Payroll Services in Estonia
Fully managed Estonian payroll: 33% social tax with the 2026 monthly minimum, income tax after the €700 basic exemption, TSD returns and payments by the 10th and employment register entries before day one, with a named specialist a phone call away.
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What Estonian payroll actually involves
Estonian payroll is simple on paper and strict in practice: one flat income tax, an employer social tax with a monthly minimum and a single TSD return each month. Taxes follow the date wages are paid, not the month worked, and every employee must be in the employment register before starting work.
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Calculate Your Employee Costs in Estonia
Enter a gross annual salary to see the employer cost of an Estonian employee in 2026: 33% social tax and 0.8% unemployment insurance, both on the full salary with no ceiling. The calculator does not apply the €886 monthly minimum for social tax, which only matters for pay below it.
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*Indicative figures only and not definitive legal advice. Local regulations change frequently. Consult an expertEstonia
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Employer Costs in Estonia Explained
An Estonian employee costs 33.8% on top of gross salary at every pay level, because neither social tax nor unemployment insurance has a ceiling. Below €886 a month the minimum social tax of €292.38 pushes that share higher. Income tax and the employee’s contributions come out of gross pay, so they change net pay, not the employer’s cost. Here’s the breakdown.
Employers pay social tax of 33% on gross salary, which funds state pensions and health insurance, and unemployment insurance of 0.8%. Neither has a ceiling. For most employees social tax is due on at least €886 a month in 2026, a minimum of €292.38, even when pay is lower; employees of pensionable age and some other groups are exempt from the minimum.
Employees pay 1.6% unemployment insurance and, if they have joined the funded pension (the second pillar), 2% of gross pay, or 4% or 6% if they applied for a higher rate. That rate can change on 1 January, 1 May and 1 September. Taxes follow the payment date: December wages paid in January use January’s rates and go on January’s return.
Income tax is a flat 22% in 2026. It is withheld from gross pay after the employee’s unemployment insurance and funded pension contributions and the basic exemption of €700 a month, or €776 at pensionable age. From 2026 the exemption no longer shrinks as income rises, and employers apply it only on the employee’s written application. Any part the employer could not use can be claimed in the employee’s annual tax return.
Fringe benefits are taxed at the employer, not the employee: the employer pays income tax at 22/78 of the benefit’s value and 33% social tax on the benefit plus that income tax. Up to €400 a year per employee spent on promoting employees’ health is tax-free.
Wages are paid at least once a month into the employee’s bank account, and a payday that falls on a weekend or public holiday moves to the previous working day. Full-time work is 40 hours a week and eight hours a day. Overtime is compensated with equal time off unless money is agreed, in which case it is paid at 1.5 times the wage. Night work between 22:00 and 6:00 is paid at 1.25 times the wage and work on a public holiday at twice the wage.
Since 13 February 2026 employers can agree flexible working time in writing with employees paid at least 1.2 times the minimum hourly wage: a fixed number of agreed hours, at least ten a week, plus additional hours the employee may refuse, all within full-time hours. An employee who has worked above the agreed hours for most of the last six months can ask to raise them.
For an employee on €2,500 gross a month, the employer pays €825 in social tax and €20 in unemployment insurance, a total cost of €3,345 a month or €40,140 a year, 33.8% on top of salary. The employee pays €40 in unemployment insurance, €50 to the funded pension at 2% and €376.20 in income tax, and takes home €2,033.80.
Part-time pay below €886 still carries social tax on €886: on €600 a month the employer pays €292.38 in social tax and €4.80 in unemployment insurance, 49.5% on top of salary. With the full-time minimum wage at €946 a month, the social tax minimum mainly affects part-time staff.
The first three days of sick leave are unpaid. The employer pays days four to eight at 70% of the employee’s average wage over the last six months, and the Health Insurance Fund pays from day nine. Employees are entitled to 28 calendar days of annual leave, not counting public holidays, and probation lasts four months unless the contract shortens or waives it.
An employer ending a contract must give at least 15 calendar days’ notice in the first year of employment, rising to 30, 60 and 90 days after one, five and ten years. Employees made redundant receive one month’s average wage from the employer, and the Unemployment Insurance Fund adds one month’s pay after five years with the employer and two months’ after ten.
Estonian payroll taxes and contributions, 2026
| Item | Employer | Employee | Applies to |
|---|---|---|---|
| Social tax | 33% | — | Gross salary, at least €886 a month for most employees |
| Unemployment insurance | 0.8% | 1.6% | Gross salary, no ceiling |
| Funded pension (second pillar) | — | 2%, 4% or 6% | Gross salary, if the employee has joined |
| Income tax | — | 22% | After contributions and the basic exemption |
| Basic exemption | — | €700 a month | €776 at pensionable age, on written application |
| Fringe benefits | 22/78 income tax and 33% social tax | — | Paid by the employer |
| Minimum wage | €946 a month | — | €5.67 an hour from 1 April 2026 |
Gross to net and employer cost in Estonia, 2026
| Monthly gross | Employee contributions | Income tax | Net pay | Employer taxes | Total monthly cost |
|---|---|---|---|---|---|
| €600 (part-time) | €21.60 | €0.00 | €578.40 | €297.18 | €897.18 |
| €1,500 | €54.00 | €164.12 | €1,281.88 | €507.00 | €2,007.00 |
| €2,500 | €90.00 | €376.20 | €2,033.80 | €845.00 | €3,345.00 |
| €5,000 | €180.00 | €906.40 | €3,913.60 | €1,690.00 | €6,690.00 |
What changed in Estonian payroll in 2026
| Change | From | What it means for payroll |
|---|---|---|
| Flat basic exemption of €700 a month | 1 January 2026 | No longer reduced as income rises |
| Flexible working time agreements | 13 February 2026 | Agreed hours plus additional hours the employee may refuse |
| Minimum wage of €946 a month | 1 April 2026 | Up from €886, or €5.31 to €5.67 an hour |
| Pay transparency in hiring | 13 July 2026 | Pay or a pay range given before the interview; no questions about pay history |
| Data-based TSD returns | 1 October 2026 | Payroll data sent from accounting software; the Tax and Customs Board builds the return |
The gross-to-net table assumes a 2% funded pension contribution and the full €700 basic exemption; at €600 the exemption is limited to pay after contributions, and social tax is charged on the €886 minimum. These are TopSource calculations from the verified 2026 rates.
Rates and amounts shown are for 2026 and were verified on 6 October 2026 against Estonian Tax and Customs Board guidance, the Health Insurance Fund, the Employment Contracts Act and the Unemployment Insurance Act as in force on that date. This page is general information, not tax or legal advice.
How our Estonian payroll service works
Why Choose TopSource as Your Payroll Company in Estonia
TopSource for payroll, Employer of Record or any other of our services represents a simpler, more reliable and transparent option. If you would rather not employ staff in Estonia directly, our Employer of Record in Estonia can employ them on your behalf.
We don’t hide fees or sneak price increases. We run Estonian payroll in-house and file under your own registrations rather than a bureau’s, so the same team that files your TSD returns answers your calls. You get a named account manager, one consolidated monthly invoice covering salaries, taxes and fees, and one live Portico view of Estonia beside every other country we run for you. Portico syncs with your time-tracking, leave and HR systems via API – set up by our onboarding team, not left to yours. GDPR, SOC 2 and ISO 27001 certified.
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Estonian payroll FAQs
Employers pay 33% social tax and 0.8% unemployment insurance on gross salary, 33.8% in total with no ceiling. For most employees social tax is due on at least €886 a month, a minimum of €292.38.
A flat 22%, withheld after the employee’s unemployment insurance and funded pension contributions and a basic exemption of €700 a month, or €776 at pensionable age. Since 2026 the exemption no longer falls as income rises.
The employer adds 33.8% to gross salary: an employee on €2,500 a month costs €3,345 a month, or €40,140 a year. Tell us the role and salary and we’ll send the full cost within one business day.
€946 a month for full-time work, or €5.67 an hour, from 1 April 2026. From January to March 2026 it was €886 a month and €5.31 an hour.
In 2026 social tax is charged on at least €886 a month, so the employer pays at least €292.38 for each employee even when pay is lower. Employees of pensionable age and some other groups are exempt from the minimum.
By the 10th of the month after wages are paid. Income tax, social tax, unemployment insurance and pension contributions are declared together on form TSD, and since 1 October 2026 the data can be sent straight from accounting software.
The employer pays the tax, not the employee: income tax at 22/78 of the benefit’s value and 33% social tax on the benefit plus that income tax. Up to €400 a year per employee spent on health promotion is tax-free.
Since 13 July 2026 employers must give job applicants the pay or pay range for the role in writing before the interview, for example in the job ad, and may not ask about their current or previous pay. Employers also may not stop employees from disclosing their own pay.
The first three days are unpaid. The employer pays days four to eight at 70% of the employee’s average wage over the last six months, and the Health Insurance Fund pays 70% from day nine.
Yes. A company that is not in the Estonian commercial register can register with the Tax and Customs Board as a non-resident employer and run Estonian payroll directly, with the same duties as a local employer. TopSource can run that payroll for you or employ your team through our Employer of Record service.
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