Employer of Record Guide in 

Estonia

Vacation Leave

• Standard Entitlement: 28 calendar days annually (35 days for minors or those with partial/no work capacity)
• Accrual Rate: 2.33 days per month from the first day of employment
• Usage Eligibility: Can take leave after 6 months of employment
• Public Holiday Exclusion: Public holidays are not included in vacation count
• Vacation Pay:
  • Fixed salary employees: Continue normal wage
  • Variable pay employees: Based on average daily wage over preceding 6 months
• Payout Rules: All unused accrued vacation must be paid out upon termination

Sick Leave

• Duration: Up to 182 consecutive calendar days per year (240 days for tuberculosis)
• Payment Structure:
  • Day 1: Unpaid
  • Days 2-8: Employer pays 70% of average salary
  • Day 9 onwards: Estonian Health Insurance Fund pays 70% of average salary
• Medical Certificate: Required for sick pay benefits

Maternity Leave

Note: Please verify this information - research shows conflicting data on duration (100 vs 140 days)

• Duration: 100 calendar days (can begin 31-70 days before due date)
• Payment: 100% of average earnings from previous calendar year (paid by Social Insurance Board)
• Job Protection: Guaranteed return to same position

Parental Leave

• Paternity Leave: 30 calendar days paid leave (usable from 30 days before due date until child turns 3)
• Shared Parental Leave: 475 days shared between parents (usable until child turns 3)
• Simultaneous Use: Both parents can take up to 60 days simultaneously
• Childcare Leave: 10 working days paid leave per parent per child until child reaches age 14

Bereavement Leave

Note: Please verify this information - research shows conflicting data on legal requirements vs typical practices

There is no specific legal mandate for paid bereavement leave in Estonia. Bereavement leave is subject to employer agreement and company policy.

Personal & Family Leave

• Carer's Leave: Up to 5 working days to care for family member or household member needing personal support (compensated at minimum wage rate)
• Study Leave: 30 calendar days annually for formal education or vocational training (20 days paid at average wage)

Summary

Termination Types

With Cause (Extraordinary Cancellation):

• Valid reasons include significant breach of duties, long-term incapacity, or loss of trust
• Prior warning typically required for performance issues
• No notice or severance required

Without Cause (Redundancy/Lay-off):

• Economic reasons such as decreased work volume or reorganisation
• Specific procedures required with restrictions on terminating protected employees
• Notice and severance required

Constructive Dismissal:

• Employee can terminate without notice for significant employer breach (e.g., failure to pay wages)
• May receive compensation equivalent to 3 months' average wages

Notice Period Requirements

Notice periods are based on length of service:

Pay in Lieu: Required if employer provides less than statutory notice period.

Severance Pay

Note: Please verify this information - research shows conflicting data on calculation methods

• When Required: Mandatory in redundancy cases
• Calculation: One month's average salary from employer
• Additional Compensation: Estonian Unemployment Insurance Fund may provide additional compensation based on length of service
• Fixed-Term Contracts: If terminated due to redundancy, employee entitled to salary for remainder of contract term

Probationary Periods

• Maximum Length: 4 months
• Termination Notice: 15 calendar days notice required from either party during probation
• Rights: Full employee rights maintained during probation

Final Pay Requirements

All final payments must be made on the employee's last day of employment, including:

• Outstanding wages
• Accrued unused vacation compensation
• Applicable severance
• Other owed compensation

Termination Documents & Process

• Notice Format: Must be in format reproducible in writing (email acceptable)
• Content Requirements: Must clearly state legal grounds for termination
• Registration: Employer must de-register employee from Employment Register within 10 days

Anti-Discrimination & Retaliation Laws

Protected characteristics include gender, nationality, race, colour, language, origin, religion, political opinion, social status, age, disability, and sexual orientation. Termination due to pregnancy or exercising family leave rights is unlawful, as is termination for whistleblowing.

National Holidays

Estonia observes 12 official public holidays in 2025:

Shortened Workdays

The workday preceding New Year's Day, Independence Day, Victory Day, and Christmas Eve must be shortened by 3 hours.

Regional Holidays

Estonia has no official regional public holidays.

Working on a Statutory Holiday

Employees who work on public holidays receive:

• Double pay (2×) for hours worked on public holidays, OR
• Additional paid time off by mutual agreement

Required Documents for Employment

• Employment Contract: Written contract mandatory, must be in Estonian unless both parties agree otherwise
• Identification: Valid passport or ID card required
• Work Authorisation: Non-EU/EEA citizens require valid work permit or visa
• Employment Register: Employer must register employee with Estonian Tax and Customs Board before work commences
• Banking Information: Required for salary payments

Language Requirements

• Official Language: Estonian
• Contract Language: Employment contracts and official documents must be in Estonian
• Business Practice: English is widely spoken, especially in the tech sector and international business

Background Checks & References

Background checks are permitted but strictly regulated by GDPR and the Personal Data Protection Act. Permissible checks include employment history, education, and criminal records (if legitimate interest or legal obligation exists). The legal basis is typically legal obligation or employer's legitimate interest rather than consent due to power imbalance.

Data Protection & Privacy

Estonia follows EU General Data Protection Regulation (GDPR) requirements, including:

• Clear legal basis for data collection and processing
• Employee notification about data processing
• Data security assurance

IP Assignment & Confidentiality

Economic rights to IP created by employees as part of their duties transfer to the employer unless the contract states otherwise. Recommended clauses include clear IP assignment, confidentiality obligations, and post-employment restrictions.

Non-Compete Agreements:

• Permissible but must be reasonable in scope, duration (typically up to 1 year), and geographical area
• Employer must pay separate monthly compensation during restriction period

Probation Period Setup

Up to 4 months can be included in the employment contract as a probationary period.

Onboarding Timeline (Sample)

What the EOR Handles

Borderless AI will handle:

• Estonian-language employment contracts
• Employment Register registration
• Local tax and social security compliance
• Payroll processing in euros
• GDPR compliance
• Local legal representation

Worker Classification: Employee vs Contractor

Estonian law presumes that individuals performing work for another person with expectation of payment are employees. Key employment indicators include subordination to employer's management and control, use of employer's tools, and regular remuneration.

Independent contractors operate with autonomy, bear their own business risks, and are responsible for their own taxes and social contributions. Misclassification penalties include retroactive payment of payroll taxes, social contributions, and employee benefits.

Unionisation & Collective Agreements

Employees have the right to form and join trade unions. Collective agreements can regulate employment conditions such as wages and working hours, often providing more favourable terms than statutory minimums.

Cultural Norms & DEI Expectations

Estonian workplace culture highly values work-life balance, with the 40-hour work week respected and flexible arrangements increasingly common. Communication style is direct, efficient, and solution-oriented, with a low-power-distance culture featuring relatively flat hierarchies.

As an EU member state, Estonia has a strong legal anti-discrimination framework. Employers are expected to foster inclusive environments and ensure equal opportunity.

Anti-Discrimination Laws

• Equal Treatment Act: Prohibits discrimination based on nationality, race, colour, religion, age, disability, and sexual orientation
• Gender Equality Act: Prohibits sex-based discrimination
• Accommodation Requirements: Employers must make reasonable accommodations for employees with disabilities

Remote Work Considerations

Estonia has no separate remote work law; Employment Contracts Act principles apply. Key considerations include:

• Contract Requirements: Work location (if remote) should be specified in employment contract
• Employer Obligations:
  • Ensure safe and healthy working environment for remote workers
  • Conduct risk assessments and provide ergonomics guidance
  • Ensure equal treatment of remote and in-office staff
• Cross-Border Considerations: Working from another country creates significant tax and social security complexities requiring careful legal and tax analysis
• Digital Nomad Visa: Available for foreigners working remotely in Estonia for foreign employers