Estonia employment compliance: a guide for employers

You have an employee in Estonia, and four or five pieces of legislation now decide what you owe them and when. Two places go wrong most often, and neither one looks dangerous where the mistake happens: annual leave is counted in calendar days, not working days, and the obligation to pay sick pay sits in the Occupational Health and Safety Act, not the Employment Contracts Act.

In Estonian statutes, a superscript number marks a section inserted into the law later: Occupational Health and Safety Act § 12² is not the same provision as § 122, and in some acts a genuine § 122 exists in the same range and covers something entirely different. Every superscript in this guide is written out in full, so you never have to work it out yourself.

This page is a map. Each section gives the rule, the figures you need by month-end, and a link to the full guide.

Start where you are. Planning the summer or running June payroll? Annual leave and holiday pay — start with the unit, because that is where day counting goes wrong. Did someone call in sick? Who pays which days. Building schedules or weighing a new flexible working time arrangement? Working time and rest. Hiring someone? The employment contract and its mandatory contents — along with what adds to the payroll cost. Need to end an employment relationship? Ending a contract and redundancy.

How many days of annual leave does an employee get, and when must holiday pay be paid?

28 calendar days, and holiday pay no later than the second-to-last working day before the leave starts. Both halves of that sentence go wrong in practice.

A calendar day means weekends fall inside the leave and are used up along with it (Employment Contracts Act § 55). A public holiday, by contrast, is not used up — it extends the leave without reducing the balance.

Two things carry most of the risk here. The payment deadline cannot be pushed back by agreement: an agreement to pay holiday pay later than the payday following the leave is void (Employment Contracts Act § 70(2)). And leave cannot be paid out in money while the employment relationship continues — that agreement is also void (Employment Contracts Act § 70(3)); paying money instead of leave only becomes an option once the contract ends.

Read more: Annual leave in Estonia: a guide for employers — the calendar-day trap worked through with numbers, extended entitlements, the average-wage formula, expiry, and the leave-schedule deadline.

Who pays for an employee’s sick days, and on which days?

Days 1–3 are unpaid, you pay days 4–8, and the Estonian Health Insurance Fund pays from day 9. Your obligation comes from the Occupational Health and Safety Act (§ 12²), not the Employment Contracts Act — this is the single most common mistake on this topic.

Three things go unnoticed. “Days 2–5” is out of date — that was a special scheme in force from 2020 to 2023, and it stopped applying on 1 July 2023; if payroll still calculates on that basis, it is calculating wrong. Count days from the start of the leave marked on the sick certificate, not from the moment the employee told you. And the payment deadline is its own rule: sick pay must be paid on the regular payday or within 30 calendar days (Occupational Health and Safety Act § 12²).

Read more: Sick pay in Estonia: who pays which days — day counting worked through with examples, care leave and workplace accidents, certificate submission deadlines, and the 2026 cap, which does not touch your days 4–8.

What are the limits on working time and rest periods?

40 hours per seven days and 8 hours a day (Employment Contracts Act § 43). Under averaged working time, an additional limit on the average applies, and that limit is absolute.

The flexible working time arrangement took effect on 13 February 2026 (Employment Contracts Act § 43³). It can only be agreed in writing, and only with an employee whose hourly wage is at least 1.2 times the minimum wage, and the agreement must contain the information the law lists. Separately, remember that attendance records must be kept regardless, and the underlying accounting records must be retained for seven years.

Read more: Working time and overtime in Estonia: a guide for employers — averaged working time, overtime limits, night work and standby time, the difference in rest periods between ordinary and averaged working time, and the flexible working time arrangement in full.

What must an employment contract include, and what adds to the payroll cost?

In writing, with the information the law lists (Employment Contracts Act § 5). The minimum wage from 1 April 2026 is 946 euros a month and 5.67 euros an hour (Government of the Republic regulation) — those figures come from the regulation, not the act itself, and the regulation is generally updated every year.

Two things catch employers out in Estonia. The entry in the employment register must be made before the person starts work — this is not an end-of-month task, it is a first-day one. And the type of contract does not depend on its title: if the relationship is genuinely one of subordination, it is an employment contract even if the document is labelled a service contract or a contract for services, and the risk of it being reclassified as such is yours to carry.

Read more: Employment contracts in Estonia: what they must contain — the list of mandatory information, the probation period, fixed-term contracts, where an employment contract ends and a service contract begins, and the full payroll tax cost on top of wages.

How do you end an employment contract lawfully?

You need a ground, and it has to be put in writing. Estonia has no concept of ending a contract without cause — you may only end a contract on a ground listed in the law (Employment Contracts Act § 85 ff.).

Two payments get confused most often. One month’s average wage is your obligation on redundancy. The Estonian Unemployment Insurance Fund’s benefit is separate, depends on the employee’s length of service, and you are the one who applies for it — the deadline is short, so this step tends to get forgotten. The other place employers slip up is protected groups: for a pregnant employee, an employee with a right to maternity leave, and an elected employee representative, ending the contract is restricted, and in a dispute the burden of proof is on you.

Read more: Ending an employment contract in Estonia — the grounds broken down, notice periods by length of service, extraordinary termination for breach, collective redundancy thresholds, and deadlines for challenging a termination.

How does Taito.ai help with this?

Understanding the rules above is the easy part. Keeping them right continuously, as headcount grows, is where it gets hard. The annual leave balance has to sit in calendar days, sick-certificate days 4–8 have to land on the right payroll line, attendance records have to exist even when nobody asks for them, and on redundancy the two separate payments have to go to two separate places.

Taito.ai is a people operations system where these rules get configured once: the time off policy counts in calendar days, attendance accrues on its own, and leave balances and employment records sit in one place at month-end instead of scattered across spreadsheets. The law stays your responsibility — the system exists so it never quietly drifts out of line.