Employer Of Record In Estonia

You don’t need to form a corporation in order to expand your business into Estonia with the help of the Employer of Record (EOR) service. Payroll, benefits administration, and other compliance-related chores for your remote workforce may be completed more quickly and effectively with the aid of its standardized and automated global HR platform. It makes the process of growing abroad more effective with a smart global network. To learn more, get in contact with EOR Services professionals right now.

Overview of Estonia

Estonia is the northernmost country of the Baltic nations, which also include Latvia and Lithuania, and is located on the eastern bank of the Baltic Sea. According to the World Economic Forum, it is the most entrepreneurial country in Europe, which makes it a desirable location for foreign direct investments (FDI). Trading, tourism, and information technology are some of the main industries in this area. Its economy is growing so quickly that it is often referred to as the Silicon Valley of Europe.

• Population: 1.32 million
• Currency: Euro
• Capital city: Tallinn
• Languages spoken: Estonian, English, Finnish, and Russian
• GDP growth: 35.19 billion USD (2021)

Employment Landscape In Estonia

Creating a dependable global workforce from anywhere in the globe is now easier than ever. Using a global EOR solution frees you from time-consuming and challenging administrative duties like payroll, taxes, and compliance so you can focus on growing and developing your company. Simultaneously, lowering compliance worries offers another benefit.

The statutory rights and entitlements of Estonian workers are listed below.

Entitlements	Explanation
Standard Working Hours in a Week	There are forty regular working hours in a week, or eight hours a day on average. The worker can choose to work part-time if it suits them better. Depending on the business, weekends are often days of rest.
Overtime Eligibility	An employee is entitled to compensation equal to at least 1.5 times their average salary, or an additional rest period, if they work overtime—that is, beyond their regularly scheduled working hours or on their mutually agreed-upon rest days—and are not given a substitute day off. Both the employer and the employee must agree on this.
Paid Public Holidays in Estonia	Here is a list of compulsory paid leaves in Estonia – Date Significance 1st Jan New Year’s Day 24th Feb Independence Day 2nd April Good Friday 4th April Easter Sunday 1st May Labor Day, Spring Day 23rd May Whitsun 23rd June Victory Day 24th June Jaanipäev 20th Aug Estonian restoration of Independence 24th Dec Christmas Eve 26th Dec 2nd Day of Christmas
Bonuses	Usually, the company and employee agree a bonus. Although not required, bonuses are typical in Estonia. The worker receives pay on a yearly basis.
Annual Leave Entitlement	An employee is entitled to a minimum of 28 paid leaves off from work annually, including working days.
Maternity Leave	Maternity leave for female employees is entitled to 140 days. In some circumstances and in the event of medical difficulties, it may be extended to 154 days. Applying for it is possible 30 to 70 days prior to the deadline. Male workers are entitled to ten days of paid paternity leave, which they can use both two months prior to and two months following the birth of their child. When an employee adopts a kid under the age of ten, they are entitled to 70 days of leave. The leave is paid for by the state.
Childcare Leaves	In Estonia, parents are entitled to yearly leaves for childcare. If they have one or two children under the age of fourteen, they are eligible for three working days; if they have three or more children under the age of fourteen, or if they have at least one kid under the age of three, they are eligible for six working days.
Medical Leaves	An employee in Estonia is entitled to eighteen2 days of paid sick leave. From the fourth to the eighth day of sick leave, employers pay the employee; after that, the state covers the leaves. An employee’s entitlement to paid sick leave is 70% of the average wage from the prior year.
Employee Protection and Anti-discrimination Rights	It is illegal to discriminate against someone based on their nationality, sex, creed, caste, religion, status, money, or political or personal beliefs.

Full-Time Employee Contracts vs. Independent Contracts

The employment landscape in Estonia demonstrates a robust employment rate of 68.1% in 2021. This Baltic nation primarily relies on formal employment contracts, and independent employee contracts are relatively uncommon. Employers in Estonia are responsible for ensuring their workforce’s legal eligibility to work within the country.

Employers in Estonia enjoy flexibility in their hiring processes, as they can choose between contract workers and full-time employees based on specific job role requirements, project scope, and responsibilities. Contract positions are usually open-ended and revolve around project-specific tasks, with individuals hired for defined project durations. These contractors are expected to meet project objectives within the given timeframe. Alternatively, fixed-term contracts may be used for specific durations, typically around two years or until the assigned task is completed.

In contrast, full-time employees are engaged to work on ongoing projects, transitioning between various roles as needed. Their responsibilities extend beyond a single project, making them a more permanent part of the company’s workforce. Unlike contract workers, who receive fixed sums for each project, full-time employees receive monthly salaries.

When creating an employee contract, it’s crucial to include comprehensive details about the employee, such as salary, personal information, benefits, agreed-upon terms and conditions, and termination clauses. The contract should also specify the company’s particulars, including registration details, workplace location, working hours, company policies, and expectations. Additionally, the employee’s job role, title, and notice period should be explicitly stated. Employers must maintain records of these contracts for a minimum of 10 years after their expiration.

For businesses expanding or initiating operations in Estonia, EOR Services’ Estonia Employer of Record (EOR) services can offer invaluable support. We assist growing businesses in creating, managing, and overseeing contracts, as well as facilitating the onboarding process for both contractors and full-time employees while ensuring strict adherence to local laws and regulations. Connect with us to explore how we can help your enterprise thrive in the Estonian job market.

Recruiting in Estonia

In your quest to find the ideal workforce for your Estonian operations, a series of strategic steps must be followed. Here’s an insightful guide to streamline the process:

Step 1: Role Definition and Requirements

Commence by defining the job role meticulously and establishing the precise prerequisites and expectations associated with it. This is the foundation upon which your hiring process will be built.

Step 2: Advertising and Compliance

With the role clarity in hand, it’s time to connect with potential candidates. However, advertising in a foreign country requires strict adherence to local laws. Whether you’re using online platforms or traditional methods like newspapers, ensure compliance with the regulations.

Step 3: Leveraging Job Portals and Agencies

Online job portals are often the preferred choice for recruitment. In Estonia, popular options include EURES, CV Keskus, CV Online, EkspressJob, and Skillific. Additionally, you can collaborate with recruitment agencies such as Arista HRS and Ancor Estonia. Global job platforms like Monster and LinkedIn are also effective. For more flexible arrangements, consider alternatives like AIESEC and GoWorkaBit.

Step 4: Meticulous Hiring Process

The hiring process, especially through online platforms, can be exhaustive. It entails sifting through a multitude of applications, conducting in-depth interviews, and performing comprehensive background checks. Both employers and prospective employees must adhere to all recruitment policies in accordance with the law.

Step 5: Cross-Border Interview Coordination

Interviews may involve participants across different time zones and rely on various technologies such as Google Meet and Zoom. Effective planning can ensure a smooth process. It’s essential to be aware of legally permissible questions during interviews, and background checks are a must. Written consent from the prospective employee is necessary for these checks, which encompass reaching out to previous employers, conducting financial and criminal background verifications, and more.

Step 6: Extending Job Offers and Onboarding

Once you’ve identified the perfect candidate, extend a job offer. The onboarding process covers everything from filing necessary employee documentation to configuring preferred payment methods and provident funds.

Before embarking on your hiring journey, it’s essential to decide whether you want to manage the process independently, collaborate with a recruitment agency, or opt for an Employer of Record (EOR) to oversee the entire process. Marzuna, our EOR services, can expertly handle this process without the need for you to be physically present in the country. Explore how Marzuna can facilitate your business expansion in Estonia and enable you to hire a remote workforce seamlessly.

Probation & Termination

In Estonia, the probationary period typically spans 3-4 months. Upon its conclusion, the employee enters into a new contract, which is typically fixed in nature.

Termination:

• An employment contract may come to an end for various reasons, including:
• Employee’s passing
• Business liquidation
• Fixed-term contract completion
• Breach of workplace policies despite prior warnings
• Employer’s demise
• Mutual agreement between employee and employer
• Other reasons specified in the agreement

Terminating by Mutual Agreement:

Both the employee and employer have the liberty to terminate the contract at any time through mutual agreement. This should be outlined in the contract, specifying mutually agreed-upon notice periods, compensation, and other relevant terms.

Terminating by the Employer:

Employers can terminate an employment contract but must provide prior notice, the duration of which depends on the employee’s length of service:

• 15 days’ notice for employees with one year of service
• 30 days’ notice for employees with five years of service
• 60 days’ notice for employees with ten years of service
• 60 days’ notice for employees with ten or more years of service

In cases where an employer does not provide notice, they are obliged to compensate the employee monetarily for the specified notice period.

Terminating by the Employee:

Employees have two termination options: ordinary termination and extraordinary termination.

In the case of ordinary termination, the employee can resign without specifying a reason, but when dealing with a fixed-term agreement, a reason must be provided. A minimum of 30 days’ notice to the employer is required.

Extraordinary termination comes into play when the employee has a valid reason, such as health issues, unmet expectations, or employer policy violations. Grounds for extraordinary termination also encompass delayed salary payments, mistreatment, harassment, or work conditions adversely affecting the employee’s health. In such cases, notice periods are not required, and the employee can be relieved of their responsibilities immediately.

Dismissal Compensation:

In the event of redundancy leading to an employer’s termination of an employee, the employer is obligated to pay one month’s average salary as compensation.

If the employer fails to provide adequate notice, the employee is entitled to compensation based on the specified notice terms.

When a contract is terminated with immediate effect, the employer must provide compensation in place of the notice period.

Employees with 5-10 years of service are entitled to an additional one month’s salary from the Unemployment Insurance Fund, while those with over 10 years of service receive two months’ pay from the same fund. These provisions ensure fair compensation during various termination scenarios.

EOR Solution

Business expansion is a complex endeavor that demands thorough planning, especially when venturing into international markets. While it can be a challenging and time-consuming process taking several months, you can streamline and accelerate your growth efforts by opting for the EOR route when hiring personnel in Estonia. Employer of Record Estonia (EOR) solutions are designed to expedite and simplify your business expansion into Estonia. With our vast global network and advanced HR technology platform, we ensure compliance with local labor regulations by managing employment responsibilities like monthly payroll, work permits, employment agreements, and employee taxes in Estonia. Schedule a demonstration with EOR Services today to get started.

Types of Work Visas in Estonia

Primarily there are only three types of visas for Estonia:

Visa Category (Non-EU citizens)	Explanation
Schengen Visa (short-term)	With a short-term Schengen visa, sometimes called a C-type visa, you can spend up to 90 days in any Schengen nation within a six-month period. Other Schengen nations, including but not limited to Switzerland, Italy, Germany, France, Belgium, Netherlands, Spain, Latvia, Portugal, Finland, Iceland, Denmark, and Austria, can be visited by holders of a Schengen visa in addition to Estonia. Poland, Lithuania, Luxembourg, Czech Republic, Sweden, Norway, and Malta. Furthermore, there are no time limits on when you can enter or exit the Schengen region.
Criteria to getting Schengen Visa (short-term)	Documents required for employees applying for a short term visa other than the basic documents are: Employment contract. Current bank statement of the last 6 months. Leave permission from the employer. Income Tax Return (ITR) form or Certificate of Income Tax deducted at the source of salary.
National Visa (long-term)	The national type visa, often referred to as the D-visa, enables you to stay in Estonia for 91 days to 180 days over the course of six months. Seasonal employees, temporary employees, volunteers, researchers on guest visas, and students are among the groups for which the Visa D is frequently granted.
Criteria to Get National Visa	A travel document that was issued within ten years, has two blank pages, and is valid for at least three months after the visa expires. A filled-out and signed application. An insurance coverage that pays for all medical costs in the event of illness or accident up to the visa’s expiration. When a person has a multiple entry visa, their insurance should last until the conclusion of their first planned stay. An employer’s confirmation or a registration of temporary work. A 35 x 45 millimeter image Biometric information (10 fingerprints) at the time the application was submitted The general fee is €100; for youngsters aged 6 to 11, it is €40.
Transit Visa	A transit visa is entirely distinct from the other visas that have been discussed. You can enter the nation with a transit visa, but only for a short period of time. It indicates that it is only valid for a few days at most. The transit visa is issued with the intention of improving convenience and travel experience.
Criteria to Get Transit Visa	Visa in the transit country Copy of the valid visa for the final destination
National Visa (long-term)	You do not need a visa to enter Estonia if you are a citizen of the EU, the EEA (Iceland, Liechtenstein, and Norway), or Switzerland. You can register as an Estonian resident in the Population Register of Estonia during the first three months of your visit if you plan to live or work in Estonia for around three months.

Work Permits in Estonia

Can we Sponsor Work Permit in Estonia?	Yes
Processing time	2-4 weeks
Work Permit Process	Step 1: The local partner of EOR Services in Estonia submits an application for an employment authorization. Step 2: The work permit is approved by the Ministry of Foreign Affairs. Step 3: The worker uses a Schengen visa to enter Estonia. Step 4: The board of police and border guards authorizes the residency permit. Step 5: Begin your employment in Estonia.
Work Permit Validity	6 months (single/multiple entries).
Work Permit Process for Different Countries	The work permit process is broadly divided into EU and non-EU segments.
Where is the Application Processed	The application would be processed in the employees home country
When Can Employee Travel to Estonia	Once the employee’s Schengen visa has been authorized by the Estonian embassy located in their home country, they are free to go to Estonia. This letter contains the employee’s pre-approved single-entry visa, giving the employer six months to arrange for the employee’s arrival in Estonia and the issuance of the necessary permissions.
What’s the Cost of Business Visa	EUR 100
Duration of Business Visa Processing	2 weeks
Switch Business Visa to Work Permit	No
Can Spouses Work on Dependent Visas?	No
Termination of Work Permit	Ten days prior to the temporary residence permit’s validity period ending, the decision to renew or not to extend it is made. The Service Office listed on the application form is where the residency card is issued.

Payroll & Taxes in Estonia

Setting up payroll in Estonia involves several crucial considerations. Your company’s first decision is whether to hire local or foreign nationals. If you opt for a local entity, it entails recruiting employees and creating a payroll system. For those who already have an established entity, EOR Services can provide assistance to ensure full compliance with Estonian laws. If you don’t have an existing entity, EOR Services offers a comprehensive solution designed to efficiently launch your business while meticulously adhering to all relevant legislation.

After establishing your entity, the next vital step is configuring the payroll. Companies planning for a long-term presence in Estonia may opt for setting up an internal payroll system. It’s important to note that the payroll cycle in Estonia operates on a monthly basis, and being aware of the country’s standard VAT rate of 20% is crucial for businesses to navigate the complexities of payroll setup effectively.

Taxes

Tax Type	Rate
Pension	20%
Unemployment Insurance	0.8%
Health Insurance	13%

Employee Payroll Taxes

Tax Type	Rate
Compulsory Pension for those born after 31st Dec, 1982	2%
Unemployment Insurance	16%

Expanding your business into Estonia involves several critical steps, and EOR Services can serve as your invaluable global outsourcing partner to simplify the process and ensure seamless operations within the country.

Before diving into the establishment of a subsidiary, careful consideration and evaluation of various factors are essential. To begin, you must decide on the location for your subsidiary, as different cities and areas may have distinct laws that impact subsidiary fees. Next, you’ll need to determine the most suitable type of subsidiary structure that aligns with your business objectives. Estonia’s legal framework offers options such as a private limited company, general partnership, commercial association, or limited partnership. Opting for a private limited company offers flexibility for conducting your operations in the country.

Here are the key steps involved in setting up a subsidiary in Estonia as a private limited company (LLC):

• Filing the company’s registration certificate.
• Drafting the subsidiary’s Articles of Association.
• Providing proof of the subsidiary’s registered address.
• Presenting evidence of the invested share capital.
• Details of the appointed manager.
• Submission of necessary documents to the Trade Registry.
• Registration with relevant authorities, including the Commercial Register.
• Opening a local bank account.
• Registering for VAT.
• Enrolling with the Sick Fund of Estonia.

Establishing a subsidiary can be a time-consuming and intricate process. It involves adjusting to a new operating environment and comprehending Estonian laws, which may span several months to complete.

EOR Services can be your trusted partner, simplifying the process by handling comprehensive payroll setup, legal compliance, and taxation. Reach out to our experts for expert guidance on setting up a subsidiary in Estonia and streamline your expansion efforts in this vibrant business landscape.

Conclusion

Estonia has a strong, rapidly growing, and open economy that is a hub for innovation. With flat taxes, a stable budget, and exceptionally hospitable investment rules for foreign nationals, it’s a business haven and among the most business-friendly countries. Although there is an annual cap on non-EU citizens entering Estonia, senior staff members and startups are not subject to this cap. Its labor force is well educated, its legal system is straightforward, and its hiring process is easy. It was rated the greatest country in Europe for business by the World Economic Forum. The world is now much more accessible thanks to it. Contact our EOR Services experts to find out more.