Employment in Estonia is governed by the Employment Contracts Act, with benefits paid through the Estonian Health Insurance Fund and the Social Insurance Board. Payroll is simple and digital, built around a flat income tax and a single employer social tax. Here is what employers need to know.
Estonian annual leave is counted in calendar days. Family leave is generous and largely paid by the state, with parents able to share parental benefit flexibly until the child turns three.
28 calendar days a year. Public holidays falling during leave are not counted, so leave is extended.
Paid by the Social Insurance Board. It can start 30–70 days before the expected birth.
Paid by the state, and can be taken at any time until the child turns 3.
Divided between the parents as they choose until the child turns 3. More days apply for multiple births.
| Day of illness | Pay | Paid by |
|---|---|---|
| Days 1–3 | Nil | Unpaid waiting days |
| Days 4–8 | 70% | Employer |
| Day 9 onwards | 70% | Estonian Health Insurance Fund |
Set up Estonian annual, sick and family leave in IceHrm as separate leave types, each with its own accrual, carry forward and approval rules, including pro-rata entitlements for new starters. Employees see their live balance before they apply, and managers see who is away on a shared calendar. Leave management →
The minimum wage is set by government regulation, usually following agreement between employers and unions.
€5.67 per hour, from 1 April 2026. It was €886 from January to March 2026.
8 hours a day. Including overtime, working time may not exceed 48 hours a week on average over 4 months.
Overtime is compensated with equal time off, or with 1.5 times the hourly wage if agreed.
Capture attendance, overtime and night hours in IceHrm and feed them straight into payroll, so premiums reflect what was actually worked. Time & attendance →
Estonia has a flat income tax. Employers withhold tax every pay run, applying the basic exemption only when the employee has submitted an application to use it with that employer, and report it monthly to the Tax and Customs Board (EMTA).
| Item | 2026 |
|---|---|
| Income tax rate | 22% |
| Basic exemption | €700 a month (€8,400 a year) |
Employers pay social tax, which funds pensions and health insurance, and unemployment insurance on top of gross salary. Employees contribute to unemployment insurance and, in most cases, the funded pension.
Paid by the employer, with a minimum monthly base of €886 in 2026 for most full-time employees.
The employee pays a further 1.6%, withheld from pay.
Withheld from the employee’s pay at the rate they have chosen, unless they have left the scheme.
Build Estonian pay the way you already structure it, with your own salary components, deductions and formula columns, such as social tax and unemployment insurance columns. Want to know how well IceHrm handles payroll calculations for Estonia? Contact us or see Payroll →
An employer can only cancel an employment contract for a good reason: the employee’s conduct or capacity, or economic circumstances such as redundancy. Cancellation must be in a form that can be reproduced in writing and state the reason.
| Length of employment | Notice |
|---|---|
| Less than 1 year | 15 calendar days |
| 1 to 5 years | 30 calendar days |
| 5 to 10 years | 60 calendar days |
| 10 years or more | 90 calendar days |
| Length of employment | Employer | Unemployment Insurance Fund |
|---|---|---|
| Less than 5 years | 1 month | Nil |
| 5 to 10 years | 1 month | 1 month |
| 10 years or more | 1 month | 2 months |
Unused annual leave is paid out when employment ends.
Estonia has 12 public holidays. The working day before New Year’s Day, Independence Day, Victory Day and Christmas Eve is shortened by 3 hours.
Leave groups give each office its own holiday calendar, so your Estonian team gets the right days off automatically while staff in other countries follow theirs. Holiday calendars →
Employment contracts are normally concluded in writing (a digitally signed contract counts) and are presumed to be for an indefinite term. Every employee must be registered before they start work.
The probation period is 4 months unless a shorter period is agreed. A fixed-term contract needs an objective reason and can last up to 5 years; if it is renewed more than twice, or extended after one renewal, within 5 years, it becomes a contract of indefinite duration.
Send contracts for e-signing, store them on the employee’s record, and track onboarding with task lists, including registration in the employment register, so nothing is missed on day one. Documents & e-signing →
This guide is general information to help you plan HR processes, not legal, tax or financial advice. Employment law and rates change regularly and awards, enterprise agreements and state rules may give employees more than the minimums shown here. Always confirm current requirements with the official sources or a qualified adviser.
Configure leave types, accrual rules and public holidays for Estonia, keep employee records and contracts in one place, and run payroll with your own salary components. Want to know how IceHrm handles payroll calculations for Estonia? Talk to us.
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