What Are Employee Benefits?
Employee benefits are added compensations employees get on top of their base salary. These additional perks can be of different forms and types, providing a range of tangible and intangible compensation to employees.
Some of the most common employee benefits include financial and retirement benefits, health and wellness benefits, work-life balance benefits, overtime pay, and leave benefits. Financial and retirement benefits may include employer-sponsored retirement plans (401(k) plans), pension plans, and stock options. Health and wellness benefits typically offer health insurance, dental, and vision coverage.
Employee benefits and compensation may include cell phone plans, company-paid insurance, and employee discounts. Some employers also offer disability benefits to employees who sustain an injury or are sick and cannot work. However, these are temporary and provide income support until the employee is fit to resume work.
Compensation Laws in Estonia
The Employment Contracts Act primarily governs the compensation and benefits policy in Estonia. Other legislations governing work relations are the Individual Labor Dispute Resolution Act, the Law of Obligations Act, and the Occupational Health and Safety Act.
Here are some of the benefits guaranteed under the Estonian Employment Contracts Act:
- As per the employee compensation and benefits policy in Estonia, full-time employees draw a minimum monthly wage of €725 (as of 2023).
- According to Section 43 of the Employment Contracts Act, full-time employees in Estonia work 8 hours per day and 40 hours per week.
- Employees in Estonia are entitled to 1.5 times their wages as compensation for overtime work, as outlined in Section 44 of the Employment Contracts Act.
- According to Employment Contracts Act Section 55, employees are get 28 days of paid annual leaves.
- An employee is eligible for 30 days of study leave per the Adult Education Act.
- Pregnancy and maternity leaves and paternity leaves are governed by Sections 59 and 60 of the Employment Contracts Act, respectively.
How to Design Your Employee Benefits Program for Employees in Estonia
Employers must ensure that an employee benefit program covers all important elements of the compensation structure in Estonia and caters to the unique needs and priorities of the organization.
While designing employee compensation policy in Estonia, employers must consider the following factors to strategize better.
Step 1: Setting objectives for benefits plan
- Start preparing the employee benefits plan by jolting down the objectives from the compensation package.
- Get an approved budget while preparing for the objectives.
Step 2: Research industry and employee demographics
- A benefits package helps to retain and attract top talents from the market. Employers must conduct thorough research to understand what benefits competitors are providing.
- Employers designing compensation package in Estonia must consider their employees’ demographics, which includes age, gender, and family status, to design a flexible benefits plan.
- In addition, consider the company and industry size while preparing for compensation and benefits in Estonia.
Step 3: Deciding on benefits
- Employers designing employee compensation and benefits in Estonia must offer competitive and relevant benefits.
- While traditional benefits (health insurance and retirement plans) are imperative, benefits relevant to contemporary times, such as work-from-home allowances and flexible schedules, are also essential.
- Apart from offering competitive benefits, opportunities for career advancement and professional development can help employers retain top talent.
Step 4: Showing draft to stakeholders and employees
- Once decided on the compensation package in Estonia, show the draft to stakeholders for feedback.
- Companies can also discuss the same with employees to get their valuable feedback. It helps employers create a company culture that values and supports employees.
Types of Guaranteed Benefits in Estonia
Employees are entitled to certain mandatory benefits per the compensation and benefits policy in Estonia. Below is a list of the mandatory benefits included in the employee compensation package in Estonia:
Legislated leaves
- Annual vacation: Employees in Estonia are entitled to an annual paid leave of 28 days. Extended leave benefits in Estonia are available for certain employees, such as government and state officials, teachers, academics, and research staff.
- Sick leave: Employees get a maximum of 182 calendar days of paid sick leave until they are fit enough to resume work. During this time, employers must pay a gross wage that’s 70% of the employee’s last year’s average salary.
- Maternity leave: Female employees get 140 days of paid pregnancy and maternity leave, starting at least 70 days before the estimated delivery date.
- Paternity leave: Fathers are entitled to a paternity leave of 10 working days (total) during the two months before the estimated delivery date and during the two months after childbirth.
- Child leave: Both parents can request ten working days of paid child leave (20 working days) until the child turns 14. The leave can be extended to 30 days per calendar year for more than two children. Foster parents and legal guardians are also entitled to this leave, effective April 1, 2022.
Pension system
Employee benefits in Estonia include a three-pillar pension system:
- State pension: The state pays the state pension.
- Mandatory funded pension: The mandatory funded pension adds to the state pension and is contributed by the employee (2% of their gross salary) and the state (4% of the employee-paid current social tax).
- Supplementary funded pension: Two options are available for the supplementary funded pension: concluding a pension insurance contract with a life insurance company or contributing to the voluntary pension fund.
Employment insurance
- Mandatory employee compensation and benefits in Estonia cover unemployment insurance, contributed by both the employee and employer.
- This insurance pays benefits to employees in the event of unemployment.
- While employees pay 1.6% of their gross salary, employers contribute 0.8% of the payroll towards unemployment insurance.
Dental care
- Employers must provide dental care as one of the mandatory employee benefits in Estonia.
Employee Benefits for Expatriates
All employees working in Estonia, whether domestic or foreign, are entitled to the same guaranteed employee benefits. These include paid leaves, a three-pillar pension system, and employment insurance.
In addition, expatriates may also be entitled to supplemental benefits such as health insurance, life insurance, and gym memberships, depending on the industry, company size, and budget.
How Are Employee Benefits Taxed in Estonia?
Employee benefits in Estonia are subject to 20/80 corporate income tax and 33% social tax. Supplemental health and sports benefits in Estonia are non-taxable, up to a maximum of €100 per employee per quarter.
Benefits that add to tax payment by an employer include:
- House expense
- Insurance premium
- Monetary claim wavering
- Formal or informal education cost (not related to employer’s business)
- Birthday presents
- Catering
Restrictions for Estonia Benefits and Compensation
A company can only provide employee compensation and benefits in Estonia if it has a registered entity. However, setting up a subsidiary in Estonia can take several months.
Moreover, violating employment laws in Estonia may invite hefty fines, as specified in the Employment Contracts Act and the Employees’ Trustee Act. These laws outline the fundamental rights and responsibilities of employers and employees, including provisions on working hours, minimum wage, annual leave, and termination of employment.
Employers violating employee benefits and compensation provisions are liable to pay a fine of up to 100 fine units. The fine is up to €1300 for legal persons. Companies must comply with these laws when providing employee compensation and benefits in Estonia.
Supplemental Benefits for Employees in Estonia
In addition to the mandatory benefits, the employee compensation policy in Estonia includes various supplemental benefits, which are as follows:
Health insurance
Estonia employers may offer their employees health insurance as a supplemental benefit.. Supplemental medical benefits for employees in Estonia cover medical treatment costs and other health-related expenses.
Voluntary benefits
It includes life insurance, critical illness insurance, and disability insurance. While employees typically pay for these benefits through salary deductions, they can also purchase them individually.
Gym memberships
Some employers in Estonia may offer gym memberships and other wellness programs as supplemental benefits to their employees to promote a healthy lifestyle.
How Multiplier Can Help with Benefits Management in Estonia
Employee benefits in Estonia are governed by the country’s employment laws. Thus, paying the guaranteed benefits is pertinent for employers to maintain compliance.
Multiplier offers the infrastructure to help businesses hire talent overseas without the hassles of establishing a subsidiary. Partner with us to streamline employee insurance benefits, facilitate grants, and issue ESOPs with our robust, reliable, and secure SaaS platform. Test new markets, build cross-border teams, and attract talent at affordable costs while experts at Multiplier take care of your employees’ compensation and benefit formalities.