Estonia

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KEY DEVELOPMENTS FOR 2025

Changes Related to Sick Leave

In May 2024, various amendments to existing labour legislation came into force in connection with sick leave. Under the amended legislation, employers are now able to pay voluntary additional sickness allowance in addition to the statutory sickness allowance received by the employee. Previously, the state was able to claw back the statutory allowance where employees also received any taxable remuneration simultaneously, but now employers can compensate the difference between the statutory sickness allowance and the total average salary that the employer would normally receive if they were not on leave for temporary incapacity to work, in addition to the statutory allowance. In addition, an employer and employee now have the right to agree that the employee can, where their health allows, work to a limited extent whilst on sick leave. Employees may start to work when more than 60 consecutive calendar days have passed from the first date of sickness leave up to 182 consecutive days of sickness leave being the maximum. The salary paid during this period cannot be less than 50% of the employee’s usual salary. The employee also retains the right to state paid sickness allowance. 

Employers should take these amendments into account when designing their employee benefit systems to provide additional support to employees who are on long-term sick leave and ensure that they receive the correct level of remuneration during their absence. Any existing sickness absence policies and/or employee handbook should be updated to reflect these changes accordingly.

Time Spent Changing Into and Out of Work Clothes is to be Regarded as Paid Working Time

In November 2024, the Estonian Supreme Court passed a decision according to which the time spent by the employee for changing into and out of the work clothes is to be regarded as paid working time. This remained a grey area under Estonian law and practice, and it was quite common for employers to not consider this time to be part of the employee’s working hours. However, the court found that, where the employee is obliged to use special clothing for work (e.g., as protective wear), cannot take such clothes home and must change at the workplace, then the time it takes for the employee to change their clothes is regarded as working time. If the time for changing clothes falls outside agreed working hours, it should be deemed as overtime subject to compensation.

This interpretation given by the court has raised many questions, but so far it is unclear when and how the labour supervisory authority would start to monitor and enforce the new interpretation or whether there are any plans to change the law. In any case, employers should remain up to date with any relevant guidelines produced by the labour supervisory authority and any relevant legislative initiatives. They are also advised to review their work schedules and adapt these to ensure that time periods needed for change of clothes can be included in agreed working hours and would not cause extra overtime. Thought should also be given to any potential financial liability the employer may face should any claims for unpaid overtime be brought retrospectively against the employer by any current or former employees within the three-year limitation period.

Streamlined Work Visa Application Process

The process of applying for an Estonian work visa has been significantly streamlined for 2025 to reduce barriers faced by foreign professionals who are wanting to work in Estonia. One of the key changes introduced is the establishment of the Digital Nomad Visa, which allows remote workers to live and work in Estonia for up to one year, provided they meet specific requirements including:

1. earning a monthly salary of at least €4,500;
2. holding a valid health insurance policy; and
3. submitting proof of legitimate remote work.

This additional visa option is expected to be beneficial to employers in widening the pool of applicants for remote-based roles and will assist in filling existing gaps in the labour market, as well as helping to reduce delays experienced by candidates in obtaining a working visa. Employers should familiarise themselves with the updates made to the working visa process and update any policies accordingly.

KEY DEVELOPMENTS FOR 2024

Whistleblowing

The EU Directive No. 2019/1937 on Whistleblowing unfortunately has still not been implemented into the national legislation, even though the date for implementation was 17 December 2021. While the Estonian Government has approved the draft law regarding whistleblower protection again on 24 August 2023, and planned to implement the directive by 1 January 2024, no further steps have been taken by the Government. Therefore, the future of implementing the whistleblowing directive in Estonia still remains uncertain. The infringement proceedings against Estonia initiated by the European Commission are still in progress in the Court of Justice, and currently the European Commission is claiming a fine of €600 for each day of delay in adopting the directive. Estonia has however contested the amount of the fine. Meanwhile, due to a lack of information, some of the entities operating in Estonia have independently begun to establish the required reporting channels.

Focus on Occupational Health

Occupational health service providers have expanded the variety and the scope of services on offer. In addition to the mandatory occupational health checks of employees, employers must also organise the provision of a wider occupational health service at the workplace and involve the occupational health service provider to assess the overall status of the occupational environment. This assessment should be arranged regularly according to necessity (but at least once per three years).

In addition, as working remotely or performing work tasks in a hybrid format remains widely practiced in Estonia, the employer’s obligations regarding occupational health and safety in case of remote work have remained as relatively relaxed as they were the previous year. Therefore, the only way employers will be liable for breach of occupational health and safety requirements at the employee’s remote workplace is if it can be proven that the employer did not fulfil all obligations arising from the law related to remote work. Special attention is being given to mental health issues and occupational diseases also include health issues related to workplace stress and other psychosocial causes. Therefore, employers need to pay more attention to psychosocial hazards at the workplace, often by assessing relevant risks and hazards in the workplace.

Marriage Equality

As of 1 January 2024, marriage equality applies in Estonia, enabling the marriage of two people of any sex. This will also entail amendments in the Employment Contracts Act, where the wording of clauses regarding different types of child leave will be updated to accommodate the change, and therefore, the terms “mother” and “father” will, where applicable, be substituted with the more corresponsive term, “parent”. In addition, the Employment Contracts Act has been amended by also referencing the registered partners.

KEY DEVELOPMENTS FOR 2023

Whistleblowing

The whistleblowing directive still has not been implemented into the national legislation, even though the date to implement the directive was 17 December 2021. The Estonian Government planned to implement it by 1 June 2022, but failed to do so. After the first reading on 26 January 2022, around 300 amendments were proposed. No further information regarding the process or dates has been given; however, it is still planned for the entities to establish the reporting channels by 17 December 2023.

The fact that the process has been stalled for almost a year, and nothing has been done, is a problem. As the obligation to establish the reporting channels is getting closer and closer, the obligated subjects’ confusion and fear that the law will be adopted too late is growing as it shortens their time to create and prepare their internal channels. Additionally, the European Commission has already initiated infringement proceedings against Estonia and there are many unanswered questions and ambiguity in the draft law.

Employers should monitor the draft law and its progress, but should already start creating an action plan about the ways to establish the channels, think about the people responsible for the channels and also draw up the rules as the employers most likely won’t have a lot of time to do so after the directive has been implemented.

Economy

Similarly to most other countries, the economic situation in Estonia is not the best right now and most likely will not change for the better in 2023. This includes high inflation, mostly due to war in Ukraine. This has caused a lot of uncertainty for people, especially in regards to their salary and job. Recently, there have been many lay-offs, including collective redundancies. This is due to high energy prices, inflation and reduced demand, which have become fatal for some companies.

These lay-offs can especially be seen in the processing industry, more specifically in the timber industry, and the problems are reaching the construction sectors as well. Economic conditions like decreases in orders, delivery difficulties, and difficult access to materials have complicated the activities of the processing industry sector. At the same time, however, the skilled labor shortage in many sectors remains significant.

In 2023, amendments to the Unemployment Insurance Act will enter into force, which are related to the economic state of the country. With this amendment, the length of the unemployment insurance benefit depends on how the Estonian economy and labor market are doing. Currently, the benefit payment period depends only on the length of service of the insured person, but the new system should offer stronger protection during economic downturns and recession.

Flexibility

Since COVID-19, more attention has been paid to flexible working arrangements and the recent amendments in employment law also reflect that. More flexible conditions make it possible to increase employment, increase tax revenue and improve Estonia’s international competitiveness.

Recently the employer’s obligations with regard to occupational health and safety in case of remote work have been relaxed a bit considering that the employer has no control over the employee’s home environment and can only instruct the employee on safe working methods and practices. There soon will be in force more flexible rules for on-call time of employees in the field of information and communication and a possibility to agree on more flexible working hours with employees with independent decision-making competence. Also employers will have the opportunity to enter into an unlimited number of short-term fixed-term employment contracts with persons registered as unemployed without such agreements turning into unfixed-term contracts, which in return should grant more people labor protection.

Employers should use those amendments to their advantage as these can be beneficial for both the employee and the employer. Employers should also monitor any new amendments in employment law, which will help them make the working environment more flexible.

KEY DEVELOPMENTS FOR 2022

Improvements to Rights of Parents and Carers

The EU Directive 2019/1158 of the European Parliament and of the Council on work-life balance for parents and carers has been implemented into national legislation.  Certain regulations were expected into force in April 2022 and others in September 2022.

Work-life balance policies should contribute to the achievement of gender equality by promoting the participation of women in the labour market, the equal sharing of caring responsibilities between men and women, and the closing of gender gaps in earnings and pay.

The impact of amendments to the Employment Contracts Act as a result of EU Directive 2019/1158 are summarised as follows:

1. Parents and carers will have the right to request flexible working arrangements, such as part-time work, flexible working schedules and teleworking.

2. Parents and carers will have certain protections in the event of cancellation of their employment contract.

3. All parents having children under 14 years of age will have the right to receive child leave for ten working days for each child (a total of 20 working days for both parents).

Employers should consider and respond to requests for flexible working arrangements within a reasonable period of time, taking into account the needs of both the employer and the worker. Employers must provide reasons for any refusal of such a request or for any postponement of such arrangements in accordance with these new legal obligations.

Implementation of New EU Whistleblowing Legislation

The EU Directive 2019/1937 of the European Parliament and of the Council on the protection of persons who report breaches of Union law will be implemented into national legislation. Persons who work for a public or private organisation or are in contact with such an organisation in the context of their work-related activities are often the first to know about threats or harm to the public interest which arise in that context. By reporting breaches of Union law that are harmful to the public interest, such persons act as ‘whistleblowers’ and thereby play a key role in exposing and preventing such breaches. However, potential whistleblowers are often discouraged from reporting their concerns or suspicions for fear of retaliation as there is no effective protection provided for whistleblowers in many Member States. EU Directive 2019/1937 implements standard minimum protections to whistleblowers across Member States.

EU Directive 2019/1937 should assist in providing effective whistleblower protection for individuals across Member States and ensure that relevant institutions take appropriate action to prohibit any form of retaliation against whistleblowers (for example suspension, lay-off or equivalent measures).

Employers should establish reporting channels (internal reporting channels and external reporting channels) and internal procedures to comply with the new legal requirements. In addition, employers should ensure that any whistleblowing reports are processed correctly and in accordance with the GDPR.

KEY DEVELOPMENTS FOR 2021

Remote Work and Related Issues

There are still a number of unresolved issues related to remote work. It is still not entirely clear what expenses must be covered by the employer in case of remote work and whether the parties are free to agree on sharing liability related to health and safety while working remotely. Remote work from abroad also raises tax‑related issues.

Vaccination of Employees

There is an ongoing debate as to whether the employers can terminate the employment contracts of employees who refuse to be vaccinated. There are opinions that the employer should have such right in case if the risk analysis of the work environment shows that there are no other means for sufficiently protecting the health of personnel and clients (e.g., in hospitals, care homes).

Flexible Working Time

Existing employment laws do not allow agreement upon flexible working time ‑ under the law the employers and the employees need to agree upon the exact number of working hours per day, week, or month. Exceeding such agreement means working overtime, whereas working less obliges the employer to pay average salary for such time. A pilot project was due to enter into force on 1 July 2021 to enable employers in retail businesses to hire a certain number of employees with flexible working hours, i.e., only part of the working hours would need to be fixed and the employer would have the right to apply additional hours based on the company's needs for which regular salary (not overtime fee) would be paid. The aim of such regulation is to decrease the number of civil law contracts in that industry and encourage the companies to conclude which do not provide the employees protection of the employment laws.