In Estonia, a comprehensive social security system provides mandatory benefits to all employees. These benefits aim to protect workers and ensure their financial security in various situations.

Paid Leave

Estonian law guarantees all employees a minimum of 28 calendar days of paid annual leave. This minimum can be extended through individual employment contracts or collective agreements. Certain professions, like government officials and academic staff, are entitled to even longer paid leave periods.

In addition to annual leave, employees are entitled to various other types of paid leave, including:

• Sick leave: Employees receive compensation for sick leave up to 182 calendar days per year. The first three days are unpaid, days four to eight are paid by the employer, and the remaining period is covered by health insurance at 70% of the employee's salary.
• Parental leave: Both mothers and fathers are entitled to parental leave benefits.

Three-Pillar Pension System

Estonia operates a unique three-pillar pension system that provides employees with retirement security.

• State Pension: The first pillar is a state-funded pension that provides a basic income upon retirement.
• Mandatory Funded Pension: The second pillar is a mandatory funded pension scheme. Employees contribute 2% of their gross salary, and the state adds an additional 4% from social tax. These contributions are invested in a chosen pension fund and accumulate for retirement.

Unemployment Insurance

All employees in Estonia contribute to unemployment insurance, which provides financial support in case of job loss. Employees contribute 1.6% of their salary, and employers contribute 0.8% of the payroll. To qualify for unemployment benefits, employees must have paid contributions for at least 12 months in the previous 36 months.

Healthcare

Public healthcare is another mandatory employee benefit in Estonia. All employees are entitled to basic healthcare coverage after 14 days of employment. This coverage continues for two months after employment termination.

Estonian employers offer a range of attractive optional benefits to attract and retain top talent. Here's a breakdown of some commonly provided perks:

Voluntary Benefits

Some employers offer voluntary benefits such as:

• Life insurance: Provides financial support to the employee's family in case of death.
• Critical illness insurance: Offers financial assistance if the employee is diagnosed with a critical illness.
• Disability insurance: Provides income protection if the employee becomes disabled.

These benefits are typically paid for through salary deductions or a combination of employer and employee contributions.

Gym Memberships and Wellness Programs

Many companies in Estonia recognize the importance of employee well-being and offer gym memberships or on-site fitness facilities to encourage a healthy lifestyle. Some may even have wellness programs that include stress management workshops or health screenings.

Additional Paid Leave

While Estonian law mandates 28 days of annual leave, some companies offer even more generous paid vacation time to attract and retain talent.

Company Car or Car Allowance

Providing a company car or car allowance can be a valuable benefit, particularly for employees who commute long distances.

Flexible Work Arrangements

Offering flexible work options like remote work, flextime, or compressed workweeks can improve employee work-life balance and overall satisfaction.

Professional Development Opportunities

Companies may invest in employee development by offering training programs, conference attendance, or tuition reimbursement to help employees grow professionally.

Family-Friendly Benefits

Employers aiming to attract and support working parents may offer benefits like childcare subsidies, on-site daycare facilities, or flexible working hours to accommodate childcare needs.

In Estonia, all residents are provided with access to public healthcare through a mandatory health insurance system. This system is applicable to both employees and employers, each having distinct responsibilities.

Employee Health Insurance Coverage

All employees in Estonia are entitled to public health insurance coverage, however, there are some eligibility requirements:

• Employment Status: The employee must be legally employed in Estonia. The health insurance requirements for freelancers and self-employed individuals are different.
• Social Tax Contributions: The employee or their employer must contribute social tax at a minimum level to qualify for health insurance. As of 2023, the minimum monthly social tax contribution required is €215.82.

Key Point: The registration of employment automatically triggers the registration of health insurance by the employer. Therefore, employees don't need to take any additional steps to secure coverage.

Employer Responsibilities

Employers in Estonia have a crucial role in ensuring employee health insurance coverage:

• Registration: Employers are required to register all employees with the Estonian Tax and Customs Board upon the commencement of employment. This registration process automatically enrolls the employee in the health insurance system.
• Social Tax Contributions: Employers are obligated to withhold social tax from employee salaries. A portion of this social tax is directed towards health insurance funding. The current social tax rate in Estonia is 33% of the employee's gross earnings.

Estonia offers a comprehensive retirement planning system with a unique three-pillar structure. This system combines state-funded benefits with individual contributions, allowing employees to build a secure financial future.

State Pension (I Pillar)

The first pillar is a pay-as-you-go state pension system funded by social tax contributions. The Estonian government administers this system, and eligibility is based on reaching the official retirement age and accumulating the required contribution period.

• Retirement Age: The current retirement age in Estonia is gradually increasing. As of 2024, it stands at 63 years and 9 months and is expected to be adjusted based on life expectancy.
• Contribution Requirements: To qualify for a full state pension, individuals need to contribute for at least 15 years. Shorter contribution periods result in a proportionally reduced pension benefit.

The state pension provides a basic level of income upon retirement but may not be sufficient to maintain the pre-retirement standard of living.

Mandatory Funded Pension (II Pillar)

The second pillar is a mandatory funded pension scheme that supplements the state pension. This pillar operates on a defined contribution basis, meaning the retirement benefit depends on the amount accumulated in the individual's pension fund account.

• Contributions: Employees contribute 2% of their gross salary, and the state adds an additional 4% from the social tax paid by the employer.
• Investment Management: Individuals choose a licensed pension fund manager who invests their contributions in various assets like stocks and bonds. The returns on these investments determine the growth of the pension pot.
• Retirement Access: Individuals can access their II pillar funds upon reaching the state retirement age or earlier under specific circumstances, such as disability or emigration.

The mandatory funded pension offers a way to build a larger retirement nest egg compared to the state pension alone.

Voluntary Pension (III Pillar)

The third pillar is a voluntary pension plan that allows individuals to save additional funds for retirement on a tax-advantaged basis. This pillar offers more flexibility and control over retirement savings.

• Contribution Options: Individuals can contribute any amount they choose to their voluntary pension plan.
• Tax Benefits: Contributions to voluntary pension plans are typically tax-deductible up to a certain limit.
• Investment Choices: Individuals have greater control over investment options within their voluntary pension plan.

The voluntary pillar provides a way to personalize retirement savings and potentially accumulate a significant sum for a comfortable retirement.