Employer of Record in Estonia

An Employer of Record (EOR) in Estonia is a company that legally hires employees on your behalf. This means you can build a team in Estonia without setting up a local legal entity. The EOR handles all the administrative and legal tasks of employment. This includes payroll, taxes, benefits, and employment contracts, ensuring you comply with Estonian law. You manage your team's day-to-day work, while the EOR takes care of the HR and legal responsibilities. For companies looking to hire in Estonia, providers like Rivermate can simplify the process.

How an Employer of Record (EOR) Works in Estonia

Using an EOR in Estonia is a straightforward process. It allows you to hire talent quickly while the EOR manages the legal requirements. Here are the typical steps:

1. Define the Role: You start by outlining the job description and the ideal candidate profile. The EOR can help you understand the local job market to attract the right talent.
2. Find Your Candidate: You find and select the best person for the job. You are in control of the hiring decision.
3. Offer and Contract: The EOR drafts a legally compliant employment contract based on Estonian labor laws. This contract is then signed by the EOR and your new employee.
4. Onboarding: The EOR handles the formal onboarding process. This includes registering the employee with the Estonian Tax and Customs Board and other necessary authorities. You can find more information about employment registration on the official Estonian Tax and Customs Board website (https://www.emta.ee/en).
5. Day-to-Day Management: You manage the employee's daily tasks, projects, and performance, just like any other member of your team.
6. Payroll and Compliance: The EOR manages all payroll, tax withholdings, and social security contributions each month. They ensure everything is done on time and according to local regulations, keeping you compliant.

Why use an Employer of Record in Estonia

Using an EOR to hire in Estonia offers several key advantages. It removes the complexity of international hiring, allowing you to focus on growing your business and managing your team. You can enter the market and start working with local talent much faster than if you were to set up your own legal entity.

• Speed: You can hire and onboard employees in days or weeks, instead of the months it can take to establish a local company.
• Compliance: An EOR ensures you comply with all Estonian labor laws, so you don't have to become an expert overnight. They handle all the complexities of local employment regulations.
• Risk Mitigation: The EOR takes on the legal risks associated with employment. This helps you avoid potential penalties from misclassifying workers or failing to meet tax and social security obligations.
• Focus on Your Business: You can concentrate on your core operations while the EOR handles the administrative burden of HR and payroll.
• Benefits Administration: The EOR enrolls your employees in all mandatory benefits like health insurance and pension plans. They can also help you create a competitive benefits package to attract top talent in Estonia.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Estonia includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Estonia.

Hiring in Estonia is straightforward, especially with its advanced digital infrastructure. The country has a skilled workforce and a business-friendly environment. Estonians value a healthy work-life balance and direct communication. The job market is active, with many opportunities in the technology and service sectors.

Employment contracts & must-have clauses

You must provide a written employment contract for any employment relationship lasting longer than two weeks. The contract should be in two copies, one for you and one for the employee. While it doesn't have to be in Estonian, a translation may be required in case of a dispute.

Your employment contracts must include these key details:

• Parties involved: Your company's and the employee's name and identification details.
• Dates: The start date of employment and the date the contract is signed.
• Job description: A clear outline of the employee's duties.
• Work location: The primary place where the work will be performed.
• Working hours: Specification of full-time or part-time work.
• Salary: The wage amount, payment frequency, and method.
• Leave: The amount of annual paid leave, with a minimum of 28 calendar days.
• Notice periods: Details about termination notice periods.
• Probationary period: The duration of the trial period, if any.

Probation periods

A probation period allows you and the employee to see if the working relationship is a good fit.

• The maximum probation period is four months.
• For fixed-term contracts, the probation period cannot be more than half of the contract's duration.
• If you don't specify a probation period in the contract, it's assumed there isn't one.
• During probation, either you or the employee can terminate the contract with at least 15 calendar days' notice.

Working hours & overtime

Standard working hours in Estonia are straightforward.

• A typical full-time week is 40 hours, usually 8 hours a day, Monday to Friday.
• Working time, including overtime, should not exceed an average of 48 hours per week over a four-month period.
• You and the employee must agree on any overtime work.
• Overtime is compensated with either paid time off equal to the overtime hours or pay that is at least 1.5 times the employee's regular wage.
• Employees are entitled to at least a 30-minute break after 6 hours of work.

Public & regional holidays

Estonia has several public holidays throughout the year. The working day before New Year's Day, Independence Day, Victory Day, and Christmas Eve is shortened by three hours.

Here is a list of public holidays for 2025:

Hiring contractors in Estonia

Hiring independent contractors in Estonia can be a flexible way to access specialized skills without the commitments of traditional employment. Contractors are self-employed and provide services under a commercial agreement. This means they are not covered by the same labor laws as employees, so you don't have to provide paid leave or sick pay.

However, it is crucial to classify workers correctly. If a contractor works under your control and is integrated into your company's operations, they could be reclassified as an employee. This misclassification can lead to penalties, including back payment of taxes and social contributions.

An Employer of Record (EOR) can help you avoid these risks. An EOR legally employs workers on your behalf, handling all local employment responsibilities. This ensures you stay compliant with Estonian labor laws while you manage the employee's day-to-day work. Using an EOR simplifies hiring and removes the risk of misclassification.

In Estonia, handling payroll means understanding a straightforward system. The country uses a flat tax rate, which simplifies calculations. You pay your employees monthly, and while bonuses are common, a 13th-month salary isn't required by law. As an employer, you'll need to register every employee in the Estonian Employment Register and provide them with a detailed payslip each pay period.

Payroll cycles & wage structure

You should pay your employees monthly. Payments must be made on the same day each month, and no later than the last working day. You can pay more frequently, like weekly, but not less than once a month. If the payday falls on a public holiday or weekend, you need to pay wages on the preceding workday.

An employee's salary consists of a few key elements:

• Basic salary: This is the fixed monthly income before any extras.
• Gross pay: This includes the basic salary plus any allowances or bonuses, but before taxes.
• Net pay: This is the final amount an employee receives after all deductions and taxes.

Overtime & minimums

As of January 1, 2025, the minimum monthly wage in Estonia is €886 for full-time work. The minimum hourly rate is €5.31. This minimum applies to all employees, with no exceptions for younger workers.

If an employee works beyond their agreed hours, you must compensate them for the overtime. You can do this with either paid time off or by paying 1.5 times their regular wage. For work done on a public holiday, the pay rate is double the employee's normal wage.

Employer taxes and contributions

As an employer in Estonia, you are responsible for paying social tax and unemployment insurance contributions on top of your employee's gross salary.

Employee taxes and deductions

Employees also contribute to taxes and social security from their gross salary.

In Estonia, you'll find a strong system of employee benefits and leave. The country provides comprehensive support for employees, especially for new parents. This approach helps you attract and retain great talent by ensuring your team feels secure and valued.

Statutory Leave

Estonian law provides several types of paid leave to support your employees.

• Annual Leave: Employees get a minimum of 28 calendar days of paid vacation each year. Certain roles, like government officials or teachers, may receive more.
• Sick Leave: If an employee gets sick, they are entitled to paid time off. The employer pays compensation from the 4th to the 8th day of illness. From the 9th day, the Estonian Health Insurance Fund takes over payments.
• Maternity Leave: Mothers receive 140 days of paid maternity leave.
• Paternity Leave: Fathers are entitled to 30 days of paid paternity leave.
• Parental Leave: After maternity or paternity leave ends, one parent can take parental leave until the child turns three, with financial support from the state.
• Study Leave: Employees can take up to 30 days of study leave per year.

Public Holidays

Your employees in Estonia receive paid time off for public holidays. If they work on a public holiday, you must pay them double their normal wage.

Typical Supplemental Benefits

To compete for top talent, many companies offer benefits that go beyond the legal requirements. Here’s a look at what is required by law versus what you can offer as an extra perk.

How an EOR Can Help with Setting Up Benefits

Navigating a new country's laws and benefit expectations can be complex. An Employer of Record (EOR) makes it simple.

An EOR acts as the legal employer for your team in Estonia. We handle all the administrative tasks, including:

• Compliance: We ensure you comply with all Estonian labor laws, so you don't have to become an expert overnight.
• Benefits Administration: We enroll your employees in all mandatory benefits like health insurance and pension plans.
• Supplemental Packages: We help you create a competitive benefits package that attracts the best local talent. We know what candidates in Estonia expect.
• Payroll: We manage payroll, taxes, and social security contributions accurately and on time.

Using an EOR allows you to focus on growing your business while we take care of the HR complexities.

When an employment relationship in Estonia ends, you need to follow specific rules. The process isn't complicated, but you must handle it correctly. Terminating an employee can happen for several reasons, such as by mutual agreement, the end of a contract, or dismissal by the employer for a valid reason. Whatever the cause, you must provide a written notice and respect the legal requirements for things like notice periods and final pay.

Notice periods

You must give employees advance written notice before their employment ends. The length of this notice period depends on how long the employee has worked for you.

Here are the minimum notice periods you must provide:

During a probationary period, which can last up to four months, either you or the employee can end the contract with at least 15 calendar days' notice. If an employee resigns, they must give you 30 calendar days' notice.

Severance pay

Whether you owe severance pay depends on the reason for termination. Generally, you pay severance when you make an employee redundant for economic reasons. In cases of redundancy, you must pay the employee one month of their average salary as compensation.

Employees may also be entitled to additional benefits from the Estonian Unemployment Insurance Fund, depending on their length of employment:

• 5 to 10 years of employment: Entitled to one month of gross salary.
• More than 10 years of employment: Entitled to two months of gross salary.

If you terminate a fixed-term employee due to redundancy, you must pay them their wages for the remainder of the contract's term.

How Rivermate handles compliant exits

Navigating employee terminations can be tricky. We make sure the process is smooth and fully compliant with Estonian law.

Here’s how we help:

• Clear process: We guide you through every step of the termination process, ensuring you meet all legal obligations.
• Correct documentation: We prepare the necessary written notices and final payroll calculations.
• Compliance checks: Our team ensures that notice periods and severance payments are correct, avoiding any legal issues.
• Final payroll: We handle the final payment to the employee, including any unused holiday pay.
• De-registration: We ensure the employee is correctly de-registered from the Estonian Tax and Customs Board's employment register within the required ten-day timeframe.

We manage the details so you can focus on your business.

Navigating visas and work permits in Estonia can be straightforward. The process depends on your citizenship and how long you plan to stay. For citizens of the European Union, working in Estonia is simple. You just need to register as a resident. For everyone else, you will need a visa or permit to work legally.

Employment visas & sponsorship realities

Getting the right to work in Estonia when you are not an EU citizen means you need a job offer first. Your employer then plays a key role in your application.

An Employer of Record (EOR) can act as your legal employer in Estonia. This is helpful if your company doesn’t have its own entity in the country. An EOR can sponsor work visas, but there can be limitations due to national quotas.

Here are the typical routes for employment:

• Long-Stay (D) Visa: This is the common choice for working in Estonia for up to one year. Your employer, or an EOR, must register your employment with the Estonian Police and Border Guard Board to get this process started.
• Temporary Residence Permit: If you plan to work in Estonia for more than a year, you will need to apply for a temporary residence permit. This permit is valid for up to five years.
• EU Blue Card: This is an option for highly skilled professionals and offers more flexibility for working in other EU countries.

Keep in mind that for many positions, employers may need to show that the role could not be filled by a local candidate.

Business travel compliance

For short trips, you might not need a visa at all. Estonia is part of the Schengen Area, which allows for visa-free travel for up to 90 days in any 180-day period for citizens of many countries.

This type of travel is for specific business activities, such as:

• Attending business meetings
• Going to conferences or seminars
• Visiting a company facility
• Negotiating contracts

It is important to understand that this does not allow you to actively work. If you are performing work duties, even for a short period, you may need to register your employment. For example, working on a temporary basis for up to 5 days within a 30-day period may be exempt, but you should always check the latest rules.