Employing in Estonia

Employing in Estonia with TopSource Worldwide provides an efficient and compliant way to manage your global workforce.

Estonia, known for its digital innovation and picturesque landscapes, offers a unique business environment. The country uses the Euro as its currency and has a robust IT industry.

Employers need to adhere to the Employment Contracts Act and stay updated with changes in social tax rates set by the Estonian Tax and Customs Board. Payroll taxes in Estonia include a flat income tax rate and social security contributions shared between employees and employers.

By partnering with TopSource Worldwide, businesses can navigate the complexities of local employment laws and regulations, ensuring smooth and compliant operations in Estonia.


Our Expertise

Managing a global workforce in Estonia

TopSource Worldwide's expertise in global EOR, payroll and compliance ensures that your business can seamlessly adapt to the Estonian market. With our knowledge of local labour laws and innovative digital infrastructure, we provide tailored solutions to manage your workforce effectively, ensuring compliance with Estonian employment regulations and optimising operational efficiency.


Extensive expertise

Our team of experienced, knowledgeable staff collectively provide up-to-date employment information across 180 countries, so you can always get accurate advice.


Entity-free employment

Feel free to hire employees from all over the world without being weighed down by setting up entities, running complex payroll or recruiting a hiring team.


Payroll without hassle

Have the confidence that your staff will always be paid accurately and on time, so that you can focus on your core business activities and work towards your success. 


Always-on support

Access helpful, relevant, personalised advice whenever you need it, along with expert-led recruitment policies and tried-and-tested HR best practices.


Global Employee Cost Calculator

Estimate the cost of your new hire with our calculator. Simply enter their location and salary information in to this handy tool to see what will be spent in employment costs each month.


Hear from our clients about our EOR solutions in Estonia

"With TopSource we were able to have employees hired or maintained in Nutreco without having to establish an entity in these countries for only 1-2 employees. I think most countries are covered by TopSource, so they can help us with almost all cases. Good advice on conditions and direct contact with employees. Invoicing done directly to the company. An easy process compared to hiring employees by ourselves."

Annette van Duijnhoven

”We searched the market for a local payroll vendor in 2014 and we chose TopSource as our partner. We were looking for error-free and timely payroll processing and TopSource Worldwide delivers this, saving us time and money. We have worked together for 8 years now and would recommend them to anyone."

Praveen Lihinar

”TopSource Worldwide has a detailed and methodical onboarding process that made it easy for us to get set up and running with our UK employees. They were able to take the worry out of trying to comply with all local laws and regulations. Because they have this knowledge we do not have to research on our own and hope we are in compliance. This has saved us hours of time and gives both the company and employees a sense of security."

Client based in Ft Worth, Texas, USA

Personalised Employer of Record services in Estonia

TopSource Worldwide offers personalised Employer of Record (EOR) services tailored to meet the specific needs of your business in Estonia. This includes handling employee onboarding, payroll processing, tax compliance, employee benefits management, and HR support. Our EOR services ensure that your business meets all legal and regulatory requirements, providing a hassle-free solution to manage your Estonia-based employees.

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End-to-end Estonia payroll services

Looking to expand into Estonia? Our unparalleled expertise in global payroll services ensures that your business can seamlessly navigate the complexities of payroll on a global scale, supporting your Estonia expansion initiatives.

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Global entity management

Venturing into the Estonian market can be both exciting and challenging. With distinct business regulations, cultural nuances, and economic landscapes, it's essential to have a clear roadmap for your business establishment journey.

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Whether your goal is to process your purchase-to-pay transactions with minimum errors or manage your expense claim procedure, our team of experts can handle your accounting responsibilities, allowing you to focus on your core business and save time and money.

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Global EOR services

Managing a diverse global workforce can be complex. This is where TopSource steps in as an invaluable employer of record services partner for companies seeking to expand their global reach while ensuring compliance with local employment laws and regulations.

Global Expansion Simplified

How to do business in Estonia

Entering the Estonian market presents a mix of excitement and challenges. Given unique business regulations, cultural intricacies, and economic dynamics, a well-defined roadmap is crucial for a successful business establishment.

TopSource Worldwide is with you at every stage. Whether it's navigating local regulations or facilitating seamless operational transitions, our expertise ensures a swift and efficient process for establishing your business in Estonia.


Estonia Insights

Key insights into Estonia's landscape


VAT rates: Estonia has a standard VAT rate of 20%, a reduced rate of 9%, and a zero rate for specific goods and services.


Ease of Doing Business rank: Estonia ranks 18th in the World Bank's Ease of Doing Business Index, indicating a favourable business environment.


Consumer Confidence Index: As of 2022, Estonia's Consumer Confidence Index was 5.8, reflecting positive economic sentiment.


Employee maternity/paternity leave: Maternity leave is 140 days, and paternity leave is 10 days. Parents can also take shared parental leave.


Employee termination period: Standard termination notice is 15 days, but specific terms may vary based on employment contracts.


Employee salary pay date: Wages are typically paid monthly, with payment dates agreed upon by employers and employees.


Bank holidays: Estonia observes national holidays, including New Year's Day, Independence Day, and Christmas, with 12 public holidays in total.

An overview of employing in Estonia


The minimum wage for full time workers in Estonia is €654 per month (2022)
There are no mandatory increases to salaries; pay scales and increases are at the discretion of the employer.


There is no statutory bonus in Estonia.Any supplementary bonuses should be outlined in the contract of employment.

Social Security System

Social security in Estonia is governed by the Ministry of Social Affairs (Sotsiaalministeerium), which oversees the three contributory social security schemes:

  • The Social Insurance board (Sotsiaalkindlustusamet) manage all funds related to pension, family and social benefits;
  • The Health Insurance Fund (Eesti Haigekassa) covers medical care, sickness and maternity leave benefits;
  • The Unemployment Insurance Fund (Eesti Töötukassa) is responsible for all issues relating to unemployment and redundancy benefits.

Public healthcare is funded by the Health Insurance Fund scheme and is provided by the national health system. The Fund signs annual contracts with medical providers and covers the cost for medical expenses of insured employees. Employees are able to access the healthcare scheme following completion of their first month of employment.

Estonian citizens will incur minimal fees for some outpatient treatments and consultations.

Employer’s costs

Employers are required to pay monthly contributions to the Tax Board (Maksuamet)

Social Tax (pension and health insurance)
0 – 2%*
Unemployment Insurance

*Employees born after 31st December 1982 are obliged to pay a mandatory pension contribution of 2%. This contribution is voluntary for anyone born prior to this date.

An overview of the main statutory benefits


Estonia has a three-tier pension system available to employees: state pension, mandatory funded pension, supplementary funded pension.

The state pension is available to employees upon reaching retirement age who have worked in Estonia for a minimum of 15 years.

The mandatory pension is available to all employees who have made monthly contributions to the Social Tax. This contribution is mandatory for all employees born from 1st January 1983. Employees contribute 2% of their gross monthly salary towards a selected pension fund and an additional 4% will be added by the State. Employees born prior to this date can opt to pay The supplementary pension is made in the form of voluntary contributions or a pension contract with a life insurance scheme.


Employees are entitled to sick leave benefits in the event of illness, workplace accidents or injury upon presentation of a medical certificate.

Sick leave entitlement begins from the second day of illness. The second to the fifth day of leave are paid by the employer and any subsequent leave is paid by the Estonian Health Insurance Fund. An insured employee has the right to receive sickness benefit for 182 consecutive calendar days.

The sickness benefit is paid at a rate of 70% average income in the six months prior to leave.

For a workplace accident, the employee may be entitled to up to 100% of their average salary based on the assessment of a medical panel.

Additional Leave

Unpaid Parental Leave: a mother or father may take up to 10 days’ unpaid leave to care for a child under the age of fourteen.

Academic Leave: employees are entitled to up to 30 days’ leave for job-related training and education. Up to 20 academic leave days are payable by the employer at a rate equal to the employee’s average daily pay.

Contractual provisions

Contract of Employment

Public healthcare is funded by the Health Insurance Fund scheme and is provided by the national health system. The Fund signs annual contracts with medical providers and covers the cost for medical expenses of insured employees. Employees are able to access the healthcare scheme following completion of their first month of employment.
Estonian citizens will incur minimal fees for some outpatient treatments and consultations.

Rules of Registration

A medical examination should be carried out within the first four months of employment and reviewed every three years, or sooner if advised by a doctor.

It is a legal requirement for employers to provide a new employee with a full overview of the workplace rules and guidelines, including health and safety procedures.

Probationary Period

Employers may choose to provide a probationary period in the contract of employment; the maximum term for probation is four months. It is currently not permissible for the probationary period to be extended; however, this is being reviewed in the case of employee sickness.

If the employer wishes to terminate the contract at the end of the probation period, they must provide fifteen days’ notice.

Working Hours

A regular working week consists of 8 hours per day and 40 hours per week.
Employees working more than six consecutive hours are entitled to a rest break of at least 30 minutes.

It is the responsibility of the employer to keep a record of the hours worked by its employees; this information can be requested by the Labour Inspectorate at any time.

Any work carried out exceeding the 40-hour working week is considered overtime.
Overtime work can be undertaken:

  • upon mutual agreement between the employer and employee;
  • in unforeseen circumstances at the request of the employer in the prevention of damage.
Compensation must be given for any overtime work carried out at a rate of 1.5 times the employee’s hourly rate or, alternatively, an equivalent period of time off.


The termination of a contract must be in accordance with the grounds stipulated in the Employment Contracts Act.

Termination on mutual agreement

A contract can be terminated at any time upon mutual agreement of both parties. Agreement must be signed in writing and detail the contract end date, conditions of expiration and payment of compensation, where applicable.

Termination of contract by the employee

An employee can terminate their contract in either ordinary or extraordinary terms. An employee additionally has the right to propose termination by mutual agreement at any time.

Ordinary termination can be applied to an indefinite contract at any time; the employee is not required to give reason for the termination. However, an employee on a fixed-term contract cannot initiate ordinary termination unless a replacement employee has been found to fill the position.

Extraordinary termination requires valid grounds for termination i.e.. breach of contract on the part of the employer or due to personal circumstances of the employee or a member of their family.

Termination of contract by the employer

An employer may only terminate a contract on an exceptional basis including:

  • economic grounds;
  • violation of contract on part of the employee.

The employer must provide the employee with written notice of termination and in the case of violation, the employee must be presented with a warning before the contract can be terminated.

Severance pay

Upon termination of a contract, the employer must make a ‘final payment’ to the employee, including all remuneration earned and compensation for unused holiday entitlement.

In the case of dismissal by reasons of redundancy, the employer is required to make a redundancy payment equivalent to one month’s average salary.

Holiday entitlement

Employees are entitled to 28 calendar days’ leave per calendar year. Annual leave should be agreed by 31st March of each year in a holiday schedule. The employee may split their leave entitlement, if both parties agree, provided that one period accounts for a minimum of 14 consecutive days. Employers have the right to refuse any leave requests of less than 7 days.

Holiday accrual begins from the first day of employment; however, holiday cannot be taken until the completion of six continuous months of employment. Leave is accrued at a rate of 2.33 days per working month from the first day of employment.

An employee may choose to carry forward up to 28 days’ leave by a maximum period of one calendar year.

Remuneration for annual leave should be paid no later than the penultimate working day before the leave begins, unless agreed by both parties.

Employ and pay anywhere

Specialising in multi-country payroll solutions

TopSource Worldwide offers comprehensive payroll outsourcing services, ensuring seamless and accurate management of your organisation's payroll functions. With cutting-edge technology and a team of experienced professionals, we handle payroll processing, tax compliance, and regulatory requirements with precision.

Calculate Your Employer of Record Taxes in Seconds

Employment Cost Calculator in Estonia

Our Employment Cost Calculator simplifies complex tax calculations for global businesses. Accurately assess tax obligations, ensuring compliance with local regulations. Streamline payroll management effortlessly with our user-friendly tool, providing transparency and efficiency in international workforce taxation.

In addition to calculating your EOR taxes, our calculator can also help you:

  • Understand the different types of EOR taxes
  • Stay up-to-date on the latest changes to EOR tax regulations
  • Avoid penalties for non-compliance
Our author

Mark Robbins

Global Sales Director

Mark is the Sales Director at Topsource Worldwide. He has been a pioneering figure in the global expansion space since 2013. He is the first salesperson to sell EOR services in Europe, a feat he accomplished in 2013. 

Published 2023-11-14 00:00:00

Updated 2023-11-15 00:00:00

Adrian Cooney

Reviewed by:

Adrian Cooney

Adrian Cooney

Fact checked by:

Adrian Cooney

Employer of Record FAQ

Frequently Asked Questions about Estonian employment solutions

What is an Employer of Record in Estonia?

An Employer of Record (EOR) is a professional services provider that assumes the responsibility of being the legal employer for a company's workforce in Estonia. This entails managing tasks such as payroll processing, tax withholding, benefits administration, and ensuring compliance with local labour laws and regulations.

How do global employment services work?

Global employment services operate as a comprehensive solution for businesses seeking to expand their workforce across borders. These services, often provided by Employer of Record (EOR) companies like TopSource Worldwide, streamline the complexities of international employment.

What are the benefits of working with an Employer of Record in Estonia?

Employer of Record companies assume the legal responsibilities associated with employment, alleviating the burden of compliance, payroll, and HR management in Estonia. This allows companies to expand globally without the complexities of establishing legal entities in each location.

What is the difference between EOR & PEO?

An EOR acts as the legal employer, handling tasks like payroll, tax compliance, and benefits administration. This allows companies to expand internationally without establishing legal entities. On the other hand, a PEO shares employer responsibilities with the client company, often co-employing workers.

How are employer payroll taxes calculated in Estonia?

Calculating employer payroll taxes involves understanding the various taxes associated with employing workers and complying with tax regulations in Estonia. Key components include federal and state income taxes, Social Security, Medicare, and unemployment taxes.

What global employment solutions does TopSource offer?

TopSource Worldwide facilitates hassle-free global expansion by acting as the legal employer, handling payroll, tax obligations, and HR responsibilities. With expertise in global entity management, TopSource assists businesses in navigating the intricacies of legal structures across borders.

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