G-P’s Employer of Record (EOR) model allows your company to start hiring talent in minutes via our global entity infrastructure. Unlike a Professional Employer Organization (PEO), G-P allows your company to expand your global footprint without the hassle of entity setup and management.
Our global employment products, including G-P Meridian Prime™ and G-P Meridian Core™, are backed by the largest team of HR and legal experts in the industry. We handle the growing complexities of compliant global expansion — so you can focus on opportunities ahead.
As a global EOR expert, we manage payroll, employment contract best practices, statutory and market norm benefits, employee expenses, as well as severance and termination. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. G-P allows you to harness the talent of the brightest people in 180+ countries around the world, quickly and easily.
Hiring in Estonia
When negotiating terms of an employment contract and offer letter with an employee in Estonia, it may be useful to keep the following in mind.
Most employees in Estonia are engaged under employment contracts, and independent contractor status is rarely used. Companies are responsible for ensuring that employees are eligible to work in Estonia. Citizens of the EU have a right to work in Estonia if they have been granted a right of residency. Temporary residents must have work permits. Hiring employees that do not have proper permission can result in civil and criminal sanctions.
Employment contracts in Estonia
It is legally required to put a strong employment contract in place in Estonia, in the local language, which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in Estonia should always state the salary and any compensation amounts in euro rather than another currency.
A work contract is required to include some specific terms, in the absence of which the contract is defective.
The following terms are mandatory:
- Identities of the parties (name, personal identification code or registration number, residence or seat)
- Date of entry into the employment contract and commencement of work by the employee
- Description of duties
- Official title if this brings about legal consequences
- Agreed pay for the work (wages), including other benefits, if agreed upon
- Time when the employee performs the agreed duties (working time)
- Place of performance of work
- Duration of holidays
- A reference to, or the terms of, advance notification of cancellation of the employment contract
- Rules of work organization approved by the employer
- Reference to a collective agreement, if applicable
A contract is considered to be expired on the following grounds:
- By agreement of the parties
- End of the contract period
- By initiative of the employee
- By initiative of the employer
- Demands on third parties and conditions not depending on the parties involved
The notice of a contract termination by either party should be presented in writing.
Working hours in Estonia
The standard workday is 8 hours with a 40-hour week, but businesses often close early on Fridays and executives often work longer hours.
Holidays in Estonia
Estonia celebrates several national holidays:
- New Year’s Day
- Independence Day
- Good Friday
- Easter Sunday
- Spring Day
- Pentecost
- Victory Day
- Midsummer Day
- Day of Restoration of Independence
- Christmas Eve
- Christmas Day
- Boxing Day
The working day directly preceding New Year’s Day, Anniversary of the Republic of Estonia, Victory Day, and Christmas Eve is reduced by 3 hours.
Vacation days in Estonia
In general, most employees in Estonia receive 28 paid calendar days of vacation, including working and non-working days. 28 calendar days is also the minimum statutory requirement for annual leave.
Estonia sick leave
Employees are allowed up to 182 calendar days of paid sick leave. Employers are responsible for paying for sick leave from the 4th through the 8th day of leave, and the state pays from the 9th day forward. Sick pay is at 70% of the employee’s average salary. The employer will base the calculation on the average salary paid to the employee during the last 6 months.
Maternity/paternity leave in Estonia
Expecting employees are entitled to 140 days of maternity leave which must start between 30 and 70 days before the due date. Maternity leave compensation is provided by the state.
Fathers are entitled to up to 30 working days of paternity leave, which can be taken anytime from 30 days before the expected due date until the child reaches the age of 3. Paternity leave is paid for by the state and is based on income.
Parental leave is allowed up until the child’s 3rd birthday and is paid by the state. Maternity and parental paid benefits together are capped at 575 days.
Health insurance in Estonia
Health insurance is paid for through a social tax. The purpose of health insurance in Estonia is to:
- Cover the costs of health services provided to insured persons
- Prevent and cure diseases
- Finance the purchase of medicinal products and medicinal technical aids
- Provide the benefits for temporary incapacity for work
Estonia supplementary benefits
Commonly negotiated benefits include:
- Company car
- Laptop
- Mobile phone
- Share options
Bonuses
Annual bonuses can be negotiated as part of the salary package.
Termination/severance in Estonia
Probationary periods of up to 4 months are common in Estonia. The minimum periods of termination notice vary from 15 to 90 calendar days, depending on the employee’s length of service. The employer must also have legal grounds for termination.
If an employee is terminated due to redundancy, the employer must pay compensation of 1 month’s average wage. If a fixed-term contract is cancelled early due to redundancy, the employer must pay what the employee would have been entitled to.
If an employer gives advance notice of cancellation later than provided by law or a collective agreement, the employee has the right to receive the compensation that they would have received had the employer adhered to the advanced notice terms.
If the employer wishes to terminate the employment contract with immediate effect, the employer may choose to provide payment instead of notice.
Employees with between 5 to 10 years of service are entitled to an additional 1 month’s salary from the Unemployment Insurance Fund. Employees with 10 or more years of service are entitled to 2 months’ additional salary from the Fund.
These provisions apply to individual as well as collective dismissal cases.
Paying taxes in Estonia
Employers are required by law to pay a social tax of 33% of gross salary, up to a limit set by the state, for all employees; 20% of which is allocated for pension insurance and 13% for health insurance.
The social security system of Estonia comprises 7 benefits:
- Health insurance (contributory)
- Unemployment insurance (contributory)
- State unemployment allowances (non-contributory)
- State family benefits (non-contributory)
- Social benefits for disabled people (universal, non-contributory)
- State funeral benefits (universal, non-contributory)
- Pension insurance (contributory)
Unemployment insurance is 2.4% of the wage. The employer pays 0.8% and employees pay 1.6%. Unemployed individuals are entitled to an unemployment benefit of at least EUR 9.73 per day for up to 9 months (as long as they are registered with the Unemployment Office).
Why G-P?
At G-P, we help companies unlock the power of the everywhere workforce through our industry-leading global employment platform. Let us handle the complex and costly tasks involved in finding, hiring, onboarding, and paying your team members, anywhere in the world, with the speed and guaranteed global compliance your business needs.
Contact us today to learn more.