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Applicable law and working conditions

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 realisation of their constitutional right to conduct a business and contributing to the growth of the competitiveness of Estonian economy.

 
 

Working conditions

An employer must ensure that the following working conditions apply to workers from the Third countries

Further information on the working conditions applicable to employees can be found in the Employment Contracts Act, the Occupational Health and Safety Actexplanations of the Ministry of Social Affairs to the Employment Contracts Act (PDF), and the Working Life Portal.

 

An employer must ensure that the following working conditions apply to posted workers in Estonia:

 

 

 

NB! The minimum wage must also be guaranteed to posted road transport sector employees.

 

Important! Exception: The working conditions effective in Estonia are not applied in the case of an up to eight-day posting if the posted worker is a skilled worker whose duty is the initial assembly or first installation of goods necessary for taking the goods ordered into use, if such work is an integral part of a subscription contract. The derogation does not apply if the work done by the posted worker is connected with construction work involving the construction, renovation, maintenance, alteration or demolition of buildings, including excavation work, earthmoving work, actual construction work, or the assembly and demolition, connection and installation, modification, renovation, repair, disassembly, demolition, maintenance, painting, cleaning or repair of prefabricated components. The periods of time worked by another employee posted to Estonia by the same employer for the performance of the same work in the year leading up to the commencement of the posting are taken into consideration in the calculation of the up to eight-day posting period.

In the application of annual holiday, compensation paid in cash in connection with the posting is considered to be part of wages, unless it is paid to cover travel, accommodation or meal expenditures incurred during the course of the posting.

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 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) pursuant to section 91 of the Working Conditions of Employees Posted to Estonia Act.

 

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 monthsIf 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 posting@ti.ee

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 a posted worker must be guaranteed the duration of his or her annual leave from the beginning of his or her posting in accordance with Estonian law (section 5 subsection 1 point 4 of the Working Conditions of Employees Posted to Estonia Act), Estonian employment law will apply to him or her after 12 or 18 months.

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 valid in Estonia

Employment relationships

 

Working environment

Further information on the working conditions applicable to employees can be found in the Employment Contracts Act, the Occupational Health and Safety Actexplanations of the Ministry of Social Affairs to the Employment Contracts Act (PDF), and the Working Life Portal.

 

Taxes

Employee

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.

Employer

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.