Payroll Services for Estonian OÜs

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). Assuming a 2% II pillar contribution and €700 basic exemption, the employee receives approximately €1,657.84 net.: gross €2,000 minus income tax (22% of €2,000 − €700 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 plus employee UI (€32) plus II pillar (€40) = Assuming a 2% II pillar contribution and €700 basic exemption, total payroll-related EMTA liabilities are €1,018.16: €660 social tax + €16 employer unemployment insurance + €270.16 income tax + €32 employee unemployment insurance + €40 funded pension contribution. 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 no later than the moment they start work. Registration on the same morning is permitted if it is completed before the employee actually begins working. 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: Late or missing registration may result in statutory enforcement measures or penalties and may create social-security compliance issues; do not state a universal €1,200 fine or automatic absence of all 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.

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) Notification and consultation obligations involving Töötukassa apply in cases of collective redundancies meeting the statutory thresholds; they are not automatically triggered by every individual redundancy.; (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 (€110 one-time fee).