Estonian Employment Made Easy: Your Ultimate Guide to Hiring Success
Estonia has emerged as a prime destination for businesses seeking growth in Europe, thanks to its start-up-friendly environment. Successfully expanding in Estonia hinges on effective hiring and recruitment processes.
Recruiting in Estonia requires a solid understanding of employment matters, such as compliance with local laws, crafting employee contracts, and offering competitive salaries and benefits to attract top talent. Navigating the complexities of Estonian recruitment and employment may seem daunting, but Silva Hunt is here to help.
Explore our comprehensive guide, tailored for e-Resident businesses, to uncover crucial insights for hiring employees in Estonia and ensuring the success of your Estonian OÜ
1. Hiring Essentials: Legal Requirements for Employing in Estonia
Let’s start with the legal requirements of an employer. In order to hire employees in Estonia, you need to register your company with the Estonian Commercial Register and obtain a Tax ID number. You must also register as an employer with the Estonian Tax and Customs Board and familiarise yourself with Estonia’s employment laws and Employment Contracts Act, including minimum wage requirements and working hours.
2. Determining Competitive Salaries in Estonia
According to recent statistics, the average monthly gross salary in Estonia is 1,685€ (source: Statistics Estonia). Of course, salaries differ depending on the job role, but it is important to understand the averages. The TOP 20 categories with the highest salary include top management roles within Information Technology, Leasing, and Banking.
We have outlined a few examples below to give you an idea of various roles and the average gross monthly salary in Estonia:
IT Manager – 2,941€
Marketing Director – 3,066€
Sales Director – 3,326€
Office Manager – between 1,039€ – 1,821€
Secretary – between 818€ – 1,478€
If you are interested in finding out more about the average salaries for a particular position in Estonia and want to offer a competitive salary in the job market, click here.
3. Navigating Payroll and Taxes for Estonia-based Employees
As an employer in Estonia, you are responsible for deducting taxes and social security contributions from your employees’ salaries and paying them to the Estonian Tax and Customs Board. You must also provide your employees with payslips that show their gross and net salaries, deductions, and taxes paid.
When it comes to determining the salary for your employee, it depends on where your employee is a tax resident. If they are a tax resident in Germany, then German rules apply. However, assuming you are an e-Resident wishing to recruit staff for your company in Estonia then of course your new recruits will be Estonian tax residents. Tax payments vary from country to country. In Estonia for example, Estonian tax residents are liable to pay taxes for their entire salary including income tax and social tax (as well as other minor taxes). Online salary calculator Calkoo is a useful tool for both employers and employees. For employees, it is useful when creating salary structures as it clearly shows the employer contribution based on the gross wage, and for employees, it shows exactly how much money they will take home after tax has been deducted. Check it out here: https://www.calkoo.com/en/salary-calculator
Example of tax payments for an employee in Estonia
Using Calkoo, here is a quick example of tax payments for a gross salary of 1,000€ in 2023:
Total cost for the employer (Wage Fund): 1338€
Gross Salary/Wage: 1,000€
Social tax (paid by the employer): 330€
Unemployment insurance (paid by the employer): 8€
Unemployment insurance (paid by the employee): 16€
Funded pension (paid by the employee): 20€
Income tax: 62€
Net Salary/Wage: 902€
So based on the calculations above, the total employer contribution is 1,338€ with your employee taking home a total of 902€ with no further tax to be paid.
4. Employee Benefits: Retaining Top Talent in Estonia
Employers in Estonia are required by law to provide their employees with paid annual leave, sick leave, and where appropriate parental leave and study leave. It’s also becoming more common for employers to offer additional non-mandatory benefits, such as private healthcare, private pension plans, and flexible working arrangements. As an employer, you’ll need to understand how to properly enable these benefits for your employees, as they require them.
5. Creating Compliant Employment Contracts for Your Estonian Workforce
By law, as an employer, you must provide employees with an employment contract. The Employment Contracts Act in Estonia outlines the general conditions typically found in an employment contract. Acting as a legally binding agreement between the employer and employee that protects both parties, an employment contract outlines the terms and conditions of the role that the employee agrees to undertake. Sounds scary, right? Fear not, here at Silva Hunt we provide sample employment contracts to get you started in our monthly subscription. However, if you need personalised contracts for your specific needs, we are happy to dive into your case and write up a specific contract for you.
6. Registering Employees in Estonia: A Crucial Step in the Hiring Process
You are not done yet! It is your responsibility as an employer to register your new recruit in the Employment Register online with the Estonian Tax and Customs Board. This needs to be done on their first day working for you. Accessible via the e-Tax system, simply log in to your company’s profile with your e-residency card. Click here for more information.
Hiring employees in Estonia can be a straightforward process when you have the right guidance and support. Silva Hunt offers a comprehensive range of services to help you find and recruit the right talent, whether you’re looking locally or want to tap into an international talent pool. By leveraging our expertise, you can benefit from Estonia’s business-friendly environment and lack of bureaucracy, while tapping into an international pool of talent.