Estonia
[Updated 4/13/24] The number one employee benefit people in Estonia care about is health insurance. This is supplementary to the national healthcare service, which can be subject to long waiting lists. When asked to rank three other common benefits in order of importance, Estonian employees are likely to say life, death, and disability.
Mandatory employee benefits in Estonia include a three-pillar pension system, legislative leaves, employment insurance, and dental care. Common supplementary employee benefits in Estonia include health insurance, voluntary benefits, and gym memberships. Common employee perks include additional vacation days and company cars.
Mandatory Employee Benefits in Estonia
Pension
Pension is a regular payment made in case of old age, incapacity for work, or loss of provider. The aim of the Estonian pension system is to help people maintain their standard of living and monthly income when they retire. The Estonian pension system stands on three pillars:
I pillar: State pension
II pillar: Mandatory funded pension
III pillar: Supplementary funded pension
I Pillar: State Pension
As the name says, the state pension is a pension paid by the state, the aim of which is to ensure regular monthly income for persons who have reached retirement age, have become incapable of work, or have lost their provider.
There are several different types of state pensions: old-age pension, pension for incapacity for work, survivor’s pension, national pension, and superannuated pension.
The first pillar is the state old-age pension, which is paid to a person who has reached the pensionable age and whose length of employment is at least 15 years.
The general pensionable age in Estonia is 63. The pensionable age for women was gradually increased to 63 by the year 2016. By the year 2026, the general pensionable age in Estonia will be 65.
The state pension is based on the principle of solidarity, which means that the pensions to today’s pensioners are paid from the taxes of people who are currently working. The state pension is paid by the state from the funds collected to the state budget from the social tax. The direct payer of the social tax is the employer, who withholds 33% of social tax from the salary of the employee, which the state then pays for health insurance and pensions.
II Pillar: Mandatory Funded Pension
The aim of the second pillar is to direct a part of the salary of the people who are working towards their personal pension so that people would have, in addition to the constantly financed state pension, an additional pension that they accrue themselves.
In the case of the mandatory funded pension, an employee pays 2% of their gross salary monthly to the pension fund they have selected, and the state adds 4% from the current social tax that the employee pays.
The money paid into the pension funds is managed by the fund management companies, which invest the pension contributions paid by the employees into different assets with the aim of increasing the value of the money contributed by the employees over the years.
- Subscribing to the funded pension is mandatory for persons who were born in 1983 and later.
In the case of the mandatory funded pension, when a person reaches retirement age (as a general rule), a contract has to be concluded with an insurance company. The insurance company undertakes the obligation to pay the person a pension, the sum of which depends on the volume of the assets accrued into the pension fund until the death of the person.
III Pillar: Supplementary Funded Pension
The third pillar, or the supplementary funded pension, was established with the aim of providing people with an opportunity to insure their retirement years even better.
There are two options for subscribing to the supplementary funded pension:
- conclude a pension insurance contract with a life insurance company or
- make contributions to the voluntary pension fund.
There are also two options for receiving payments:
- Payments on the basis of the insurance contract or
- Payments from the voluntary pension fund.
The sums of the contributions made to the supplementary funded pension can be determined by the person, and the amount of the contributions can be changed at any time. If the contributions to the supplementary funded pension are less than €6,000 or 15% of the gross income per year, no income tax is charged on the contributions.
Legislated Leaves
The duration of the annual vacation is 28 days; an extended vacation is granted in case of some professions, such as state officials and local government officials, teachers, academic, pedagogical, and scientific staff, and others. National holidays and public holidays are not included in the vacation duration calculations. An employee may be granted unpaid leave at his or her request for a period of time established by agreement of the parties.
- Maternity leave – A woman has the right to maternity leave of 100 calendar days, which becomes collectible at least 70 calendar days before the estimated date of birth. If a woman starts using maternity leave less than 70 days before the estimated date of birth, the maternity leave is shortened by the respective period. This means that the length of maternity leave will depend on when the mother goes on maternity leave. The maternity benefit is paid by the state.
- Parental leave – A mother or a father may be granted parental leave at her or his request to raise a child up to 3 years of age. The parental benefit is paid by the state. Together, the maternity benefit and the parental benefit are paid for a period of 475 days.
- Sickness – in case of sickness, the employee can be given up to 182 calendar days of paid sick leave (max 250 days per year). The gross wage during this period is 70% of his or her last year’s average salary. The employer pays the wage from the 4th to the 8th day of sickness, and the state starting the 9th day. Many higher percentile employers pay the sickness benefit starting from the 1st or second day of sickness.
Unemployment Insurance
Unemployment insurance is a compulsory insurance that is collected to pay benefits to employees in the event of unemployment. All employees pay 1.6% of their gross earnings, and employers pay 0.8% of the payroll for unemployment insurance. Unemployment insurance is withheld from the employee’s salary automatically. Persons who are old enough to receive an old-age pension do not have to pay unemployment insurance.
Unemployment insurance benefits are paid to legal residents of the EU. To receive an unemployment insurance benefit, unemployment insurance contributions must have been paid for at least 12 months of the previous 36 months.
A legal resident of the EU has the right to apply for unemployment insurance benefits from the country where he or she last worked and paid taxes. The time that a person has worked and paid unemployment insurance contributions in other EU countries is considered when deciding whether and how long he or she is entitled to receive the unemployment insurance benefit. The sum of the benefits paid by Estonia is calculated based on the wages earned in Estonia.
If a person does not meet the conditions to receive an unemployment insurance benefit, or if the person has exhausted their rights to a benefit, he/she may still qualify for the state unemployment allowance.
The unemployment allowance is paid to unemployed persons who:
- Do not qualify for the unemployment insurance benefit
- Actively look for work
- Have worked or finished full-time studies
- Have an income that is less than the allowance
The unemployment allowance €11.70 per day in 2024) is paid for a maximum period of 270 days.
Dental Care
Dental care is free for children under 19. However, free dental care is provided only by doctors who have concluded the contract for financing medical treatment with the Health Insurance Fund.
The Health Insurance Fund will reimburse dental care to adults with health insurance up to €60 per year. The patients themselves pay at least 50% of the price of the services.
All insured women who are pregnant or mothers of children under one year of age are eligible for dental care benefits of up to 105 euros per year, with the patient paying at least 12.5% of the treatment invoice.
Unemployed persons registered with the Unemployment Insurance Fund receive dental care benefits at an increased rate. The benefit is €105 per year, with the patient paying at least 12.5% of the treatment invoice.
Persons who have received subsistence allowance under the Social Welfare Act during the two calendar months preceding the month in which the service was received are eligible for the dental care benefit at the increased rate. The benefit is €105 per year, with the patient paying at least 12.5% of the treatment invoice.
Old-age pensioners and persons receiving pension for incapacity for work, people with partial or no capacity for work, and the elderly over the age of 63 are entitled to dental care benefits of €105 per year, with the patient paying at least 12.5% of the invoice.
Supplementary Employee Benefits
Healthcare
In Estonia, there are two types of healthcare systems: public and private. The public one is provided by the Estonian Health Insurance Fund (EHIF; Haigekassa in Estonian), which a person receives if they have an employment contract in Estonia and their employer is paying social taxes for them. The private one is different insurers offering private insurance for healthcare.
The Estonian health insurance system is a solidarity-based social insurance system. This means it provides healthcare for everyone. It is a solid healthcare system, and treatment is equally available in all regions.
Check out the materials made by the Estonian Health Insurance Fund and the Health Board for more details.
Voluntary Benefits
People not belonging to a group plan can sign a voluntary insurance contract with the Health Insurance Fund and pay the premium. Two conditions must be met to enter into a contract with the Health Insurance Fund.
The person must be a permanent resident of Estonia or a person residing in Estonia on the basis of a temporary residence permit or the right of residence. They must also have been insured for at least 12 months over a two-year period prior to signing the contract through:
- An employer
- State
- As a pupil or a student
- As a sole proprietor or their spouse participating in their activities
- As a notary, a sworn translator, or a bailiff registered with the Tax and Customs Board
The said insured persons may sign a voluntary insurance contract also to insure their dependents. A dependent must be a permanent resident of Estonia or a person residing in Estonia with a temporary residence permit or the right of residence.
The persons qualifying for the signature of the contract are those, who have paid social tax or for whom social tax has been paid during the preceding calendar year. Social tax must have been paid at least twelve times and calculated based on a minimum monthly rate of social tax. In 2024, the monthly rate on which the minimum social tax liability is based is €726, i.e. the minimum social tax liability for the employer is €239.25 euros per month.
Persons receiving a pension from a foreign country also qualify for the contract’s signature unless otherwise provided for by international agreements.
Gymnasiums
Very large employers can provide on-site facilities, whereas smaller employers may offer gym subsidies or access to a gym with lower corporate rates. Supporting employees’ health has always been popular. Perks can range from small things such as fruit in the office, but a large proportion of employers also pay for gym memberships and support employees who want to compete in athletic events such as marathons.
Workplace Canteens
This benefit is not common in Estonia; however, in highly competitive industries such as the technology industry, we are seeing an increase in catered lunches for employees. Large employers often have an on-site cafeteria with discounted food prices.
Employee Perks
There are not many perks Estonian employers offer. Western and financial/technical companies are usually more generous. More traditional and local companies generally understand that ‘salary is your benefit.’ The following perks some employers offer:
- Additional vacation days – The Typical holiday allowance is 28 days of paid holiday (mandatory by law). In the public sector, it’s typically 30-35 days. Any extra days would be considered a perk. Many companies offer extra days in the form of collective holidays when all the staff is away from the office and business is virtually closed down, such as during Christmas and summers.
- Company cars – These are typically offered to salespeople, and senior executives are offered for business and private use, but this is taxed. Employers also reimburse employees for the use of personal cars, and the reimbursement runs about €0.30 per kilometer (tax-free) but not more than €335 per month. If the reimbursement is more than €335, the overpaid part is taxed.
- Gym memberships – Supporting employees’ health has always been popular. Perks can range from small things such as fruit in the office, but a large proportion of employers also pay for gym memberships and support employees who want to compete in athletic events such as marathons.
- Health insurance – This is now offered by 7 insurers, and €400 per year per employee is not taxed by fringe benefits tax; it has become very popular in the market– There was a total of 1336 insurance contracts in the market in 2023, which is 10 times the number it was in 2019 (157). 8% of the total workforce had supplemental health insurance coverage. Health insurance usually covers in- and outpatient treatments, prophylactic checks, vision, and dental care. Massage and/or rehabilitation limits are also available, as well as some other extras.
- Telecommuting – It’s very popular to let employees work from home, especially employees who use a phone and laptop for their work.
- Personal Accident Insurance – This perk is getting more popular from our point of view. It usually covers death, disability, and traumas. It’s an inexpensive product to buy.
Related Government Websites
This information about mandatory and supplemental employee benefits in Estonia comes from Asinta’s Central and Eastern European Partner, the GrECo Group.