Hiring in Estonia

The contract sets out role, salary in EUR, working time, leave, notice and any restrictive covenants. The EOR is the counterparty to the employee, which is what removes the need for your own entity.

English or bilingual Estonian-English contracts are standard for international employers. The employee must be entered in the Employment Register before day one.

Fixed-term contracts are permitted only for temporary work, and repeated renewals can turn them into indefinite contracts by law, so most EORs default to indefinite terms.

Set probation from day one. It cannot be extended by agreement beyond 4 months, only by the days the employee was absent.

Some EORs shorten probation as policy because they, not you, carry the dismissal risk. Ask before you agree a start date.

Paid overtime is at 1.5 times the hourly wage, and total working time is capped at an average of 48 hours a week over the reference period.

The overtime rules apply to professional hires too, so there is no salary threshold that takes them out of scope. Put the position in writing either way.

The statutory floor is already generous, so market practice for professional roles rarely goes far beyond it. Budget on 28 calendar days.

Sick pay is split: days 1 to 3 are unpaid, the employer pays days 4 to 8 at 70% of average earnings, and the Health Insurance Fund pays from day 9. Maternity, paternity and parental benefits are state funded, so confirm the EOR is not billing you for them.

The employer may only terminate on grounds set out in the Employment Contracts Act. Redundancy compensation is statutory, and the Unemployment Insurance Fund adds further payments for long-serving employees.

The EOR runs the process as the legal employer and will want the paperwork in order, including final pay, unused leave and any contractual severance. Disputes go to the Labour Dispute Committee or the courts, so keep a documented reason.

Social tax funds state pension and health insurance, so private medical cover is a top-up rather than a necessity. Sports and wellbeing allowances are common perks for professional roles.

EORs often bundle benefits through a group scheme. Ask what is included in the fee and what is billed on top.

Employer contributions add 33.8% on top of gross salary. That is before the EOR fee.

Fringe benefits are the trap. Benefits in kind are taxed at the employer, with income tax and social tax on top, so a perk can cost around 70% more than its face value. Social tax is also due on a minimum monthly base, which bites on part-time hires.

Ask whether the EOR sponsors directly or refers to a partner. A partner-model or newly established EOR often cannot sponsor at all, and the salary floor, Unemployment Insurance Fund approval and annual quota apply to the sponsor, not to you.

Set start dates after approval, not before.

Get the data processing terms in the service agreement, not just the privacy notice. Transfers outside the EEA need an adequacy decision or standard contractual clauses.

Ask where payroll data is hosted and who in the partner chain can see it.

Incorporating a private limited company (OÜ) is quick and can be done online, but the running cost is the point: a local contact person if the board sits abroad, a legal address, accounting, annual reports, audit thresholds and payroll software set an annual floor.

Permanent establishment risk is about what people do, not where payroll sits. Revenue-generating activity can create exposure regardless of the employment route.