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Mercans CountryIntel ® Estonia Payroll And HR Insights

Mercans offers complete payroll, PEO and HR services in Estonia

Estonia presents many advantages for businesses and in terms of its investment climate. It ranks #1 globally in terms of tax competitiveness and ranks #1 again in terms of the number of unicorns per capita. A digitally-enabled nation, it provides a pro-business environment and is consistently ranked as a world leader in terms of human capital, digital capabilities and ease of doing business. Great opportunities are present across a number of sectors such as IT R&D, electronics and IoT, food and business services. While small, this is a rapidly growing economy that is open and hassle-free.

Doing Business in Estonia

Establishing a company is incredibly easy with the ability to do everything completely online and within a few hours. Estonia attracts continued investments through solid infrastructure covering utilities, industrial parks, free zones, transport, telecommunications and IT. The Trade Development Agency, part of Enterprise Estonia, is a government agency that promotes foreign investments and assists global companies in locating business opportunities locally.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Estonia is straightforward. Choose how your company operates from a range of entity types that suit your individual circumstance.

Banking

Banking Hours: 8:00 am to 5:30 pm from Monday to Friday.

Working Week

The standard working week is from Monday to Friday from 9:00 am - 5:30 pm.

Labor Law

Estonia is ranked #4 in economic freedom in Europe. The legal environment favors entrepreneurship, ensuring that foreign inventors have minimal restrictions and equal rights and obligations as local entrepreneurs.

Main Industries

Oil shale energy, telecommunications, textiles, chemical products, banking, services

GDP Growth

0.1%

Dates & Numbers

dd/mm/yyyy

Official State Name

Republic of Estonia Eesti Vabariik

Population

1.32 million

Capital

Tallinn

Major Languages

Estonian

Currency

Euro

Internet Domain

.ee

International Dialing Code

+372

Estonia
Tallinn, EE
10:53 am, December 2, 2022
-9°C
clear sky

Payroll

Estonia is ranked #15 globally in terms of human capital maximization. The average monthly gross salary is 1,548€ while the minimum monthly wage for full-time work is 654€. Wages are paid monthly and it is the employer’s obligation to calculate and withhold all payroll taxes.

It is acceptable to provide employees with online payslips

Payslip

Payroll reports must be kept for 7 years

Reports

Employees are entitled to receive paid annual leave of 28 days

Annual Leave

Employees are entitled to receive paid sick leave of 182 days

Sick Leave

Employees are entitled to 20 weeks of paid maternity leave and 10 days of paid paternity leave,

Maternity & Paternity Leave

At least 15 days’ notice must be provided for termination of the employment contract

Employee Termination

There are no provisions mandated by law regarding the 13thmonth salary

13th month salary

3.83 EUR per hour

Minimum Wage

Overtime payment cannot be made for overtime worked that exceeds 8 hours within a period of 7 consecutive days

Overtime

Employees paid monthly are entitled to 30 days’ pay for each year of employment for between five to ten years of service.

Severance Pay

Tax and Social Security

A resident is liable to tax on worldwide income whereas non-residents are taxed on Estonian-source income. The Estonian Social Insurance Board (ENSIB) is a government institution acting under the supervision of the Ministry of Social Affairs and regulates pension benefits, family child protection, disability welfare services and more.

Tax

When a worker stays in Estonia for over 183 days in a year, they become a tax resident but will be required to notify the tax authorities as such through a Form R submission.

20%

Corporate Income Tax

20%

Personal Income Tax

20%

Sales Tax

20%

VAT

Social Security

Foreign workers who are registered at the Employment Registry and have an Estonian ID-code will have healthcare coverage from their 15th day of employment. They will be entitled to social benefits from the Social Insurance Board.

37.4%

Social Security Rate

33.8%

Social Security Rate for Employers

3.6%

Social Security Rate for Employees

Employment Law

Employment and labor contracts are regulated by the Employment Contracts Act.

Employment Agreement

A successful startup hub, the process of hiring is straightforward. Contracts may be entered into for a fixed term or an unspecified term and must set out details such as name and place of residence, description of duties, agreed remuneration, training entitlements, place of work, procedures for compensating overtime and more.

Working condition

Overtime may be done by mutual agreement but the work schedule cannot exceed an average 48 hours per seven days over a four month period.

Leaves

Annual vacation is 28 days and national holidays are not included in this calculation. There is also additional leave categories applicable such as maternity leave, parental leave and sick leave.

Employment termination

There are a number of ways in which an employment contract may be terminated such as ending on mutual agreement, ending due to term expiry, due to death or cancellation and due to misconduct.

15 days

Minimum notice period for terminating an employee

12 days

Total number of public holidays

40

Working hours per week

Not specified

Total number of days for Compassionate & Bereavement Leave

Immigration

While there is an annual immigration quota for non-EU nationals, there is no limit to startups.

Residency permits

Where the foreign worker comes from an EU country intending to work for over 3 months, the worker will need to apply for an Estonian personal identification code within 5 days of starting work in order for their employer to register at the Employment Register.

Work Permit Validity

2 years

Required Documents

A job offer by an Estonian employer

A recognized work contract

A letter of invitation from the Police and Border Guard Board

A travel document issued within the previous 10 years that is valid for at least
three months after the visa expires and has two blank pages for visas

A completed and signed application form

A photo

An insurance policy with at least EUR 30,000 coverage for the duration of the employee’s stay

Documents showing the purpose of the employee’s journey, such as a letter from the host, work documents, study documents, proof of family ties, and proof of accommodation

Biometrical data including 10 fingerprints.

Compliant, reliable, error-free and touchless payroll in Estonia

Build the best team and hire top talent compliantly in Estonia. Get in touch with Estonia payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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