Looking for an Employer of Record in Estonia? Here’s what you need to know

Hiring talent in Estonia can be an attractive option for global companies. The country is renowned for its highly skilled and tech-savvy workforce, particularly in the fields of IT and technology.

However, when international businesses begin exploring options for hiring through an Employer of Record in Estonia, they may quickly encounter a significant reality: EOR services may not be permitted there. 

Instead of an EOR in Estonia, companies can use a workforce management platform, like Payoneer Workforce Management, to simplify the talent engagement and employee management process.

Learn more about Payoneer Workforce Management, or keep reading to find out what the process of engaging talent in Estonia involves.

How to hire employees in Estonia

If you’re planning to engage talent in Estonia, there are three options you can choose from. Each comes with different levels of cost, complexity, and risk.

1. Set up a local entity

Establishing a legal entity in Estonia gives you full control over hiring local employees directly. However, it also requires significant administrative work, from company registration to a comprehensive understanding of Estonian employment law.

For many small companies and start-ups, this route can be time-consuming and expensive.

2. Hire independent contractors or freelancers

Hiring contractors can offer flexibility, but it comes with risk. Estonian authorities can scrutinize contractor relationships, and misclassification can lead to penalties, back payments, and reputational damage.

It’s critical to ensure contractors meet the legal criteria for independent work.

3. Workforce management platform

Since using an Employer of Record in Estonia is not an option, companies can choose a workforce management platform. This approach allows businesses to:

• Streamline onboarding and payroll processes
• Manage employment contracts and payments in a centralized system
• Reduce administrative overhead
• Maintain visibility over the local workforce

Payoneer Workforce Management offers a streamlined option for companies engaging talent in Estonia, particularly those managing distributed or cross-border teams. We help you set up localized benefits as per local laws and requirements.

Payoneer Workforce Management also assists you in mitigating risks related to contractor misclassification, helping you engage independent professionals more confidently.

How to onboard employees in Estonia

Onboarding employees in Estonia involves several formal steps, including employment contract issuance, payroll setup, and enrollment in benefits.

A streamlined onboarding process in Estonia typically includes:

• Payroll and statutory setup: Register the employee in Estonia’s Employment Register before their first working day, set up their payroll details in the e‑Tax system, and ensure all required tax declarations and social contributions are submitted.
• Device and workspace preparation: Provide all necessary equipment, software permissions, and account access ahead of the start date. Confirm their remote or on‑site workspace is fully prepared and aligned with company standards.
• First week orientation: Offer an introduction covering company policies, workplace expectations, regulatory considerations in Estonia, and a clear overview of the employee’s duties and goals.
• Team and stakeholder introductions: Arrange initial meetings with the employee’s manager, team members, and relevant partners to support smooth integration and encourage early collaboration.

Payoneer Workforce Management enables companies to compliantly engage talent across borders through its technology platform, with a single dashboard to manage their entire global workforce.

Pay employees in Estonia

Understanding local Estonia payroll requirements is essential when you pay employees in Estonia.

Payroll basics

Employees in Estonia are paid in euros (EUR) by the 10th of the following month. While annual bonuses are not mandatory, companies do have to pay employees in Estonia at least the minimum wage of EUR 820 per month.

Taxes and employer costs

As part of the Estonian payroll process, employers need to deduct income tax, a flat rate of 20% on all income for residents. 

Employers also pay social tax (33.8%), a vacation reserve (10%), and ELI (2%).

In Estonia, public health insurance comes directly from the social tax paid from employees’ salaries. Estonia operates a solidarity-based healthcare system, meaning access to care does not depend on income, age, or health risks. The broader social security system also includes pension contributions and unemployment insurance. 

Payoneer Workforce Management’s unified, all-in-one platform gives you a single dashboard to manage a global workforce, and allows you to pay contractors in just a few clicks.

Employment laws in Estonia

Anyone employing workers in Estonia has to comply with all local laws and regulations. Important employment laws to be aware of include:

• Working hours: A standard workweek is 40 hours.
• Overtime hours: Employees should work no more than 12 hours per day and 48 hours per week.
• Overtime pay: All overtime work should be remunerated at 1.5 times basic pay.
• Night work: Nighttime hours are paid at 1.25 times basic pay.
• Probation period: Probation should last no more than 4 months for standard contracts, and no more than half the contract length for fixed-term contracts.

Get support to stay compliant with Estonia’s payroll and labor laws by using Payoneer Workforce Management’s infrastructure.

Minimum wage in Estonia

The minimum wage in Estonia is EUR 820 per month. 

Employers should regularly review wage regulations and collective agreements for continued compliance, especially when scaling teams or adjusting compensation structures.

Employment contracts in Estonia

Employment contracts in Estonia must be in writing and should clearly outline:

• Personal information, including the name and address of the employee
• Date when work will commence
• Job title and description of duties
• Compensation and payment schedule
• Taxes and benefits to be paid
• Working hours and location
• Leave entitlements
• Termination and notice periods
• Rules of work organisation established by the employer

Onboard talent quickly and securely with localized contracts and payroll using Payoneer Workforce Management.

Leave policy in Estonia

In Estonia, employers must offer leave, including vacation time, public holidays, sick leave, and more.

Vacation leave and public holidays

Employees are entitled to 28 calendar days of vacation leave per year. They must take at least 14 continuous days off, while the other days can be divided as needed and agreed upon. They can transfer unused vacation time to the next calendar year. 

Estonia also has 12 public holidays per year. 

Sick leave

Employees are entitled to a maximum of 182 consecutive calendar days of sick leave per year (or 250 days for tuberculosis). 

This is covered in part by the employer and the Estonian Health Insurance Fund. 

Parental and family leave

From maternity and paternity leave to adoption and childcare leave, employees in Estonia are entitled to a range of parental and family leave. 

These include:

• Maternity leave: 100 days paid by the government
• Paternity leave: 30 days (20 paid, 10 unpaid)
• Parental leave: Available until the child is 3 for 1 parent at a time (paid by the government for the first 1.5 years only)
• Adoption leave: Paid, per employment law
• Childcare leave: 10 working days per child under 14
• Disabled child leave: 1 paid day per month

Study leave

In Estonia, employees are entitled to up to 30 days of study leave each year. Of these, 20 days are paid, and 10 are unpaid. If they’re completing formal education, they can also take an additional 15 days of study leave, paid at minimum wage. 

Work permits in Estonia

Work permit requirements vary based on nationality. EU, EEA, and Swiss citizens just need to register an official place of residence to live and work in the country. The Estonian Police and Border Guard Board website has more information about this. 

Other nationals, however, need a visa and a residence permit to live and work in Estonia.

Employers and employees should consult official government guidance for the most accurate information.

Background checks in Estonia

You may like to carry out background checks before engaging a new employee in Estonia. Common background checks include a criminal check, confirming a candidate’s employment and education history, and a social media check.

You likely need consent from the employee and have to disclose what background checks you are running before you start the background check process.

Always consult local laws before initiating any background checks in Estonia.

Employment termination in Estonia

In Estonia, employment can be terminated in several ways, including through employee resignation, mutual agreement, the end of a probation period, or employer-initiated dismissal. 

Notice periods

If an employee has worked for less than 1 year or is still in their probation period, the notice period is 15 days. For employees who have been with the company between 1 and 5 years, the notice period increases to 30 days.

Severance pay

In cases where the employer has to pay severance, the severance payable depends on the duration of employment.

Company registration in Estonia

Companies looking to hire and pay employees in Estonia can choose to register their company in the country. This provides long-term stability, but requires local compliance and administration.

To do this, you need to understand the business structures available to you and the associated legal obligations. Details can be found on the Estonian government website. 

However, using a workforce management platform is a quicker option to engage talent. 

Payoneer Workforce Management enables compliant onboarding and engagement of talent in 160+ countries, without having to set up a legal entity.

PEO in Estonia

A PEO is designed to help you with HR and admin tasks for employees you already employ through your local entity.

While some countries allow the use of EORs, in Estonia, companies should use compliant workforce management solutions. 

These platforms help manage HR and compliance processes for companies without a local entity. This is invaluable for international companies seeking global talent.

Discover Payoneer Workforce Management services in Estonia

Working with a partner like Payoneer Workforce Management helps support global operations and access local talent. 

Our unified platform offers support with:

• Onboarding & offboarding
• Payroll and taxes
• Local compliance
• Benefits administration
• Timesheets and more

Book a demo to find out more.

FAQs

1) Are there EORs in Estonia?

Unlike other countries, an EOR in Estonia may not be a permitted model. Companies can use a management platform like Payoneer Workforce Management. We can help you compliantly onboard and engage talent in 160+ countries without having to set up a legal entity.

2) What is a workforce management platform?

A workforce management platform helps companies onboard, manage, and pay global employees and contractors while supporting compliance and operational efficiency. 

3) Why hire Estonian talent through a workforce management platform?

Payoneer Workforce Management offers transparent pricing and allows companies to pay employees across the globe in 70+ currencies.

Ready to engage and pay talent in Estonia with confidence? You can use our cost calculator tool for a detailed employment cost.