Quick facts

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Estonia, a small country in Northern Europe, has a highly digitalized economy and is considered one of the most advanced digital societies in the world. The country's economic growth is driven by information technology, financial services, and manufacturing. Estonia is known for its favorable business environment and ease of doing business, making it an attractive location for startups and international companies.

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Employment Contracts

In Estonia, employment contracts must be written and concluded before the employee starts work. Most contracts are for an indefinite period, but fixed-term contracts are allowed for specific situations, such as seasonal or temporary work. Fixed-term contracts must clearly state the end date or the conditions that will terminate the contract. The maximum duration for fixed-term contracts is 5 years.

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Probation Period

The probation period in Estonia usually lasts 3 to 4 months. Fixed-term contracts, however, must justify the temporary nature of the work. If the employment contract is for a fixed term, the probation period cannot exceed the duration of the contract itself.

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Working Hours

A standard workday in Estonia is 8 hours, and a workweek is 40 hours spread over 5 days. The maximum shift length is 12 hours. Overtime is permitted but requires a written agreement between the employer and employee. Overtime work or work on holidays must be compensated at no less than 100% of the employee’s hourly or daily wage.

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Vacation Days

Employees are entitled to at least 4 calendar weeks of paid annual leave, excluding public holidays. Employers and employees may agree to split the leave, but one portion must be at least 2 uninterrupted calendar weeks. Cash compensation for unused vacation is only allowed upon termination of employment.

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Sick Leave

Employees are entitled to up to 182 days of paid sick leave in case of illness, with a maximum of 250 days per year. During sick leave, employees receive 70% of their gross wage, based on their previous year’s salary. The employer covers sick pay from the 4th to the 8th day, and the state takes over starting from the 9th day.

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Wages and Salary Payment

Wages in Estonia are paid at least once a month, and it is the employer’s responsibility to calculate and withhold payroll taxes. In 2022, the national minimum wage was set at €654 per month. All payments must be made to the employee’s bank account.

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Public Holidays

Estonia observes 12 public holidays, including:

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• January 1: New Year’s Day
• February 24: Independence Day
• March/April: Good Friday, Easter Sunday, and Easter Monday
• May 1: Labour Day
• June: Whit Sunday and Whit Monday
• December 24-26: Christmas
• December 31: New Year's Eve

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Employer Taxes

Employers in Estonia are required to contribute the following:

• Public Pension Insurance: 20%
• Public Health Insurance: 13%
• Unemployment Insurance Contribution: 0.8%

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Employee Taxes

Estonia has a proportional income tax system:

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• Personal income tax: 20% for everyone.
• Unemployment Insurance: 1.6%

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Notice Period

Employees can resign at any time by providing 30 days' written notice. If the employer terminates the contract without adhering to the notice period, they must compensate the employee for the reduced notice period in cash.

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Termination and Severance Pay

Termination of employment can occur due to mutual agreement, fixed-term expiration, redundancy, or the employee’s death. When terminating an employment contract, the employer must pay the employee for all earned wages and any unused vacation. In the case of redundancy, the employee is entitled to a severance payment equal to one month’s salary. Employers who fail to provide the required notice must compensate for the shortened period.