In Estonia, employment relations are regulated by the Employment Contracts Act (ECA). Available online on the Web page of Riigi Teataja (State Gazette). The purpose of the Act is to regulate the relations between employers and employees, ensuring that based on the principle of a welfare state all employees have sufficient security, allowing undertakings to exercise their constitutional right to conduct a business and contributing to the growth of the competitiveness of Estonian economy.
Working conditions applicable if an employee from a third country is a posted worker
An employee posted to Estonia must be guaranteed the wage and compensation for overtime work applicable in Estonia. According to the Employment Contracts Act (ECA) wages is the agreed remuneration payable for the work, including remuneration payable based on the economic performance and transactions.
The minimum wage
An employee may not be paid less than the minimum wage established by the Government of the Republic. The minimum wage is therefore one of the types of pay that must be guaranteed to the posted worker. The agreement on the minimum wage, which is approved by the Government of the Republic, applies across the sector. In 2022, the minimum wage is 3.86 euros per hour (gross) and the minimum monthly salary for a full-time employee is 654 euros (gross). A minimum salary for basic school and upper secondary school teachers has also been adopted, which is 1412 euros (gross) per month.
An employee from a third country posted to Estonia whose short-term employment has been registered in Estonia is not subject to the requirement arising from the Aliens Act to pay remuneration in the amount equal to at least the annual average gross monthly salary last published by Statistics Estonia.
Other types of wages
In addition to the minimum wage, the posted worker must also be guaranteed the payment of other types of wages, which are mandatory under Estonian law and extended collective agreements. Such types of wages can be considered, for example, additional wages for working on a public holiday and wages for night-time work, as well as wages for the time when the employee is not guaranteed a job.
Paid free time or upon agreement 1.5 times the wages
2 times the wages or upon agreement additional paid free time
1,25 times the wages or upon agreement additional paid free time
It may be agreed that the wages include remuneration for working at night-time (except if the employee is paid the minimum wage)
Employee’s average wage
Employee’s average wage
Extended collective agreements and wages
The amount of remuneration paid to a posted worker may also come from extended collective agreements. If the employees of the recipient (recipient of the service - a parent or subsidiary belonging to the group or, in case of temporary agency work, a user undertaking) of a posted worker are subject to the application of an extended collective agreement then it is applied to the posted worker as well.
Collective agreement on health care workers
The collective agreement on health care workers concluded in the field of healthcare has been concluded between the Estonian Hospitals Association, the Union of Estonian Medical Emergency, the Estonian Medical Association, the Union of Estonian Healthcare Professionals and the Estonian Professional Association of Clinical Psychologists. The collective agreement in question extends to all institutions and enterprises that provide health care services on the basis of an activity license issued by the Health Board and whose activities are financed under a health care financing agreement concluded with the health insurance fund or from the state budget, and to employees working in the above institutions and enterprises.
The general agreement on the carriage of passengers
The general agreement on the carriage of passengers regulates the employment, professional, and social relations of persons engaged in the carriage of passengers by bus who are members of the Union of Estonian Automobile Enterprises and members of the Estonian Transport and Road Workers’ Trade Union. The terms and conditions of working and rest time and of remuneration provided for in the general agreement on the carriage of passengers extends to and is compulsory for all employers and employees engaged in the carriage of passengers by bus and coach for the purposes of the Public Transport Act, regardless of the type of contract concluded with them.
Work and rest time
- Equal treatment and equal opportunities
- Terms and conditions for temporary agency work
- Compensation of costs accompanying business trips
The employee must be compensated for expenses related to business trips (for example, vehicle costs and accommodation costs). If the conditions of employment applicable to the employment relationship do not specify whether the expenses incurred in the performance of duty are to be paid or in the case of payment, what part of it is paid to cover the actual costs of the posting and which part is the salary, all compensation for expenses incurred in the performance of duty are deemed to have been paid to cover actual costs arising from the posting.
In the event of the failure to comply with the conditions governing the payment for working time, rest time, remuneration, and compensation for overtime work of an employee posted to Estonia, the Labour Inspectorate has the right to assign a penalty of up to 300 fine units to a natural person and up to 3200 euros to a legal person (employer, a member of its management board or other representative, to whom the performance of the corresponding obligation had been delegated).
Short-term posting and exceptions in the applicable working conditions
As an exception, in the case of an up to eight-day posting if the posted employee is a skilled worker whose duty is the initial assembly or first installation of goods necessary for taking the ordered goods into use, if such work is an integral part of a subscription contract the following working conditions are not be applied:
- Wage and compensation for overtime work.
- Duration of annual holiday;
The aforementioned exception is not applicable if the work done by the posted employee is connected with construction work involving the construction, renovation, maintenance, alteration or demolition of buildings, including:
- Excavation work;
- Earthmoving work;
- Actual construction work;
- Assembly and demolition of prefabricated components;
- Connection or installation work,
- Modification, renovation, repair, disassembly, demolition, maintenance, painting and cleaning work;
- repair work.
When calculating the duration of a posting period of up to eight days, the periods of time worked by an employee or different employees posted to Estonia by the same employer to perform the same work in the year leading up to the commencement of the posting are taken into consideration. This means that in the aforementioned case, the periods of posting of the different posted workers are added together.
Employees posted to Estonia must also be registered with the Labor Inspectorate in the case of short-term postings.
Duration and extension of the posting
The employer must apply the working conditions prescribed in section 5 subsection 1 of the Working Conditions of Employees Posted to Estonia Act to an employee who has been posted to Estonia for a posting of up to 12 months. If the posting lasts for more than 12 months, the employer is required to guarantee the employee all working conditions in force in Estonia (except for the rights and obligations related to concluding and terminating the employment contract, including the restriction on competition that is valid following the termination of employment and occupational pension schemes). If the employer has replaced the posted worker with another posted worker performing the same duty in the same place, the duration of the postings of the employees is added up (e.g. if the first posted worker installed pipes on the site and left after eight months, and another posted worker took their place installing pipes on the same site, it is sensible to add up the durations of the two postings of the posted workers in Estonia. If the other employee works for more than four months, they are considered a long-term posted worker after the completion of four months and the other employee becomes subject to all Estonian employment law from the fifth month of their employment).
A 12-month period can be extended to 18 months. To obtain an extension, a reasoned notice must be submitted to the Labour Inspectorate in a form that can be reproduced in writing. The notice must be reasoned, i.e. it must be stated why the posted worker needs to remain in Estonia for more than 12 months. The request for an extension must be sent to the Labour Inspectorate’s e-mail address email@example.com
If the posting lasts for more than 18 months, all working conditions in force in Estonia must be applied to the employee (except for the rights and obligations related to concluding and terminating the employment contract, including the restriction on competition that is valid following the termination of employment and occupational pension schemes). If the long-term posted worker is a temporary agency worker, the user undertaking must inform the employer which working conditions shall apply to the employee after 12 or 18 months have passed.
It is important to note that the duration of the posting of employees posted to Estonia is not limited in any way. The posted worker may also remain in the country of destination as a posted worker for a longer period of time; however, in that case, all working conditions in force in Estonia must be applied to the employee. For example, if in the beginning of a posting a posted worker must be guaranteed the duration of annual leave in accordance with Estonian law then after 12 or 18 months the Estonian labour law will apply to him or her as well in regards to drawing up a holiday schedule and the expiration of a holiday.
In the case of posted workers who are staying in Estonia at the time of the entry into force (30 July 2020) of the new wording of the Working Conditions of Employees Posted to Estonia Act, this period will begin to be calculated from the day following the entry into force of the Working Conditions of Employees Posted to Estonia Act.
Working conditions when an employment contract is concluded directly with an employee from a third country
Remuneration paid upon registration of short-term employment
Remuneration for employees from third countries is regulated by the Aliens Act. An alien, whose short-term employment in Estonia has been registered, has to be paid a remuneration in the amount equal to at least the annual average gross monthly salary last published by Statistics Estonia. Data on the average annual gross salary in Estonia can be found on the webpage of Statistics Estonia.
Working conditions valid in Estonia
- Organisation of occupational health and safety in an enterprise
- Risk assessment
- Safety instructions
- Instruction and training
- Safety signs
- Medical examination
- Provider of first aid
- Working environment representatives
- Internal control
- Use of work equipment
- Personal safety equipment
- Occupational accident
- Occupational disease
Further information on the working conditions applicable to employees can be found in the Employment Contracts Act, the Occupational Health and Safety Act, explanations of the Ministry of Social Affairs to the Employment Contracts Act, and the Working Life Portal.
Terms and conditions for temporary agency work
Pursuant to the Equal Treatment Act, employees who perform duties by way of temporary agency work shall have equally favourable conditions of working and rest time and remuneration as well as access to the user undertaking’s catering, transportation, and childcare services.
An employer has various notification obligations in regard to temporary agency workers:
- The employer must inform the employee of the data specified in section 5 subsection 1 of the Employment Contracts Act, including duties and remuneration, while also reaching an agreement in writing with the employee regarding working conditions in special cases specified in section 6 of the Employment Contracts Act. Temporary agency work is considered one such special case. Therefore, the employee must be informed that the work is being performed as temporary agency work.
- Pursuant to section 6 subsection 5 of the Employment Contracts Act, the employer shall notify the employee that the duties are performed by way of temporary agency work in the user undertaking. If there is no written agreement, it is presumed that an agreement has not been entered into.
- Additionally, the employer is obligated to notify an employee who is performing duties by way of temporary agency work of vacant positions in the user undertaking corresponding to their knowledge and skills with regard to which an employment contract can be entered into for an unspecified term. If the user undertaking has notified the temporary employee of its vacancies, the employer is under no obligation to notify. For example, a temporary agency worker has entered into a fixed-term employment relationship with a user undertaking to work as a website administrator, and at the same time the user undertaking creates a website administrator job in its company, for which an open-ended employment contract is concluded. In the future, the employer is required to notify the temporary agency worker about this position. However, if the user undertaking has already informed the temporary agency worker in advance regarding this vacancy, the employer is not subject to a separate notification obligation.
- Pursuant to the Employees’ Trustee Act, the employer shall inform the company’s trustee of temporary agency workers if the changes and planned decisions significantly affect the structure of the employer and the staff. For example, the employer must provide information on how many temporary agency workers are working in the user undertaking and which positions they are occupying.
Entry into employment contracts for a specified term
An employer and an employee may enter into an employment contract for a specified term if it is justified by good reasons arising from the temporary fixed-term characteristics of the work, especially a temporary increase in work volume or performance of seasonal work. In the case of temporary agency work, an employment contract for a specified term may be entered into if it is associated with the temporary characteristics of the work in a user undertaking.
Therefore, a temporary agency worker can enter into a contract for a specified term with the employer in two instances:
- entry into a contract for a specified term is justified by good reasons arising from the temporary fixed-term characteristics of the employer’s work (for example, the employer requires a replacement or the volume or work has temporarily increased).
- entry into a contract of employment for a specified term is justified by reasons arising from the temporary nature of the user undertaking’s work (for example, the user undertaking needs an employee who performs duties as a temporary agency worker in place of another employee or needs additional labour in due to the user undertaking’s seasonal work).
Restriction on consecutive entry into and extension of employment contract for specified term
For the protection of employees, there are placed restrictions on the conditions under which an employer may consecutively enter into or extend an employment contract for a specified term with an employee. In the case of temporary agency work, the restriction on consecutive entry into or extension of an employment contract for a specified term is applied to every user undertaking separately. For example, if an employer enters into a fixed-term employment contract with a temporary agency worker to work for the same user undertaking more than twice, the employment contract is deemed to be an employment contract entered into for an unspecified term from the start. If the temporary agency worker performs work under employment contracts with a specified term at different user undertakings, then the restriction on consecutive entry into or extension of an employment contract for a specified term is applied to each user undertaking separately.
Submission of a notice on economic activities and the prohibition on charging a fee for intermediating a temporary agency worker
Two important basic principles are prescribed in the Labour Market Services and Benefits Act:
- An undertaking shall submit a notice of economic activities if the undertaking is engaged in job mediation and/or operates as an intermediator of temporary agency work. Thus, there must be an entry for an undertaking providing job mediation services or temporary agency work in the register of economic activities. If there is no entry, the undertaking is operating illegally.
- An undertaking engaged in job mediation shall not charge a fee for job mediation to a user undertaking from an employee for the performance of work tasks or for concluding an employment contract with a user undertaking.
The Labour Inspectorate exercises supervision over compliance with the aforementioned requirements. If the employer has failed to fulfil the registration obligation or the employer has demanded a fee from the temporary agency worker for their mediation, the Labour Inspectorate will initiate supervision proceedings against the employer.
The employer must ensure that the following working conditions are applied to the employee:
- Precontractual negotiations
- Entry into employment contract
- Employment contract for a specified term
- Probationary period
- Termination of employment contract
- Summarised working time
- Limit on time for performing work
- Overtime work
- Nighttime work
- Shortening of working time before national and public holidays
- On-call time
- Annual holiday
- Earning and using leave
- Annual holiday pay
- Interruption or postponement of the holiday
- Expiry of the holiday
Rules for the application of the social security system for people working in the European Union, the European Economic Area, and Switzerland
In order for a person to be able to freely choose their country of residence and employment in the European Union (EU), they must also be guaranteed the right to free medical care, sickness benefits, pensions, benefits for accidents at work and occupational diseases, unemployment benefits, and family benefits for their children.
It is not always possible to guarantee social protection to a migrant worker by applying the law of one country alone. Therefore, regulations have been adopted in the EU for the coordination of social security systems. These are found in Regulation (EC) No. 883/2004 of the European Parliament and of the Council and in implementing regulation (EC) No. 987/2009. The rules on how social security institutions determine which country’s social security applies to a person are set out in section II of the specified regulations.
The general rule is that employees moving within the European Economic Area (all EU Member States, Norway, Liechtenstein, Iceland, and Switzerland) as well as self-employed persons are subject to the social security scheme of only one Member State at a time. As a rule, this is the social security system of the country where the employee is working or is self-employed, regardless of the country in which the employee or self-employed person resides or in which country the employer is located.
However, in a situation in which a person is linked to more than one EU Member State due to employment or self-employment, it is necessary to determine which country’s social security applies to that person. Examples of these types of situations are the temporary posting of employees and simultaneous employment/operation in several countries. The decision as to which country’s social security and applicable laws apply to a person in such a situation is made by the social security authorities on the basis of the legislation in force and the person’s actual situation. When the decision is made on which country’s social security legislation applies, that country will issue the person an A1 certificate.
An A1 certificate (‘Certificate concerning the social security legislation which applies to the holder’) is a certificate issued by the European Commission, which allows a person who has been posted or who is working in more than one country to prove to the host country’s authorities that they are already covered by another country’s social security legislation. In other words, the holder of the certificate is not obliged to pay social security contributions in other countries; instead, all of their employers pay social security contributions in the country from which they were issued the A1 certificate, thus guaranteeing all social rights and benefits under the law of that country.
In case the employee is working in multiple countries, the A1 certificate must always be applied for from the country in which the employee resides and, in the case of posting, from the country from which the worker is to be posted.
Read more on the website of the Social Insurance Board.
If tax liability is created in Estonia (i.e. the person lacks a valid social security certificate in their home country or they spend at least 183 days in Estonia), the employee must apply for an Estonian personal identification code to be registered in the employment register.
For more information, see the instructions on the registration of employees on the website of the Tax and Customs Board.
The following information is based on the assumption of no permanent establishment.
Short-term (up to 183 days within 12 months) employment in Estonia:
- no income tax liability arises in Estonia, hence there is no obligation of deducting income tax from remuneration;
- employment must only be registered only if the following tax liability arises in Estonia:
- payment of social tax and unemployment insurance premiums and deduction of the employee’s unemployment insurance premium, except if the employee has been issued an A1 or E101 social insurance certificate (EEC member state, Switzerland) or a similar certificate (any country that is a party to an agreement on social security: Ukraine, Canada, Australia) that precludes the creation of social insurance tax liability on the remuneration in Estonia, thus also precluding a registration obligation;
- fulfilling the employer’s tax liabilities listed above requires the prior registration of the non-resident employer with the Tax and Customs Board (in addition to the registration of employment).
If no tax liability arises in Estonia (a social insurance certificate has been issued in the home country), no registration obligation will arise.
Long-term (at least 183 days within 12 months) employment in Estonia:
- fulfilling the employer’s tax liabilities requires the registration of the non-resident employer with the Tax and Customs Board;
- employment must be registered in the employment registry;
- an e-Tax Board agreement is signed;
- employer declares wages to Estonian Tax and Customs Board;
- income tax liability is created on employees’ remuneration; the employer deducts income tax;
- employer pays social tax and unemployment insurance premiums and deducts the employee’s unemployment insurance premium, except if the employee has been issued an A1 or E101 social insurance certificate (EEC member state, Switzerland) or a similar certificate (any country that is a party to an agreement on social security: Ukraine, Canada, Australia).
For more information, see the instructions on tax liability of non-resident employers on the website of the Tax and Customs Board.