Payroll Services for Estonian OÜs

Complete Estonian payroll management — salary calculations, TSD declarations, employment register, social tax, income tax, unemployment insurance, II pillar pension — all filed through the EMTA e-Tax portal on time, every month.

TSD by 10th Social Tax 33% Income Tax 20% Töötamise Register Töölepinguseadus II Pillar Pension

33% Social Tax

20% Income Tax

1.6% Employee UI

0.8% Employer UI

10th TSD Deadline

€820 Min Wage 2024

Estonian Payroll — The Key Obligations

TSD Annex 1 must be filed by the 10th every month
Every month that salary or board member fees are paid, the OÜ must file TSD Annex 1 (the employee income and social tax declaration) with EMTA by the 10th of the following month and pay all taxes due. This applies from the first salary payment. No TSD = 0.06%/day interest on unpaid tax.

Employment register entry is mandatory before day one
Before a new employee’s first day at work, the OÜ must enter them in the töötamise register (employment register) via the EMTA e-Tax portal. This is not optional — and it must happen before work starts, not on the same day or after. Failure creates a fine up to €1,200 per employee.

Social tax adds 33% on top of gross salary
The employer pays sotsiaalmaks (social tax) at 33% of the employee’s gross salary as an additional cost. This is the single largest payroll tax. For a €2,000 gross salary, social tax is €660/month — making the total employer cost €2,676. Social tax funds health insurance and pension.

Employment contract is mandatory in writing
Under Töölepinguseadus §4, an employment contract (tööleping) must be concluded in writing before work begins. The contract must specify: start date, position, duties, working time, gross salary, holiday entitlement, and notice period. We review employment contracts as part of our payroll setup service.

28 days annual holiday — advance payment required
Every employee is entitled to at least 28 calendar days of annual leave per year (Töölepinguseadus §68). Holiday pay (puhkusetasu) must be paid at least one day before the leave begins, calculated at the employee’s average daily earnings. The calculation and advance payment is part of our payroll service.

II pillar pension contributions must be correctly handled
Most Estonian employees have joined the II pillar pension scheme (kogumispension). The employee contributes 2% of gross salary (withheld) and the state adds 4% funded from social tax. We verify each employee’s II pillar status and apply the correct withholding — an error here creates a correction obligation.

What payroll services does an Estonian OÜ need from the moment it hires its first employee? Employment contract review, employment register entry before day one, gross-to-net salary calculation each month, TSD Annex 1 filed by the 10th, all taxes paid by the 10th, payslip issued, holiday pay calculated and paid in advance, and termination handled correctly when the time comes. We provide all of this from €25/employee/month — or as part of our full accounting packages.

Section 1 — Estonian Salary Calculation

Gross to net — how every component is calculated

Gross to Net — Two Salary Examples

The table below shows every payroll component for two common gross salary levels in Estonia: €2,000 and €3,500. The basic tax exemption (maksuvaba tulu) of €654/month is applied for both (2024 rate). Rows highlighted in blue show the total employer cost and the net salary to employee.

Component	Gross Salary €2,000	Gross Salary €3,500	Who Pays / Legal Basis
Gross salary (brutopalke)	€2,000.00	€3,500.00	Employment contract amount — what employee earns
Employer social tax (sotsiaalmaks) 33%	€2,000 × 33% = €660.00	€3,500 × 33% = €1,155.00	Employer pays on top of gross — Sotsiaalmaksuseadus §2
Employer unemployment insurance (töötuskindlustus) 0.8%	€2,000 × 0.8% = €16.00	€3,500 × 0.8% = €28.00	Employer pays on top — Töötuskindlustuse seadus
Total employer cost	€2,000 + €660 + €16 = €2,676.00	€3,500 + €1,155 + €28 = €4,683.00	OÜ pays this amount per employee per month
Income tax withheld (tulumaks) 20%	(€2,000 − €654) × 20% = €269.20	(€3,500 − €654) × 20% = €569.20	Withheld from gross — Tulumaksuseadus §21
Employee unemployment insurance 1.6%	€2,000 × 1.6% = €32.00	€3,500 × 1.6% = €56.00	Withheld from gross — employee’s contribution
II pillar pension (kogumispension) 2%	€2,000 × 2% = €40.00	€3,500 × 2% = €70.00	Withheld if employee has joined II pillar (most have)
Net salary to employee (netopalke)	€2,000 − €269.20 − €32 − €40 = €1,658.80	€3,500 − €569.20 − €56 − €70 = €2,804.80	Bank transfer to employee on payday

Key Payroll Rates — 2024

Tax / Contribution	Rate	Paid By	What It Funds
Social tax (sotsiaalmaks)	33% of gross	Employer — on top of gross salary	20% state pension (I pillar) + 13% health insurance (Haigekassa)
Income tax (tulumaks)	20% of gross above basic exemption	Withheld from employee gross	General state budget — withheld by employer, remitted to EMTA
Employer unemployment insurance (töötuskindlustus)	0.8% of gross	Employer — on top of gross salary	Unemployment insurance fund
Employee unemployment insurance	1.6% of gross	Withheld from employee gross	Unemployment insurance fund — employee’s share
II pillar pension (kogumispension)	2% of gross	Withheld from employee gross	Employee’s personal pension fund account
Basic exemption (maksuvaba tulu)	€654/month (2024)	N/A — reduces taxable income	Applied against income tax base; reduces monthly income tax by €130.80

Section 2 — The TSD Declaration

Estonia’s monthly payroll and distribution tax declaration — all five annexes

TSD Structure — What Each Annex Covers

The TSD (tulu- ja sotsiaalmaksu ning kohustusliku kogumispensioni makse deklaratsioon) is filed through the EMTA e-Tax portal by the 10th of each month for the prior month. It is the primary declaration for employment income, board fees, dividends, fringe benefits, and non-resident payments. A separate line is filed for each employee.

TSD Element	What It Declares	Filed When	Rates / Notes
TSD Main Form	Header — identifies OÜ, period, total tax amounts owed	Monthly by 10th whenever salary/fees paid	Links Annexes 1–5; must balance to declared totals
TSD Annex 1	All employee salaries, board member fees, taxable benefits — line by line per recipient	Monthly by 10th when any employment income paid	Income tax 20%; social tax 33%; employer UI 0.8%; employee UI 1.6%; II pillar 2%
TSD Annex 2	Payments to non-resident individuals or companies	Monthly by 10th when non-resident payment made	WHT rates by income type; DTT reductions; residency certificate required
TSD Annex 3	Fringe benefits (erisoodustused) — private car use, gifts, meals	Monthly by 10th when fringe benefits provided	20% income tax + 33% social tax paid by OÜ on benefit value
TSD Annex 4	Dividend distribution tax declaration	Monthly by 10th of month after dividend payment	22/78 gross-up formula; 20% distribution tax or 14% reduced rate
TSD Annex 5	Payments to entities in low-tax territories	Monthly when such payments made	Anti-avoidance provisions under Tulumaksuseadus §49

What We Check Before Every TSD Submission

Salary amounts verified
Gross salary confirmed against employment contract; any mid-month changes, bonuses, or commission components verified with the OÜ owner before calculation.

Basic exemption applied correctly
Each employee’s basic exemption entitlement (€0–€654/month based on annual income) applied to their correct income tax calculation — wrong application creates over- or under-withholding.

II pillar status verified
Each employee’s II pillar participation status verified in Merit Aktiva and against EMTA data — contribution rates vary; non-participants excluded from the 2% deduction.

Social tax minimum checked
If gross salary is below the social tax minimum base, we verify whether top-up is required for health insurance eligibility.

TSD filed and confirmed
TSD submitted via EMTA e-Tax portal using our esindusõigus delegation. Submission confirmation retained. All taxes paid to EMTA by 10th deadline.

Section 3 — Employment Obligations

Everything required from the Töölepinguseadus — from hire to exit

Employer Obligation Reference — Hire to Exit

Estonian employment law under the Töölepinguseadus creates specific obligations at every stage of employment. The consequence column below is highlighted in red to make clear: these are not administrative niceties — each missed obligation carries a specific legal or financial consequence.

Obligation	When	Legal Basis	Consequence if Missed
Employment contract (tööleping)	Before or on first day of work	Töölepinguseadus §4 — written contract mandatory	No written contract = employee rights still apply; no penalty per se but creates disputes
Employment register entry (töötamise register)	Before first day of work — not on the day	Töölepinguseadus §21 — must be registered before work begins	Fine up to €1,200 per unregistered employee; employee has no social security coverage
TSD Annex 1 filed	10th of following month for each month salary was paid	Tulumaksuseadus; Sotsiaalmaksuseadus	0.06%/day interest on unpaid tax; late filing fine €200–1,200
Tax and social contributions paid	10th of following month	Sotsiaalmaksuseadus §9 — same deadline as TSD	0.06%/day interest from 11th on any shortfall
Payslip issued to employee	By payday each month	Töölepinguseadus §33(3)	Employee can demand; non-issuance creates liability
Holiday pay calculation and payment	Before employee takes leave	Töölepinguseadus §72 — advance calculation required	Incorrect holiday pay = underpayment liability; interest if disputed
Termination procedure (koondamine/vallandamine)	Notice periods and final pay per contract type	Töölepinguseadus §96–100 — minimum notice periods apply	Unlawful dismissal claim at Töövaidluskomisjon (Labour Dispute Committee)
Employment register exit update	On last day of employment	Töölepinguseadus §21 — must update register on exit	Fine; inaccurate register creates audit exposure

The Employment Register (Töötamise Register) — Critical Rules

The töötamise register is EMTA’s real-time database of all employment relationships in Estonia. It is visible to banks, social insurance, and EMTA auditors. The register must be updated before the employee’s first day of work — EMTA is explicit that same-day entry is not compliant. For termination, the register must be updated on the last day.

Register Action	Required By	How to Update	Common Error
New employee entry	Before first day of work — not on the day, not after	EMTA e-Tax portal → Töötamise register → Add employee; provide: name, ID, start date, job title, employment type	Entering on the first day of work instead of the day before — EMTA treats this as a late entry
Change in employment terms	Within 10 days of change taking effect	Update relevant fields: salary change, position change, working hours change	Not updating when employee’s role or salary changes materially
Employee exit	On the last working day	Update end date; enter exit reason (contract expired, resignation, dismissal)	Forgetting to update — ex-employee appears as still employed; creates social insurance and audit issues
Part-time or temporary employment	Before work begins — same rule as full-time	Specify hours and employment type; note if fixed-term	Not distinguishing fixed-term from open-ended — affects termination rules

Section 4 — Payroll Service Prices

Every payroll service with transparent pricing

All Payroll Services — Prices Excluding 22% VAT

Our payroll service is priced per employee per month for standalone payroll, or included in our full accounting packages. All prices below exclude 22% VAT. For clients on our Growth or Scale accounting packages, payroll is included.

Payroll Service	Starting Price	What Is Included
Monthly payroll (1 employee)	€30/employee/month	Gross-to-net calculation; TSD Annex 1; payslip; EMTA payment instruction; töötamise register maintenance
Monthly payroll (2–5 employees)	€25/employee/month	All of above per employee; employer cost summary; net salary bank transfer list
Monthly payroll (6–10 employees)	€20/employee/month	All of above; payroll register; employer cost report per department if needed
Monthly payroll (11+ employees)	Quoted on scope	High-volume; complex structures; bonuses; commission; partial-month calculations
Full accounting Growth package (≤ 3 employees)	€300/month total	Bookkeeping + KMD + TSD + payroll + annual report — all included
Full accounting Scale package (unlimited)	€500/month total	All services unlimited including payroll for any headcount
Employment register setup (new hire)	Included in payroll	Register entry before first day; contract review for TSD classification
Payroll setup for first employee	€100 one-time	Initial employment contract review; payroll parameters setup in Merit Aktiva; register entry
Holiday pay calculation (puhkusetasum )	Included in payroll	Average daily rate; days entitlement; advance payment processed correctly
Termination pay calculation	€80 one-time	Final pay; unused holiday; notice pay; register exit; final TSD Annex 1

Payroll Topic Guides

Explore each area of Estonian payroll in detail through the guides below

Payroll Outsourcing

Why Estonian OÜs outsource payroll — what we handle, how the monthly process works, what you provide to us, and the risk of handling payroll in-house without specialist knowledge.

Salary Calculation Estonia

Complete guide to gross-to-net salary calculations in Estonia — income tax with basic exemption, social tax 33%, unemployment insurance, II pillar pension, and how to calculate any gross salary amount.

Employee Taxes Estonia

Every employee-related tax in Estonia explained — social tax, income tax, unemployment insurance, II pillar pension contributions, the basic exemption, and how they interact in the TSD declaration.

Payroll for Startups

First-hire payroll guide for Estonian startups — employment contract requirements, töötamise register setup, first TSD, salary planning for founders and early employees, and stock option tax treatment.

Contractor vs Employee

The critical Estonian classification question — when a contractor relationship is reclassified as employment, the tax and legal consequences, what factors EMTA uses, and how to structure correctly.

Frequently Asked Questions

The total monthly employer cost for one employee at €2,000 gross salary is €2,676: the €2,000 gross salary, plus employer social tax of €660 (33% × €2,000), plus employer unemployment insurance of €16 (0.8% × €2,000). The employee receives a net salary of €1,658.80: gross €2,000 minus income tax of €269.20 (20% of €2,000 − €654 basic exemption), minus employee unemployment insurance of €32 (1.6%), minus II pillar pension of €40 (2%). All of this is declared on TSD Annex 1 by the 10th of the following month. Social tax (€660) plus employer UI (€16) plus income tax (€269.20) plus employee UI (€32) plus II pillar (€40) = total EMTA payments of €1,017.20 per month for one employee. This is filed and paid as a single TSD transaction.

Do I need to register an employee in the töötamise register before first day, or can I do it on the first day?
You must register the employee before their first day of work — not on the day, not the same morning. EMTA’s guidance is explicit: the töötamise register entry must exist before the employment begins. In practice, this means completing the register entry at least the day before the start date, ideally the moment the employment contract is signed. The consequence of same-day or late registration: a fine of up to €1,200 per employee, and during the unregistered period, the employee has no social insurance coverage — meaning if they were injured at work before being registered, the social insurance liability could fall on the employer personally. We handle the töötamise register entry as the first step in our new hire onboarding process.

A board member fee (juhatuse liige tasu) is treated identically to employment salary for EMTA tax purposes. The OÜ must: file TSD Annex 1 with income tax (20% above the basic exemption) and social tax (33% on the gross fee), and pay both by the 10th of the following month. The main difference from standard employment: a board member relationship does not require a tööleping (employment contract) — it is established by a juhatuse liige leping (board member agreement) or by the articles of association and a board resolution. The board member is not automatically entitled to Töölepinguseadus protections (holiday pay, minimum notice periods) unless the board member agreement explicitly grants these. However, the tax treatment in the TSD is the same. For the töötamise register: board members are registered separately from employees — use the ‘juhatuse liige’ category.

Employment contracts in Estonia can specify salary in a foreign currency, but the payment must be made in euros under the Töölepinguseadus unless the contract explicitly provides otherwise and the employee agrees. For TSD purposes, if the payment is made in a foreign currency, the amount is converted to euros at the exchange rate on the payment date for the purposes of calculating and declaring income tax and social tax. The gross salary for TSD purposes is the euro equivalent of the payment. Currency conversion differences are the employer’s risk — if the currency weakens, the EUR gross for TSD purposes may be lower than expected. We handle foreign currency payroll calculations as part of our payroll service.

Redundancy (koondamine) in Estonia is governed by Töölepinguseadus §89–100. The key requirements: (1) Notice period — minimum notice depends on the employee’s length of service (15 calendar days for under 1 year; 30 days for 1–5 years; 60 days for 5–10 years; 90 days for over 10 years); (2) Redundancy notification to the Töötukassa (Unemployment Insurance Fund) — required when making one or more redundancies; (3) Severance pay (koondamishüvitis) — one month’s average salary payable by the employer; the Töötukassa additionally pays up to two months’ average salary depending on length of service. (4) All accrued but unused holiday must be paid out in the final payslip at the average daily earnings rate. (5) Employment register must be updated on the last day. We prepare the final payroll calculation, the redundancy documentation, and the final TSD as part of our termination service (€80 one-time fee).

Need Estonian payroll managed professionally — TSD filed by the 10th, every month?

Book a free consultation. We calculate salaries, file TSD Annex 1, maintain the employment register, issue paysplips, and ensure every employee tax obligation is met — from first hire to termination.

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