Setting up and managing payroll in Estonia
Estonia’s convenient location in Europe, EU membership, and fast-growing economy all contribute to it being a desirable country to grow a business.
If your organization is interested in expanding into Estonia, one of the initial steps will probably be establishing an official entity in the country, setting up a payroll system, and hiring employees. Unfortunately, this can regularly take longer than expected, with complex administrative procedures and unique business laws that can stall progress.
A popular solution to this difficulty is to outsource the Estonia payroll setup and management to a global PEO. At New Horizons, our team specializes in helping organizations expand into Estonia as smoothly as possible. We’ll handle your payroll setup and management, whether or not you already have an established presence in the country.
If you have an entity
If your organization already has an entity registered in Estonia, then we can help you by setting up and managing your in-country payroll. We’ll ensure everything is in full compliance with Estonian legislation and ready to go as quickly as possible, so you don’t have to worry about the complex details and can focus on your expansion.
If you don’t have an entity
If your organization has yet to register an entity in Estonia, then we can provide a comprehensive service to get you up and running in the country. We’ll use our subsidiary in Estonia to act as employer of record for your hires so you don’t have to go through the complex process of establishing an entity.
Additionally, we will set up and manage your Estonia payroll, handle HR, compliance, and any other associated work to make your expansion simpler and low risk.
The simplest way to expand your business in Estonia
Estonia payroll guide
What are the withholdings and tax regulations in Estonia?
Employers in Estonia must contribute a percentage of salary toward employee benefit schemes. 20% must be contributed to pensions, and 13% to health insurance, totaling 33% on top of salary.
There is also an unemployment insurance scheme, to which employers must contribute 0.8% of salary, and employees must contribute 1.6%.
The income tax rate in Estonia is 20%. The corporate tax rate in Estonia is generally 20%, but this rate can vary in some circumstances.
Employee entitlements and terminations
The standard notice period prior to termination for employees in Estonia is between 15 and 90 days, depending on how long they have been with their employer.
Upon redundancy, employees are entitled to a severance payment of one month of salary. For employees who have worked for between five and ten years, this payment is increased by one month of salary (covered by unemployment insurance), and if they have more than ten years of service then they receive two extra months.
Probation periods in Estonia have a limit of four months.
How to establish payroll in Estonia
One option for your payroll in Estonia payroll is to establish it internally. This can be a viable choice for larger organizations looking to build a long-term presence in the country, but it can also be very expensive and can cause significant delays to expansion.
New Horizons can help you to avoid this lengthy process, providing comprehensive payroll setup and management outsourcing in Estonia. Beyond this, our experts will handle your in-country HR, compliance, and tax, and we can even act as your employer of record if you don’t have an entity in the country. Outsourcing to New Horizons can save you time, effort, and money, setting you up for a successful expansion into Estonia.