The Republic of Estonia is a country in northeastern Europe. The country is regarded as an advanced economy characterized by a free market, pro-business and sound fiscal policies, which is open to foreign investment. The combined value of the country’s imports and exports is equal to 151% of its GDP, signifying the importance of foreign investment to its economy. Oil shale energy, textiles, timber, banking, telecommunications, transportation, electronics, food and fishing, chemical products and shipbuilding are the major sectors of the economy.

Currency: Euro (€)

Principal Languages: Estonian, Russian

Government: Parliamentary System, Unitary State, Parliamentary Republic

Capital City: Tallinn

Other Major Cities: Tartu, Narva, Parnu, Kohtla-jarve

Employment Contracts

The employment contract is generally entered into for an unlimited term unless a limited term is justified by the characteristics of the work. Employment agreements can be amended only by mutual consent of the employer and the employee.

An employment contract (and any subsequent amendment to it) must be in writing if its duration is longer than 2 weeks. The employer and the employee can freely detail the terms and conditions of employment, but the terms and conditions cannot be less favorable to the employee than those provided by the law.

Work/Time Regulations

A regular workday has 8 hours and a normal work week comprises 40 hours. A workday cannot exceed 13 hours, including overtime work.

Overtime work, or work done beyond 8 hours a day, is paid at a rate of 150% of regular remuneration. Work done at night, between the hours of 10 p.m. and 6 a.m., is remunerated at a rate of 125% of regular pay. Work done on a holiday is paid at 200% of the normal rate.


Annual Leave
The minimum amount of annual leave for employees who have worked for the company for at least a year is 28 days. Employees who have worked 6 months but less than a year are entitled to a prorated vacation. The timing of annual leave is mandated by the employer.

Employees must take one period of annual leave no less than 14 consecutive calendar days in length. Employers can refuse to allow employees to take leave in increments shorter than 7 days.

The annual leave payment must be made no later than the penultimate working day before the commencement of the leave. Any unused annual leave may be carried over into the next year. An employee may apply for additional vacation without pay, if necessary.


There are 12 public holidays in Estonia:

  • Jan. 1: New Year's Day
  • Feb. 24: Independence Day
  • Good Friday
  • Easter Sunday
  • May 1: Spring Day
  • Whitsunday
  • June 23: Victory Day
  • June 24: Midsummers Day
  • Aug. 20: Independence Restoration
  • Dec. 24: Christmas Eve
  • Dec. 25: Christmas Day
  • Dec. 26: Boxing Day

When the holiday falls on a Saturday or a Sunday, the following Monday is a regular working day in Estonia. The working day before the New Year's Day, Independence Day, Victory Day, and Christmas Eve is 3 hours shorter than the regular working day. 

According to the general rule, public holidays are not working days. The need for an employee to work on a public holiday may arise (for example) due to the employer's economic activity. In these cases, the employer must pay the employee 2 times his/her regular wages for the time worked. Employer and employee can agree upon the compensation for work done on a public holiday in the form of additional time off.

Sick Leave 
For the first 3 days of absence, the employee is not paid any benefits. From the fourth day to the eighth day, the benefit is paid by the employer at 70% of the average salary during the last 6 months. Starting from the ninth day, the benefit is paid from the Social Insurance Fund at 70% of the social security tax paid a year before.

Maternity Leave 
An expectant mother has the right to paid pregnancy and maternity leave of 140 calendar days. She is entitled to maternity leave of at least 70 calendar days before childbirth. If an expectant mother starts using pregnancy and maternity leave less than 30 days before the estimated date of birth, pregnancy and maternity leave is shortened by the unused leave. The leave is paid by the social security system.

Paternity Leave
A father receives a total of 10 working days of paternity leave during the 2 months before the expected date of childbirth and during the 2 months after childbirth. Paternity leave is remunerated based on the father's average wages but by no more than 3 times the average salary.

Other Leaves:

Adoptive Parent Leave 
An adoptive parent is entitled to paid parent leave of 70 calendar days when adopting a child under 10 years of age but after the approval of adoption from a court.

Childcare Leave with Pay
Parents are entitled to paid childcare leave each year as follows:

  • 3 working days if they have 2 or fewer children under 14 years of age,
  • 6 working days if they have at least 3 children under 14 years of age.

The benefit is paid by the social security system.

Childcare Leave without Pay
Mothers or fathers who are raising a child up to 14 years of age are entitled to up to 10 days of unpaid childcare leave per year.

Parental Leave
Parents, step-parents, adoptive parents or guardians of a child are entitled to 435 days of paid parental leave until the child reaches 3 years of age. Only one parent can take leave at the same time. The benefit is paid by the social security system.


Pension and Social Security  

Under the social insurance system, the legal retirement age is 63 and will increase by 3 months every year starting on January 1, 2017, until reaching 65 in 2026. To qualify for a pension, an employee must have at least 15 years of service. Early retirement is allowed under certain conditions but may result in decreased benefits.

Employees born after 1982 are also required to participate in the mandatory individual account system. As under the social insurance system, the minimum retirement age is 63 and will increase by 3 months every year until reaching 65 in 2026, but only 5 years’ service is required to qualify.

Employees are required to contribute 2% of earnings to their individual accounts but make no contribution to the social security system. The employer contributes 16% of gross payroll to the social insurance system and 4% to individual accounts.

Workers' Compensation
There is no specific worker's compensation program in Estonia. Benefits are provided through the sickness and maternity and old age, disability, and survivor programs and by employers. All employed persons residing permanently in Estonia are covered for occupational diseases and for accidents that occur at work or while commuting to and from work.

Total disability is defined as a loss of at least 40% of earning capacity and qualifies an employee for a pension benefit of 100% of the reference wage (the insured's average gross daily wage in the previous calendar year). A partial benefit is paid for a loss of earning capacity between 10% and 40%.

How GPS can Help

With our Global PEO/Employer of Record services, companies can expand into Estonia and hire their employees without having to establish a branch office or subsidiary in Estonia.

  • Your candidate is hired via our Estonia PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services
  • Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll – all in full compliance with the Estonia laws
  • Global PEO Services experts manage all day-to-day operational issues, such as employee expenses, and severance/termination if required.
  • No contractor risks, pass on the compliance burden to Global PEO Services.

 Spin Off/M&A Support

  • Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.

24/7 Support in 150+ Countries

  • Empower your teams with 24×7 support and a single point-of-contact model in which experienced client services directors are in continuous communication with information and advice.
  • We are backed by a mix of 300+ multidisciplinary experts from HR, Payroll, Finance, Tax, and Legal domains who are ready to respond to the expected and unexpected needs of your business on the shortest notice.

Easy Visibility into Your Employee Time & Attendance and Benefits Data

With our Global PEO, you get access to our proprietary Mihi SaaS solution for time and attendance, vacation, leave management and benefits enrollment and management. Mihi enables clients to have easy access to employee data in real time. It is designed specifically for companies with a global workforce, especially when working in multiple countries with low headcount.

Ready for Growth When You Are

When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Learn more about our end-to-end international expansion services here.

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