Introduction to Payroll in Estonia

Setting up a remote team can be tricky if you’re not familiar with local labor laws. You’ll need to carefully consider the local labor laws to make sure that your payments are both accurate and timely, as well as compliant with all labor laws in Estonia as well as in your country.

With Skuad’s in-country expertise and support, you can get help with payroll outsourcing in Estonia:

• Employee benefits and salary
• Employee and employer contributions
• Leave, such as holiday and sick leave
• Payroll taxes in Estonia
• Payroll compliance in Estonia

To begin setting up your remote workforce in Estonia, get help from Skuad. Skuad’s legal experts can keep track of changes to labor legislation so you can be assured you’ll remain compliant.

Payroll Process in Estonia

Payroll processing in Estonia is classified into three main phases: the pre-payroll phase, the actual payroll calculations, and the post-payroll phase.

Pre-payroll Phase

During this phase, you’ll set up the organization, gather documentation, put leave and attendance policies in place, and collect employee information so they can get paid their salaries and benefits.

Setting up the organization

In the pre-payroll phase, you’ll set up your organization and communicate your policies. You’ll gather employee information and let them know about their pay frequency and attendance requirements. These policies may differ depending on the various locations in Estonia your employees may reside, and depending on your organizational policies.

Business profile

Register your company in Estonia and make sure you get a registration number, such as a tax ID number.

Work location

Define policies for each region in Estonia if you have remote employees throughout the country. Policies may differ in each area, so it's crucial that you are as precise as possible.

Leave policy

Certain types of leave must be given to employees by law, such as parental leave or paid public holidays. Make sure all of your team know about the leave they are entitled to, how many days they receive, when they qualify for leave, and any policies related to leave.

Attendance policy

Integration with Biometric devices and time sheets will record remote hours worked. Let employees know about how regular hours are computed, doctor’s note requirements for sick leave, and requesting time off.

Statutory components

Strictly adhering to labor laws will keep your company on a strong legal footing. Make sure your employees know which mandatory benefits they’ll receive in addition to any perks and benefits you’ll offer. Get help from payroll solutions in Estonia such as Skuad to make sure you’re in compliance.

Salary components

Salary components can be designed in accordance with your organization’s policies. Be sure to include earnings, reimbursements, allowances, deductions, and flexible benefits plans.

Pay schedule

Decide which day of the month employees will get paid and make sure they all know the date. The payroll frequency in Estonia is usually monthly, must be paid on the same day each month, and is often at the beginning of the following month.

Employee information

To prepare for payroll, make sure all employee information is correct, such as their names and addresses.

Payroll Calculation Phase

The calculation phase is the main part of payroll in Estonia. The data from the pre-payroll portion of the payroll process is put into the system, which then calculates every employee's pay, resulting in the actual salary paid after withholding, deductions, and taxes.

Post-payroll Phase

Salary payments

Salary payments to employees are the major part of the post-payroll phase. After payroll calculations are complete, you’ll send your bank advice to disperse salaries.

Payroll accounting

Payroll is likely one of your company’s largest expenses. After payments have been sent, ensure all salary payments have been recorded.

Payroll reporting and compliance

Statutory deductions and contributions are withdrawn from paychecks and remitted to the government. For full compliance with labor laws and to make sure your payroll is properly paid and recorded, contact Skuad for a demo.

Payroll Processing in Estonia

To get accurate and timely payroll services in Estonia, contact Skuad and let us process your payroll for you.

Payroll Processing Company in Estonia

Skuad makes it easy to set up payroll processing in Estonia so your business can grow and thrive. Contact us today to get a demonstration of our services.

Payroll Management in Estonia

Payroll management is about keeping accurate financial records and compliance with labor laws. Net and gross salaries are recorded and payslips are generated for any given timeline.

Payroll Compliance in Estonia

When you process payroll, you need to be in statutory compliance with benefits, taxes, and social security. These laws are subject to change, so unless you have local legal experts to help, you’ll need a payroll outsourcing company like Skuad to take care of compliance.

Payroll Components in Estonia

The following components are unique to Estonia in regard to payroll management.

Compensation

Estonia's minimum wage is 654 EUR per month and 3.86 EUR per hour. There are no laws in Estonia for a mandated 13month salary, but annual bonuses are common. As of May 2022, 1 Euro is US $1.07.

Working Hours

The working week in Estonia is no more than 40 hours per week and eight hours per day. Night time work between 10 p.m. and 6 a.m. should be paid at 125% of normal wages.

Overtime Laws

Any hours beyond 40 hours per week or eight hours per day is considered overtime. Employment contracts and collective agreements regulate overtime pay. Both employee and employer must agree for the employee to work overtime. Overtime must be paid at least 150% of normal wages.

Social Security

There are certain contributions that must be taken from payroll. Employers and employees must pay for pension, health insurance, and unemployment insurance.

Employers must pay:

• 20% for pension
• 13% for health insurance
• 0.8% for unemployment

Employees must pay:

• 2% for pension for employees born after December 31, 1982
• 1.6% for unemployment insurance

Sick Leave

Employees who get sick are entitled to up to 182 days of paid sick leave at 70% of the salary of the previous year. The first nine days of sick leave are paid by the employer. Sick days beyond the ninth day are paid by health insurance.

Parental Leave

Maternity leave in Estonia is 140 days, which can start 70 days before the expected due date. This leave is paid by health insurance at 100% of the employee’s average salary in the previous calendar year and at least the minimum wage for employees who had not worked in the year prior.

Fathers can take 10 work days off during the two months before the expected delivery date. Two months of paternity leave can be taken after childbirth and paid at 100% of his average salary but no more than three times the Estonian minimum wage.

Adoptive parents of children under 10 years old can take up to 70 days off after court approval of the child’s adoption.

Paid childcare leave can be taken depending on the age of the child: three days of leave for two children under the age of 14, and six days of leave for three or more children under the age of 14. Parents of disabled children can take an additional day off per year until the child reaches age 18.

Public Holidays

At least 28 calendar days per year must be given to employees as annual leave. Collective bargaining and employment contracts will stipulate time off per year if longer than the minimum required by law.

Certain jobs have different leave requirements:

• Government officials are entitled to 35 days of paid leave per year
• Research and academic staff are entitled to 56 days of paid leave per year

Estonia has 12 public holidays. If work must be done on a holiday, it must be paid 200% normal salary.

Public holidays in Estonia are:

• New Year's Day
• Independence Day
• Good Friday
• Easter Sunday
• Spring Day
• Whit Sunday
• Victory Day
• Midsummer Day
• Independence Restoration Day
• Christmas Eve
• Christmas Day
• Second Day of Christmas

Payroll Taxes in Estonia

Payroll tax in Estonia is a big portion of your total costs. The Estonia corporate tax rate is a flat tax rate of 20%.

For employees, the income tax rate in Estonia is also flat rate of 20%.

Other Laws

A probation period can be up to four months. The notice period for termination differs depending on how long the employee worked for the organization:

• 15 days’ notice: Less than one year of employment.
• One month’s notice: One to five years of employment.
• Two months’ notice: Five to 10 years of employment.
• Three months’ notice: Over 10 years of employment.

Students may take 30 days off per calendar year for studying. 20 of those days off will be paid at the employee’s regular salary.

Using a payroll company in Estonia can help you with all of these payroll components.

Conclusion

Paying contractors and employees can be easier with the right payroll system. If you are ready to hire remote workers and pay them compliantly with payroll services in Estonia, contact Skuad to ask for a demo.