Employment Laws in Estonia

Contractual Agreements

The contract employment law in Estonia recognizes several employment arrangements, each offering a different structure for the working relationship:

• Employment Contract: Establishes a clear employer-employee relationship with specific rights and obligations for both parties.

• Contract for Services: This contract engages independent contractors for specific services. 

• Authorization Agreement: This agreement applies to situations where someone is authorized to perform a specific task, often with a high degree of autonomy. 

You may depend on employment contracts to define workplace roles, duties, and privileges for hiring purposes. Let's look at the key elements to ensure clarity and compliance for both employers and employees.

• Names and addresses of the employer and employee
• Commencement date of employment
• Job description and entitlements
• Salary information, including benefits if applicable
• Annual leave entitlement
• Payment date and specifics on wage calculation and withholding taxes
• Working hours, workplace location, and termination notice period.

You may also draft Data Processing Agreements to avoid legal disputes arising from employee data breach claims.

Types of employment contracts in Estonia

• Jobs in Estonia usually have written contracts that may include:
  • Indefinite agreements: Standard contract for full-time or part-time work with no predetermined end date
  • Fixed-term arrangements: This contract has a specific end date clearly defined in the agreement and is limited to a maximum duration of five years in Estonia. 
  • Probationary period: This cannot exceed four months and cannot be imposed on minors or individuals with disabilities. 

Obligations and rights for both parties

• You must enforce all statutory minimums under the employment laws in Estonia to uphold employee rights.
• Meanwhile, employees should maintain a smooth work environment by fulfilling their duties.

Working Hours and Overtime

Estonia labor law provides two options for scheduling working hours. Let’s discuss further. 

Regular working hours

• Conventional working hours: You may ask full-time employees to work for eight hours a day or 40 hours in a seven-day week. 
• ‍Summarized working hours: Additionally, the employment laws in Estonia allow work scheduling at different hours each week as long as employees average 40 hours over a set period (up to four months).

• Further, you must offer at least 11 hours of uninterrupted rest in a workday or 48 consecutive hours of rest every week. However, the minimum weekly rest period may be reduced to 36 consecutive hours for summarized working hours. 

Overtime regulations and compensation 

• You can only request overtime where there's an immediate risk of harm to the employer's property. 
• You must ensure total working hours, including overtime, do not exceed an average of 52 hours in a week (over four months)

• Under the labor laws of Estonia, overtime is compensated either with paid time off or at 1.5 times the regular wages.

Alternatively, you may use Employer-Of-Record (EOR) solutions to manage international compensation and benefits in a timely and legally compliant manner.

Minimum Wage and Compensation

Minimum wages are adjusted each year through discussions between the Estonian Trade Union Confederation and the Estonian Employers' Confederation. 

The minimum wage rate in 2024

• The minimum wage in Estonia is set at €820 per month gross or €4.86 hourly. 

Factors affecting wage determination

• A wage determinants study in the European Union found a correlation between characteristics like age, education level, skills, location, company size, and higher wages. 
• Further, the employment laws in Estonia require monthly payroll frequency and negotiation of salary payments in euros. Learn more on how you can pay your remote employees. 

Employee Benefits and Social Security

Here is a brief overview of employee benefits and social security contributions in Estonia.  

Statutory benefits

• Statutory benefits under labor law In Estonia encompass a comprehensive pension system, mandated annual leaves, family leave benefits, and unemployment insurance. 
• You may extend sickness leave pay for the first three days and then pass it on to the health insurance provider. 
• Employment laws in Estonia require you to reduce regular daily working hours by three before New Year’s Day, the anniversary of the Republic of Estonia, Victory Day, and Christmas Eve. 

Additional perks and benefits

• Supplementing these are additional perks such as health insurance, optional benefits, and gym memberships. Moreover, employees often enjoy enticing perks like extra vacation days and the provision of company vehicles.

Social security contributions and requirements

• There are three main social security contributions in Estonia:
  • Social tax 
  • Unemployment contributions
  • Mandatory funded pension contributions

• Social tax in Estonia is not taken from employees' pay but is 33% of employees’ total earnings and any additional benefits given to managers or controlling members. 
• Breaking it down: 20% goes towards financing public pension insurance, and 13% goes towards public health insurance.

Vacations and Paid Time Off

Estonia labor law requires suitable work rule provisions to extend the following paid and unpaid leave entitlements:  

Annual leave entitlement

• You must grant paid annual leave for at least 28 calendar days per year.  
• The labor law in Estonia allows you to reject any leave request for less than seven continuous days. 
• You may carry forward unused annual leave for a maximum of one following year. 

• Meanwhile, you cannot include national and public holidays in annual leave calculations. 

Public holidays and special leaves

• In Estonia, there are 12 national public holidays, each lasting for one day:

• The family leave benefits in Estonia include: 
  • Maternity leave: 100 calendar days, divided into 70 days before and 30 days after the birth. 
  • Paternity leave: 30 calendar days, anytime between 30 days before the birth until the child turns three. However, you may refuse to leave in short spans of less than seven days. 
  • Shared parental leave: Until the child reaches three years. 
  • Adoption leave: 70 calendar days. 

• Further, the employment laws in Estonia prescribe special leave entitlement for reasons including, 
  • Carer’s leave: Up to five working days with minimum wage benefits. 
  • Academic leave: For 30 calendar days, including 10 days of unpaid leave.
  • Sick leave: Up to 182 calendar days in a year.

Termination and Severance

Terminating an employee in Estonia is a serious matter and requires justification, procedural warning, notice periods, and protection of specific employee groups during redundancy. 

Here is how employment laws in Estonia regulate employee termination: 

Grounds for termination

• You can terminate the contract due to employee health issues preventing work.
• Further, you must give a written warning and request improvement before firing for misconduct or performance issues. 
• You can terminate the employment agreement during business redundancy. However, you must prioritize protecting certain groups like employee representatives and parents with young children. 

Notice period and severance pay

• You must provide written notice to the employee before termination based on how long the employee has been working for the company, 

• Meanwhile, employment contracts in Estonia can be terminated with a minimum of 15 calendar days’ notice during probation.   

• Further, the labor laws of Estonia extend severance pay based on the grounds of terminations: 
  • For business redundancy: Compensation equivalent to one month's average wages. In the case of a fixed-term contract, you may settle the remaining salary owed. Further, you must ensure unemployment insurance benefits.
  • Compliance lapse at the workplace: Employees may seek compensation equivalent to three months’ average wages.

Discrimination and Equal Opportunity

The employment laws in Estonia outline obligations to ensure employee protection from workplace discrimination, uphold equal treatment principles, and advance equality.

Prohibitions against workplace discrimination

• Prevent discrimination based on nationality, race, color, religion, other beliefs, age, disability, or sexual orientation.
• Establish an obligation to promote equal treatment, reflecting societal diversity within organizations.
• Provide legal protection for those subjected to discrimination.

Health and Safety Regulations

The employment laws in Estonia require compliance with occupational health and safety standards in all work-related scenarios. You can start with:

• Implementing preventive measures to mitigate or eliminate workplace hazards.
• Conducting risk assessments of the work environment to identify potential hazards.
• Developing and executing action plans to enhance occupational safety based on risk assessment findings.
• Avoid any overtime agreements involving minors, pregnant women, employees entitled to maternity leave, or employees exposed to workplace hazards whose work hours are legally restricted.

Stay Compliant with Skuad 

Skuad’s EOR solutions offer an alternative in Estonia, allowing you to focus on business while ensuring compliance with employment laws in Estonia from the start.

We manage legal and administrative intricacies, guaranteeing adherence to local laws in 160+ countries (including Estonia) through contract management, seamless payroll processing, tax obligations, and social security contributions. 

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FAQs

Q1. How many hours can I work in Estonia?

A1. The employee's average weekly working hours cannot exceed 40 hours a week. However, if agreed upon with the employee and deemed fair, you may work up to an average of 52 hours over the same period.

Q2. What is the redundancy law in Estonia?

A2. An employee dismissed due to redundancy will be entitled to a severance payment on termination. The payment level is one month's average salary.

Q3. What is the employer of record in Estonia?

A3. In Estonia, an Employer of Record (EOR) is a company that acts as your legal employer for your staff. They handle HR tasks like payroll, taxes, and benefits administration, ensuring compliance with Estonian labor law. This frees you to focus on your business while employing a team in Estonia.

Q4. What is the probation period in Estonia?

A4. In Estonia, the probation period ranges from 15 to 90 days, as agreed upon between the employer and the employee.