Labour Market

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Labour Market
The Estonian labour market experienced significant change in the 1990s. The reason, on one hand, has been economic restructuring that created new types of employment. On the other hand, there have been changes in the demographic structure of the population.

Employment Legislation
The most important statues and rules regulating the activities of the labour market are the Constitution of Estonia, Conventions of International Organisation of Labour, Employment Contracts Act; Collective Agreements Act and other regulation of the ministries and Government of Estonia.

The new Employment Contracts Act took effect as of 1 July, 2009. The main purpose of the new legislation is to assure more flexibility in employment relations, lessen formalities and enable enterprises to react quickly to market situations while still providing employees with sufficient protection.  The new legislation aims to more efficiently take into account the needs and interests of the contracting parties.

The new Employment Contract Act is available at 
An employment contract must be concluded in writing including all the important conditions, in the absence of which, the contract is defective.  

According to § 5 (1) a written employment contract shall contain at least the following data:
1) the name, personal identification code or registry code, place of residence or seat of the employer and the employee;
2) the date of entry into the employment contract and commencement of work by the employee;
3) a description of duties;
4) the official title if this brings about legal consequences;
5) the agreed pay payable for the work (wages), including wages payable based on the economic performance and transactions, the manner of calculation, the procedure for payment and the time of falling due of wages (pay day), as well as taxes and payments payable and withheld by the employer;
6) other benefits if agreed upon;
7) the time when the employee performs the agreed duties (working time);
8) the place of performance of work;
9) the duration of holidays;
10) a reference to or the terms of advance notification of cancellation of the employment contract;
11) the rules of work organisation approved by the employer;
12) a reference to a collective agreement if a collective agreement is applicable to the employee.

An employment contract may be cancelled by a declaration of cancellation drawn up in a format which can be reproduced in writing.

Foreign citizens must apply for residency and work permits.  

More detailed information is available at (Administration of Police and Border Guard).

Working Time and Holidays
The presumed working time is 40 hours per seven days (full-time work) and 8 hours a day, unless the employer and the employee have agreed on less working time (part-time work).
An employee’s annual holidays are 28 calendar days.

The minimum wage in Estonia is EUR 290 per month and 1.80 EUR per hour. In 2011, the average monthly wage (gross) is EUR 849.

Payment for overtime
Upon compensation of overtime in money, an employer shall pay an employee wages exceeding the normal wages by 1.5 times. This can also be compensated with time off.

If the working time falls on a public holiday, employers shall pay wages for the work exceeding the normal wages by 2 times or by offering time off.

Age of retirement (for both men and women)

The following persons have the right to receive old-age pensions:
- permanent residents of Estonia;
- aliens residing in Estonia on the basis of temporary residence permits or temporary rights of residence.

Persons who have attained 63 years of age and whose pension-qualifying period in Estonia is 15 years have the right to receive old-age pensions.

On April 7, 2010, the Riigikogu (Estonian Parliament) adopted a law to amend the State Pension Insurance Act and related acts, which provides for a general pensionable age of 65.

Parental benefit
The Parental Benefit Act took effect on January 1, 2004. The new law helps parents to cope with the expenditures arising from the birth of child by paying benefits to the parent that has taken parental leave. Any parent, adoptive parent, step-parent, guardian or foster parent who is raising a child and who is a permanent resident of Estonia or a foreigner living in Estonia on the basis of a temporary residence permit has the right to parental benefits.  As of 1 September 2007, a child’s father has the right to parental benefits once the child is 70 days old.

The parental benefit is calculated on the basis of the income subject to social tax earned in the calendar year prior to the day on which the right to the benefit arose, but not less than EUR 290 per month. The upper limit of the amount of the parental benefit is three times the average salary from the year before last, which in 2011 is 2,157.03 euros.

The parental benefit is paid to the working mother after the maternity benefit ends, and the right to receive the parental benefit ends 575 days after the  first day of the pregnancy and maternity leaves.  Parental benefits for non-working parents begin when the child is born and continue for 18 months.

The right to parental leave continues until the child reaches the age of three years.

To apply for parental benefits, one must submit an application to the Social Insurance Board.

Benefits for temporary incapacity for work
Benefits for temporary incapacity for work include: sickness benefits, care allowances, maternity benefits, and adoption allowances.
Sickness benefits shall be paid to insured persons starting from the fourth day of the non-performance of their duties of employment. From the fourth to eighth day of the insured person’s illness, sickness benefits shall be paid by the employer that total 70% of the employee’s average wages. Starting from the ninth day of illness, the sickness benefit shall be paid by the Health Insurance Fund.

The maternity benefit is meant for working mothers and compensates 100% of the mother’s previous wage up to 140 days prior and after childbirth. Mothers who have difficult childbirths or have a multiple birth are given an additional 14 days of maternity benefits.  The maternity benefit, the care allowance and the adoption allowance are payable starting from the first day of the non-performance of the duties of employment.

In case of disease or injury, the insured person has the right to receive sickness benefits for not more than 182 consecutive calendar days.
The payment amount is based on previous earnings.

Social tax is paid by employers operating within Estonia on all payments in cash or in kind made to individuals at a rate of 33% of the total payments.

Unemployment insurance and benefit
Unemployment insurance is a compulsory insurance which provides benefits to employees upon unemployment, collective redundancy or the insolvency of employers. The unemployment insurance premium is 2.8% of wages and other income for employees and 1.4% on gross payroll for employers. If a person becomes unemployed, he or she should register with the Eesti Töötukassa (Estonian Unemployment Insurance Fund) in order to receive unemployment insurance benefits.

More information:
Statistical Office of Estonia:
Estonian Unemployment Insurance Fund:
Ministry of Social Affairs:
Estonian Law in English: 
Estonian Health Insurance Fund: 
Social Insurance Board: 
Administration of Police and Border Guard: