Employ Candidates Compliantly in Estonia

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  1. Overview: Estonia
  2. Global HR Compliance
  3. Global PEO and payroll
  4. Work permit for hiring expats via PEO
  5. Expand without a company set up
  6. Contractor vs. employee: which is better?
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Global HR Compliance in Estonia

If you hire an international workforce, or plan to hire, then Hiring and Firing Workforce in Estonia Guide below will help you understand the nuances of labor legislation in the country.

When the company is planning to enter a new foreign market of Estonia and has a need to employ a local national there, the first question to answer is how it is going to make local hires.

We have designed a Global Employer of Record service to help you outsource global employment of your foreign workforce to companies like ours.

This solution helps you employ your global sales force in Estonia as well as in other 180+ countries of the world, and provide pay and benefits to your employees, as well as administer any business expenses with our help.

Our solution is different from other hiring modes in that it helps you engage your foreign workforce in full compliance with the local labor legislation. This means you are protected from any non-compliance and employee misclassification risks while we bear all employment risks, not you.

So, it looks very much like hiring your in-house sales force in your home country. However, you focus on only on your global business development while we admin your global HR. In addition, you don’t need to open your own entities in the foreign countries and can leverage our infrastructure in Estonia instead. With our service, you can become a global company with reduced costs and minimized time and effort on your end.

Your employed foreign sales force will devote 100% of their time to your company product and may stay with you longer than foreign independent sales reps.

Global Employer of Record solution is 100% compliant solution that guarantees you and your employees fully compliance with local legislation in Estonia .

We are experts in global workforce employment in Estonia, and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Estonia.

See Hiring and Firing Workforce in Estonia Guide below for a general overview of labor rules and regulations in the country. Or contact us if you need to employ workers in Estonia or would like to get more details.

Hiring and Firing Workforce in Estonia Guide

# Employment Agreements

Legislation provides for collective agreements at three levels – national, industry and company/organization. In practice the most important level is company or organizational level bargaining, although there have also been a number of important national agreements.

Permanent employment contracts 

A written document of an employment contract shall contain at least the following data:

  • The name, personal identification code or registry code, place of residence or seat of the employer and the employee
  • The date of entry into the employment contract and commencement of work by the employee
  • A description of duties
  • The official title if this brings about a legal consequence
  • The agreed remuneration payable for the work (wages), including remuneration payable based on the economic performance and transactions, and the manner of calculation, the procedure for payment and the time of falling due of wages (pay day), also taxes and payments payable and withheld by the employer
  • Other benefits if agreed upon
  • The time when the employee performs the agreed duties (working time)
  • The place of performance of work
  • The duration of holiday
  • A reference to the terms for advance notice of cancellation of the employment contract or the terms for advance notice of cancellation of the employment contract
  • A reference to the rules of work organization established by the employer
  • A reference to a collective agreement if a collective agreement is applicable with regard to the employee

Fixed-term contracts 

An employment contract may be entered into for a specified term of up to five years 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. If duties are performed by way of temporary agency work, an employment contract may be entered into for a specified term also if it is justified by the temporary characteristics of the work in a user undertaking.

# Employment Termination and Severance Pay (Dismissal)

On employee will 

An employee may cancel an employment contract extraordinarily due to a fundamental breach of the employer’s obligation, in particular if:

  • The employer has degraded the employee or threatened to do so or allowed the employee’s colleagues or third parties to do so.
  • The employer has considerably delayed with payment of wages.
  • Continuance of work is related to a real threat to the employee’s life, health, morals or good name.

An employee may cancel an employment contract extraordinarily due to a reason arising from the employee, in particular if the employee’s state of health or family duties do not allow him or her to perform the agreed work and the employer does not provide him or her with suitable work.

An employee may cancel an employment contract only within a reasonable time after he or she learnt or should have learnt of the circumstance serving as the basis for the cancellation

Employer decision

In order to terminate employment, employers must have suitable grounds. These can be either related to the employee’s conduct or capabilities (e.g. gross misconduct, breach of the employment contract, poor performance or permanent incapacity to work due to illness), or to economic, organizational or technological reasons of the company (e.g. a decrease in the volume of work, organizational changes or financial position of the company). The reason for dismissal must be given to the employee in writing or a format that can be reproduced in writing (e.g., by email or letter).

Employers must also observe the appropriate period of notice. The general rule is that an employer can only terminate employment without notice if the employee is guilty of gross misconduct

Mutual agreement

Termination of the employment contract can be done by mutual agreement. The parties are entirely free to agree termination on any grounds they desire. Where the parties agree to terminate the employment, they are not required to obtain the courts’ or regulatory body’s approval before the termination is effective.

# Notice period

The amount of notice that an employer must give to an employee depends on the period of employment. If the employee has worked for:

  • Less than one year, the employer must give a minimum of 15 calendar days’ notice.
  • One to five years, the employer must give a minimum of 30 calendar days’ notice.
  • Five to ten years, the employer must give a minimum of 60 calendar days’ notice.
  • Ten year or more the employer must give the employee a minimum of 90 calendar days; notice.

Employees who wish to terminate the employment contract must give the employer a minimum of 30 calendar days’ notice. 
Employment contracts may be cancelled during the probationary period by giving no less than 15 calendar days’ notice. An employee does not have to notify the employer of extraordinary cancellation if, considering any and all circumstances and mutual interests, it cannot be reasonably demanded that the performance of the contract be continued until the expiry of the agreed term or term of advance notice.

# Severance payments

Upon terminating an employment contract due to a lay-off, an employer shall pay an employee compensation of one month’s average wages. An employee also has the right to receive an insurance benefit under the Unemployment Insurance Act.

Upon terminating a fixed-term employment contract for economic reasons, an employer shall pay employees compensation equal to the salary due for the remainder of the contract.

No compensation is paid if the employment contract is terminated due to force majeure.

If an employee terminates the employment contract extraordinarily because the employer has committed a fundamental breach of the contract, the employer shall pay the employee compensation of three months’ average wages. A court or a labor dispute committee may change the amount of the compensation, taking into account the reasons for the termination and the interests of the parties.

If an employer or an employee gives advance notice of termination later than provided for by law or a collective agreement, the employee or the employer has the right to receive compensation to the extent to which they would have had the right to obtain upon the term of advance notice.

# Employee Benefits and Contributions

Annual leave, sick leave, public holidays entitlement, maternity, paternity and parental leave, mandatory pay of employer pension, health insurance and unemployment insurance.

# Probationary period

If an employment contract does not specify a probation period, it shall be regarded as entered into without a probation period. The probation period may not exceed four months. In a fixed-term employment contract, the trial period cannot be longer than half of the contract term.

# Overtime

In general, overtime must be agreed upon by the employee and employer.  Overtime hours cannot exceed a total of 8 hours within a 7-day period.

# Work hours

A full-time employee works 40 hours per week (which is deemed to be seven days), unless the employer and the employee have agreed that the employee will be a part-time worker. It is presumed that the employee works 8 hours a day.

# Annual Leave

Employees are entitled to 28 calendar days of holiday per year. The employee and employer can agree to a longer period of annual holiday or a longer period can be provided by law.

# Sick Leave

In case of sickness, the employee can be given up to 182 calendar days of paid sick leave (max 250 days per year). The gross wage during this period is 70% of his or her last years` average salary. The employer pays the wage from the 4th to 8th day of sickness and the state starting the 9th day.

# Parental Leave

Maternity rights

A woman is granted 140 days pregnancy and maternity leave, which may commence at least 70 days before the estimated birth date of the child. The maternity benefit is paid by the state.

Parental leave 

A mother or a father shall be granted parental leave at her or his request for raising a child of up to 3 years of age. The parental benefit is paid by the state. Together the maternity benefit and the parental benefit are paid for a period of 575 days.

Acumen International can help you fast-track your possibilities of entering and expanding your business in Estonia by providing you with our Employer of Record services. Our unique mix of PEO/EOR solutions will enable you to jumpstart your global operations almost immediately, cost-effectively and compliantly without any need to set up a legal entity first or afterwards.

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