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Hiring in Estonia
Background checks in Estonia
Hire employees in Estonia
Language spoken in Estonia
Corporate presence requirements and payroll setup in Estonia
Employer of record in Estonia
Hiring workers in Estonia typically requires establishing a local legal entity — a process that can be expensive and slow. This can present significant challenges for companies aiming for speed and agility. Another alternative is engaging independent contractors. While this may reduce setup time and costs, it carries a high risk of misclassification, which can lead to legal penalties and serious reputational damage.
There is a simpler solution: hire through an employer of record, or EoR.
What is an employer of record (EoR)?
An employer of record (EoR) is a third-party provider that becomes the legal employer of workers on your behalf, allowing you to hire and pay staff in Estonia without establishing a local legal entity. When you work with an employer of record in Estonia, the EoR handles onboarding, payroll, tax remittance, benefits, and local labour‑law compliance, while your company retains full control over the day‑to‑day management of your workers.
Using an employer of record in Estonia
Estonia is known for its digital-first infrastructure and business-friendly environment, making it ideal for efficient EoR engagements. Partnering with an EoR enables companies to hire swiftly and compliantly — without establishing a local subsidiary — while the EoR handles legal registrations, work permits, payroll, benefits, and reporting.
Hiring in Estonia with or without an employer of record
To successfully hire in Estonia — whether directly or via an EoR — employers need a solid understanding of local regulations. By educating yourself on the rules that apply, you’ll be able to ensure compliance and protect both you and your employees. We’ll take you through everything you need to know in this section.
Hiring in Estonia
Estonia is a Baltic state bordering Latvia and Russia, with major industries including trading, technology, and tourism. According to the World Economic Forum, Estonia is the number one entrepreneurial country in Europe, making it a popular destination for international business expansion and investments. Estonia’s economy performs strongly on indices like the Ease of Doing Business and Economic Freedom, with fast GDP growth.
Despite these benefits, employers hiring in Estonia need to grapple with various local labour laws, regulations and norms, which can be tricky to understand. We’ll go through some of the main things to be aware of in this section.
Labour laws in Estonia
Employers hiring in Estonia need to be aware of various labour laws that apply to their employees. The relationship between employers and employees in Estonia is largely governed by the Employment Contracts Act (Töölepinguseadus). Other important pieces of legislation that employers need to abide by include:- The Law of Obligations Act (Võlaõigusseadus).
- The Individual Labour Dispute Resolution Act (Individuaalse töövaidluse lahendamise seadus).
- The Occupational Health and Safety Act (Töötervishoiu ja tööohutuse seadus).
Employment contracts in Estonia
Estonian labour law requires employment contracts to be concluded in written form. Contracts must include certain details, including the employee’s working hours and salary, and the payment methods to be used. Full-time employees in Estonia work 40 hours per week, with overtime permitted within certain limits.Social security and tax compliance in Estonia
Employers hiring in Estonia are responsible for calculating and withholding all payroll taxes from their employees’ wages. Social security contributions in Estonia are largely borne by employers, with employees paying just a small percentage (3.6% as of 2025).Work permits and visas in Estonia
Workers from other EU member states are free to live and work in Estonia. However, those from third countries must obtain a visa. Employers hiring in Estonia must register any foreign employees with the Estonian Police and Border Guard.Background checks in Estonia
Employees in Estonia can conduct background checks on potential employees to verify information obtained during the recruitment process and confirm their suitability for a role. In some cases, certain types of background checks may also be mandatory. There are also certain limits that apply to background checks in Estonia, which employers must be aware of.
Required background checks in Estonia
Employers in Estonia are responsible for ensuring the people they employ have the correct visa or work permit to work and earn money in Estonia. For certain roles, such as those involving work with children, criminal record checks may also be mandatory.
Other permissible background checks in Estonia
Here are some other possible background checks in Estonia:
- Criminal records checks: Even when not required by law, employers may be able to perform criminal records checks in Estonia as long as they have a legitimate interest in doing so. This involves requesting a copy of the employee’s criminal record from the Estonian Criminal Records Database.
- Education and credentials checks: Employers in Estonia can also verify diplomas, licences and work experience by contacting the relevant educational institutions. This is a common type of background check in Estonia for roles requiring specific qualifications (e.g. finance, healthcare).
- Employment history and reference checks: Verifying a candidate’s employment history by contacting their past employers is a legitimate type of background check in Estonia. It allows employers to check information gathered during the recruitment process and gain insight into the employee’s skills and experience.
- Debt registry checks: In certain circumstances, employers in Estonia can perform a debt registry check on potential employees to verify their financial history. This is typically only possible for roles in regulated industries or involving significant financial responsibility.
- Social media checks: Employers in Estonia can access publicly visible information on potential employees’ social media profiles to verify their suitability for a role. However, the candidate must be informed before such a check is carried out.
Limitations on background checks in Estonia
Employers in Estonia must ensure that any background checks they carry out are compliant with the General Data Protection Regulation (GDPR) and local data protection legislation. This typically means obtaining consent from the candidate and ensuring that there’s a valid legal basis for performing the check. It’s important to note that consent is usually not counted as a valid legal basis in the employment context due to the inherent imbalance of power in the relationship.
Hire employees in Estonia
Before you hire employees in Estonia, it’s important to be sure that this is really the best engagement structure for your specific business needs. For example, if you need a worker to work on a time-limited project that’s external to your company’s main activity, it may make more sense to engage an independent contractor instead. We will go into the differences between the different hiring options in Estonia below.
Main hiring options in Estonia
Here are the main options for organisations wanting to engage workers in Estonia:
- Employee: Employees in Estonia can be engaged on an indefinite, fixed-term, full-time, or part-time basis. Part-time and fixed-term employees are entitled to the same treatment as their permanent or full-time counterparts unless there are objective reasons for treating them differently. Under Estonian labour law, employment contracts must be concluded in writing.
Employees are granted various protections under labour laws, including the Law of Obligations Act and the Occupational Health and Safety Act. - Independent contractor: Independent contractors in Estonia are people who provide services for businesses but are not employees. They may be engaged directly as sole proprietors or through a legal entity such as a limited liability company. In Estonia, independent contractors are responsible for regulating their own working time and are not entitled to the full protections granted to employees under Estonian labour law. However, they may still have some entitlements such as sick pay and pensions.
- Agency worker: Temporary agency work is also recognised in Estonia. It involves a business leasing out workers to other organisations to work under their direction and supervision. Under Estonian labour laws, temporary agency workers have certain rights, such as the right to equal treatment with permanent employees performing the same work. As the workers’ official employer, the agency (and not the client company) is responsible for the payment of wages, taxes, and social security contributions.
The risk of employee misclassification in Estonia
Employers in Estonia can face significant fines and penalties for misclassifying employees as independent contractors. In worker misclassification cases, the key factor is not the contract in place, but the actual facts of the working relationship. For example, a worker may be judged to be an employee if they work under the control and supervision of the employer and are integrated into its organisational structure.
Language spoken in Estonia
The main language spoken in Estonia is Estonian, which is also the country’s official language. The largest minority language is Russian. Others include Vöro, Seto, Swedish, German, Ukrainian and Polish. The main foreign languages spoken in Estonia are Russian and English.
Language requirements for employment documents in Estonia
There are no statutory language requirements for employment documents in Estonia. It’s possible to conclude an employment agreement in English or another language, as long as both parties understand. However, in the event of a legal dispute, courts may request official translations into Estonian.Language requirements for Estonian visas and work permits
There are no language requirements for EU citizens wanting to live and work in Estonia, since they are free to do so without a visa. However, learning at least some Estonian may be helpful in securing employment. While first-time applicants of the temporary residence permit (TRP) do not need to show any language proficiency, those extending their TRP need to prove they have at least A2-level proficiency in Estonian according to the Central European Framework for Languages (CEFR). Some categories of employees are exempt. Applicants for the long-term residence permit must have at least B1-level proficiency.English language in Estonia
English is fairly widely spoken in Estonia, with around 84% of the population having at least a passive command of the language. Around 53% of ethnic Estonians speak English fluently. According to the EF English Proficiency Index, Estonia is ranked 20th out of 116 countries in the world (17th in Europe) for English language proficiency. English is most commonly spoken in the capital, Tallinn.Corporate presence requirements and payroll setup in Estonia
It is technically possible for foreign companies to engage employees in Estonia, but there are certain legal, business, and tax considerations to keep in mind. In practice, hiring in Estonia often involves setting up a local entity or working with an employer of record (EoR).
Steps to set up payroll in Estonia
Setting up payroll in Estonia involves various registration requirements. Here are the basic steps to follow:
- Register with the Estonian Commercial Register: Both local entities and branches of foreign companies are required to register with the Estonian Commercial Register. They will be automatically registered as tax withholding agents as part of this process.
- Register with the Tax and Customs Board: A company hiring in Estonia without a permanent establishment there must register as a non-resident employer with the Tax and Customs Board. This allows them to withhold and pay taxes on their Estonian employees’ income.
- Register employees with the Estonian Employment Register: Each new employee must be registered with the Estonian Employment Register, which is administered by the Tax and Customs Board. Employers must complete this registration before the employee starts work. It can be done electronically.
- Register for e-tax: Employers in Estonia must also register for the electronic tax filing system, e-Tax. This allows them to withhold and pay tax payments to the relevant authorities. Non-resident companies can name a representative to operate their e-Tax account on their behalf.
Do you need a local bank account to run payroll in Estonia?
There is no specific requirement to open a local bank account to run payroll or make payments to employees or local authorities in Estonia. However, doing so might make things easier from an administrative perspective.
Easily hire employees in Estonia with our EoR solution
Hiring employees in Estonia usually means setting up a legal entity, which can be costly and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.
Through our EoR solution, you can confidently hire employees in Estonia, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.
Compliantly hire workers anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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