Salary Calculation in Estonia
Complete guide to Estonian gross-to-net salary calculations – income tax with the fixed basic exemption applicable from 2026, employer and employee social tax, unemployment insurance, II pillar pension contributions, partial-month proration, and worked examples at every salary level.
Estonian Salary Calculation – The Components
The gross salary (brutopalke) is the amount stated in the employment contract. It is the starting point for all calculations. From this gross, employee-side deductions are withheld (income tax, employee UI, II pillar) to arrive at the net salary the employee receives in their bank account.
The employer pays social tax (sotsiaalmaks) at 33% of gross and employer unemployment insurance at 0.8% of gross as additional costs on top of the gross salary. These are not deducted from the employee’s pay – they are extra costs for the OÜ. For a €2,000 gross salary, the OÜ spends €2,676 in total.
Income tax is withheld at 22% after deducting applicable employee unemployment insurance and mandatory funded pension contributions and the basic exemption applied on the basis of the employee’s written application. The employer withholds this amount from the employee’s gross and remits it to EMTA. The employee never receives or handles this tax – it is deducted before the net payment.
The employee’s II pillar contribution may be 2%, 4% or 6%, depending on the registered contribution rate. The state additionally contributes 4% from the pension-insurance component of social tax. Employees who have opted out pay no II pillar contribution.
Both employer (0.8%) and employee (1.6%) pay unemployment insurance contributions. The employee’s 1.6% is withheld from gross; the employer’s 0.8% is an additional cost on top of gross. Both are declared on TSD Annex 1. These fund the Töötukassa (Unemployment Insurance Fund) for redundancy payments.
Net salary (netopalke) = Gross − Income tax − Employee UI (1.6%) − II pillar (2%). This is the actual bank transfer amount. For a €2,000 gross salary with a €700 basic exemption and a 2% II pillar rate: income tax is (€2,000 − €32 − €40 − €700) × 22% = €270.16, and net salary is €1,657.84.
The gross-to-net formula: Assuming a 2% II pillar rate: Net = Gross − employee UI − II pillar contribution − [(Gross − employee UI − II pillar contribution − applicable basic exemption) × 22%]. The employer additionally pays 33% social tax and 0.8% employer UI on top of the gross, making the total employer cost = Gross × 1.338. For a €2,000 gross salary: total employer cost = €2,000 × 1.338 = €2,676.
Section 1 – Worked Calculation Examples
Step-by-step gross-to-net at three common salary levels
Example 1 – Minimum Wage €946/month from 1 April 2026
Gross Salary: €946/month – Full Basic Exemption Applies
Employee-side deductions (withheld from gross):
Basic exemption: €700.00/month
Taxable income: €946 − €15.14 employee UI − €18.92 II pillar − €700 basic exemption = €211.94
Income tax (22%): €211.94 × 22% = €46.63
Employee UI (1.6%): €946 × 1.6% = €15.14
II pillar pension (2%): €946 × 2.0% = €18.92
Total deductions: €46.63 + €15.14 + €18.92 = €80.69
Net salary to employee: €946 − €15.14 − €18.92 − €46.63 = €865.31
Employer costs (on top of gross, not deducted from employee):
Employer social tax (33%): €946 × 33% = €312.18
Employer UI (0.8%): €946 × 0.8% = €7.57
Total employer cost: €946 + €312.18 + €7.57 = €1,265.75/month
EMTA payment (TSD Annex 1 by 10th):
Income tax: €46.63
Social tax: €312.18
Employer UI: €7.57
Employee UI: €15.14
II pillar (transferred to fund): €18.92
Total to EMTA/funds: €400.44/month
* Minimum wage ensures Haigekassa health insurance coverage
* The 2026 monthly base for the minimum social tax liability is €886, giving a minimum social tax liability of €292.38 where the minimum obligation applies. It is not the same as the €946 minimum wage.
Example 2 – Mid-level Salary €2,000/month
Gross Salary: €2,000/month – Full Basic Exemption Applies
Employee-side deductions:
Basic exemption: €700.00/month
Taxable income: €2,000 − €32 employee UI − €40 II pillar − €700 basic exemption = €1,228.00
Income tax (22%): €1,228.00 × 22% = €270.16
Employee UI (1.6%): €2,000 × 1.6% = €32.00
II pillar pension (2%): €2,000 × 2.0% = €40.00
Total deductions: €270.16 + €32.00 + €40.00 = €342.16
Net salary to employee: €2,000 − €270.16 − €32.00 − €40.00 = €1,657.84
Employer costs:
Employer social tax (33%): €2,000 × 33% = €660.00
Employer UI (0.8%): €2,000 × 0.8% = €16.00
Total employer cost: €2,000 + €660 + €16 = €2,676.00/month
EMTA/fund payments (TSD by 10th):
Income tax €270.16 + social tax €660.00 + employer UI €16.00 + employee UI €32.00 + II pillar €40.00 = €1,018.16/month
* Employee keeps approximately 82.9% of gross (€1,657.84 ÷ €2,000) under these assumptions
* Employer pays 33.8% more than gross (€2,676 ÷ €2,000 = 1.338×)
Example 3 – Senior Salary €4,000/month
Gross Salary: €4,000/month
Employee-side deductions:
Basic exemption: €700
Taxable income: €4,000 − €64 employee UI − €80 II pillar − €700 basic exemption = €3,156.00
Income tax (22%): €3,156.00 × 22% = €694.32
Employee UI (1.6%): €4,000 × 1.6% = €64.00
II pillar pension (2%): €4,000 × 2.0% = €80.00
Total deductions: €694.32 + €64.00 + €80.00 = €838.32
Net salary to employee: €4,000 − €64 − €80 − €694.32 = €3,161.68
Employer costs:
Employer social tax (33%): €4,000 × 33% = €1,320.00
Employer UI (0.8%): €4,000 × 0.8% = €32.00
Total employer cost: €4,000 + €1,320 + €32 = €5,352.00/month
Employee keeps 79.0% of gross at €4,000 level (€3,161.68 ÷ €4,000)
Employer pays 33.8% more than gross (same multiplier – 1.338×)
* The 1.338× employer cost multiplier is constant regardless of salary level
* From 2026, the general €700 monthly basic exemption no longer decreases as income increases.
Section 2 – Quick Reference Salary Table
All key figures from €946 to €6,000 gross
Gross-to-Net Reference – 11 Salary Levels
The table below shows the complete payroll calculation at 11 gross salary levels from minimum wage to senior professional. The net salary column is highlighted in green. Row for minimum wage (€946) is highlighted in blue. All figures assume II pillar participation (2% employee contribution) and the €700 monthly basic exemption applied.
| Gross Salary | Employer Social Tax 33% | Employer UI 0.8% | Income Tax 22% (after employee UI 1.6%, II pillar 2% and €700 monthly basic exemption) | Employee UI 1.6% | II Pillar 2% | Net Salary to Employee |
|---|---|---|---|---|---|---|
| €946.00 | €312.18 | €7.57 | €46.63 | €15.14 | €18.92 | €865.31 |
| €1000.00 | €330.00 | €8.00 | €58.08 | €16.00 | €20.00 | €905.92 |
| €1200.00 | €396.00 | €9.60 | €100.50 | €19.20 | €24.00 | €1056.30 |
| €1500.00 | €495.00 | €12.00 | €164.12 | €24.00 | €30.00 | €1281.88 |
| €2000.00 | €660.00 | €16.00 | €270.16 | €32.00 | €40.00 | €1657.84 |
| €2500.00 | €825.00 | €20.00 | €376.20 | €40.00 | €50.00 | €2033.80 |
| €3000.00 | €990.00 | €24.00 | €482.24 | €48.00 | €60.00 | €2409.76 |
| €3500.00 | €1155.00 | €28.00 | €588.28 | €56.00 | €70.00 | €2785.72 |
| €4000.00 | €1320.00 | €32.00 | €694.32 | €64.00 | €80.00 | €3161.68 |
| €5000.00 | €1650.00 | €40.00 | €906.40 | €80.00 | €100.00 | €3913.60 |
| €6000.00 | €1980.00 | €48.00 | €1118.48 | €96.00 | €120.00 | €4665.52 |
Section 3 – Holiday Pay Calculation
Holiday pay is calculated under the statutory average-wage rules where an average wage calculation is required. If the employee has received an unchanged fixed monthly wage during the relevant period, an average-wage recalculation may not be required.
How Holiday Pay (Puhkusetasu) Is Calculated
Holiday pay is governed by §70 of the Employment Contracts Act and calculated according to the statutory procedure for calculating average wages. This is different from simply paying a regular salary for holiday days. The calculation uses the employee’s average daily gross earnings from the preceding reference period, multiplied by the number of calendar days of holiday.
Holiday pay must generally be paid no later than the penultimate calendar working day before the holiday begins, unless the employer and employee agree otherwise. Payment cannot be postponed beyond the payday following the holiday. Failure to pay in advance is a violation of the Töölepinguseadus and can be raised as a labour dispute. The holiday pay is subject to income tax, social tax, UI, and II pillar contributions in the same way as regular salary.
| Calculation Step | Formula | Example (variable wages averaging €2,000/month) | Notes |
|---|---|---|---|
| Determine reference period | Six calendar months preceding the month in which the need to calculate holiday pay arises. | Leave starts 13 July 2026; calculation reference month is July; reference period is January–June 2026. | Example below assumes variable wages, all reference-period wages already due, and no excluded absences. For unchanged fixed wages, continue the fixed wage instead of calculating an average. |
| Calculate total gross earnings in reference period | Wages earned in the reference period that have become due, including relevant bonuses and commission. | Variable gross wages earned in January–June 2026 total €12,000 (average €2,000/month). | Exclude holiday pay, sickness benefits and other payments that are not wages for work. Allocate bonuses to the period for which they were earned. |
| Count calendar days in reference period | Calendar days less national/public holidays and other days excluded by the average-wage rules. | January–June 2026: 181 calendar days − 8 national/public holidays = 173 days, assuming no other exclusions. | Exclude national/public holidays even when they fall on a weekend; account separately for other statutory exclusions. |
| Average daily rate (keskmise päevapalga) | Eligible reference-period wages ÷ eligible calendar days. | €12,000 ÷ 173 = approximately €69.364162/calendar day. | Retain calculation precision before rounding the final holiday-pay amount to cents. |
| Holiday pay amount | Average daily rate × paid annual-leave calendar days, excluding national/public holidays. | 14 days of leave, 13–26 July 2026: €12,000 ÷ 173 × 14 = €971.10 gross. | Must generally be paid no later than the penultimate calendar working day before leave begins, unless otherwise agreed within the statutory limit. |
| Tax treatment | Holiday pay treated as regular salary – same IT, UI, II pillar deductions. | €971.10 is gross holiday pay; calculate withholding together with other payments in the same calendar month, applying the monthly basic exemption only once. | Social tax also due on holiday pay at 33% employer cost |
Partial Month – When an Employee Starts or Leaves Mid-Month
For an employee on a monthly salary who works only part of a month, remuneration should generally be calculated according to the applicable working-time norm, for example by calendar working days or actual working hours, not simply by all calendar days in the month. The formula: Monthly gross salary ÷ applicable calendar working days or working hours in the month × calendar working days or hours actually worked, depending on the applicable working-time arrangement.
Partial Month Calculation – Employee Starts 15 March
March 2026 has 22 calendar working days. The employee starts on 15 March and works 13 working days in the month.
Gross salary (full month): €2,000
Prorated gross for March: €2,000 ÷ 22 × 13 = €1,181.82
Calculate tax on prorated gross €1,181.82:
Basic exemption applied: €700.00/month (per the employee’s written application)
Employee UI (1.6%): €1,181.82 × 1.6% = €18.91
II pillar (2%): €1,181.82 × 2% = €23.64
Taxable income: €1,181.82 − €18.91 − €23.64 − €700.00 = €439.27
Income tax (22%): €439.27 × 22% = €96.64
Net salary to employee: €1,181.82 − €18.91 − €23.64 − €96.64 = €1,042.63
Employer costs on partial gross:
Social tax (33%): €1,181.82 × 33% = €390.00
Employer UI (0.8%): €1,181.82 × 0.8% = €9.45
Total employer cost for partial month: €1,181.82 + €390.00 + €9.45 = €1,581.27
* For a monthly-paid employee, partial-month remuneration is generally determined by the applicable working days or working hours, not by all calendar days.
* The same method applies when an employee exits mid-month