Professional Employer Organization (PEO) in Estonia

Professional Employer Organization (PEO) in Estonia

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What is a professional employer organization (PEO)?

A professional employer organization (PEO) is an HR outsourcing partnership, also called co-employment. A PEO can simplify the HR needs of a company by hiring and on-boarding employees, administering payroll, providing statutory benefits, and ensuring compliance with labor laws. PEOs operate by entering a joint-employment agreement with a client company. The responsibilities and liabilities of hiring and managing personnel are then shared between the PEO and the company.

If your company is hiring remote employees in Estonia, you can partner with a PEO who can then handle some of the aspects of HR such as hiring and on-boarding new employees, and paying your remote employees their compensation, including statutory benefits.

Hiring a PEO can be a sensible and strategic move for both small and large businesses. It not only improves operations but can allow managers to focus on growing revenue and expanding operations globally, without having to have an in-country presence in any country.

Do you think a professional employer organization in Estonia can help your company hire remote employees? Contact Skuad to learn more about how a PEO can help you build a team in Estonia.

What are the benefits of using a PEO in Estonia?

You can build and manage your remote team easily when you partner with Skuad. Here are a few reasons a PEO can help you efficiently build your team:

  • Compliance with labor laws is ensured.
  • Payroll is processed and taxes are withheld and remitted.
  • Risks are mitigated: taxes are filed on time, laws are complied with, and employee claims are handled appropriately.
  • Competitive benefits are offered: ideal recruitment processes are designed.
  • Money and time are saved for your company using our strategic HR support.

Partnering with a PEO can help your business grow by letting us take care of some HR tasks. You can hire top global talent and have access to benefits that are usually reserved for larger companies. You don’t have to set up an in-country human resources department to get the same benefits.

Recruiting and managing a workforce is regulated by complex and changing labor laws. A PEO has access to a team of legal experts and is familiar with local laws. You can have the benefits of global expansion without some of the costs, saving you time and money.

A PEO oversees compliance, saving your company money and mitigating some of the risks. A PEO can be your strategic partner and help your company grow and scale.

To see what Skuad can do, schedule a demo.

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What are the differences between an EOR and a PEO?

A Professional Employer Organization (PEO) and an Employer of Record (EOR) in Estonia are both employment arrangements that can simplify human resources operations for companies looking to hire remote employees. The two setups provide similar services but have a few differences. The following are some differences:

A PEO in Estonia

  • Acts as your organization’s co-employer
  • Shares HR functions and responsibilities with your company, giving you more control over HR functions
  • Operates in the country only if your company is duly registered and able to hire the employees
  • Does not handle the drafting of contracts and agreements

An EOR in Estonia:

  • Can act as the legal employer of your remote workers
  • Can handle HR-related responsibilities such as hiring new employees, on-boarding, payroll, benefits, and compliance
  • Does not require an in-country legal entity to be set up
  • Drafts employment contracts for the employees

Information about Estonia

Understanding labor laws and the local culture are important when hiring remote employees to remain compliant.

Quick facts

  • The official language is Estonian.
  • The population is 1.331 million.
  • Chief industries are engineering, electronics, wood, textiles, IT, and telecommunications.
  • The official currency is the euro (EUR).

The corporate tax rate in Estonia

The Estonian corporate tax is a flat rate of 20%. The income tax rate in Estonia for employees is a flat rate of 20%.

Employment laws of Estonia

Work hours

The workweek in Estonia is 40 hours. The workday is eight hours. Night work between 10 p.m. and 6 a.m. should be paid at 125% of the normal salary.


Hours work above 40 per week or eight per day are considered overtime. Employment contracts and collective agreements can regulate overtime pay. Both employer and employee must agree on overtime. It must be paid at least 150% of the normal salary.

Minimum wage

Estonia's minimum wage is 654 EUR per month and 3.86 EUR per hour. A 13th-month salary bonus is not mandated but it is common to pay yearly bonuses.

Social security

Some contributions must be taken from payroll. Employers and employees pay for health insurance, pension, and unemployment insurance.

Employers must pay:

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

Employees must pay:

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

Paid time off in Estonia

At least 28 calendar days of annual leave per year must be given to employees. Employment contracts and collective bargaining can stipulate time off per year longer than the minimum mandated by law.

Some jobs have differing leave requirements:

  • Government officials can get 35 days of paid leave per year.
  • Research and academic staff can get 56 days of paid leave per year.

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

These are the public holidays in Estonia:

  • 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

Sick leave

Sick leave is 182 days paid at 70% of the salary of the prior year. The first nine days are paid by the employer. Beyond that day, sick leave is paid by health insurance.

Maternity leave

Maternity leave is 140 days in Estonia. This leave can start 70 days before the expected childbirth date. It is paid by health insurance at 100% of the employee’s average wage in the prior calendar year. It is paid at least minimum wage for employees who did not work in the year prior.

Fathers can take 10 working days off for the two months before the expected childbirth. Two months of paternity leave can be taken after the childbirth. This is paid at 100% of his average wage and no more than three times the Estonia minimum wage.

Adoptive parents of children 10 years and younger can take up to 70 days of leave after the court approves the child’s adoption.

Employees are entitled to paid childcare leave depending on age: three days leave for two children under age 14, and six days leave for three or more children under age 14. Parents of children with disabilities can take an extra day off per year until the child reaches the age of 18.

Termination in Estonia

Probation periods cannot be more than four months.

Notice periods depend on the length of employment with the organization:

  • 15 days- under one year.
  • One month– one to five years.
  • Two months– five to 10 years.
  • Three months– over 10 years.

Contact Skuad today to find out how we can help your company with hiring and paying Estonian employees.

Payroll in Estonia is challenging. It’s easy when you use a PEO.

Payroll processing can be difficult but it’s an essential process in any company. It can be overwhelming if a company is preparing and handling its own payroll because many components of salary structures must be accounted for. Salary has several components including gross and salary, taxes, contributions, bonuses, and payslips. Some components are nontaxable and others are taxable. Some elements are required by law such as some statutory benefits, contributions, and severance.

Keeping up with compliance can be complicated. Talk to our experts today to learn about how Skuad can manage payroll and compliance for you.

What a PEO in Estonia can and cannot do

A PEO Can A PEO Cannot
Help hire employees Take total control of your organization
Help onboard new employees Be the legal employer of your employees
Help with legal compliance Be solely responsible for hiring and firing employees
Reduce costs of employment
Process payroll properly

Businesses big and small can find value in partnering with a PEO in Estonia

Doing business and managing payroll in Estonia can be difficult without a partner in the nation who can help you pay employees and remain compliant with Estonian laws. Labor laws and rules about paying your employees can be complex. Partnering with Skuad in Estonia is the solution to save you money and time.

Skuad offers payroll solutions for expanding your company in Estonia. Compliance with local laws is ensured by Skuad in over 160 countries. Partnering with Skuad could be what your business needs to succeed and grow with PEO services in Estonia.

To learn more, reach out to us to schedule a demo so you can see how the platform works and how we can help your company with a PEO in Estonia.

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