born, the amount is 1,000 EUR per child.

Fathers can take 10 days off within two months of the due date. After the birth, the father is entitled to 2 months paternity leave. The pay is also based on 100% of the previous year’s average pay. However, even if for the mother there is no maximum, the father’s pay is capped at three times the minimum wage.

Parental leave starts at the time of birth until the kid is 3. The mother or father can take 435 days of consecutive or non-consecutive leave. However, only one parent can take this leave at a time.

Other leaves

Other leaves available are:

Common benefits offered by Estonian companies

How to employ an Estonian worker

The main work authorization category is the Residence Permit for Employment, suitable for foreign workers with skills not locally available.​​​ Estonia also offers a Short-Term Employment Program for work activities for up to 12 months and a Digital Nomad Visa for remote work ​for up to 12 months.

Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.

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