Recruiting Top Talent in Estonia

Estonia Top Talent

Locating and then recruiting top talent in an overseas territory is a significant commitment for companies who have set their sights on international expansion – and one that can face many obstacles.

The relatively small – and shrinking – population of around 1.3 million makes for a highly competitive employment market. The European Center for the Development of Vocational Training predicted that the most significant growth areas of the Estonian employment market would be research and development. Specialist skills will be in demand from suitably qualified individuals. Programmers, chefs, teaching professionals, production managers, services managers and admin professionals will also be sought after. Additionally, there is a projected shortfall in software developers, a key sector of Estonia’s economy, with Europe’s highest percentage of start-ups per capita.

Where to begin? This is where Bradford Jacobs’ global experience is vital for taking the smartest recruitment route into Estonia.

The Recruitment Process in Estonia

Estonia’s population of just 1.3 million includes a small, well-educated, highly skilled, literate and motivated workforce operating in a relatively tight but well-developed employment market. As a result, the recruitment process can be frustrating if the right talent is not targeted.

There is a projected shortfall in software developers, a key sector of Estonia’s economy, with among Europe’s highest percentage of start-ups per capita. Programmers are also in demand, along with teaching professionals, production, and services managers, while admin professionals will also be sought after.

Recruitment is the first stage of making your company operational and competitive in Estonia. There are many complications in moving staff into the country and the complexities of obtaining work visas and permits. To avoid these issues, knowing where to locate the finest candidates for your company’s expansion plans is vital. Don’t wait! Contact Bradford Jacobs for the solutions.

Once recruited, companies must consider the implications of handling payroll for their staff and deal with the revenue and social insurance authorities. Foreign companies generally establish subsidiaries to undertake these tasks and follow strict registration procedures. Requirements include:

• Employees of all nationalities must be registered in the Employment Register and with the Estonian Tax and Customs Board, either through the e-Tax Board or at a Tax and Customs Board Office.
• To register, employees must have an Estonian ID card before starting work; if registering by initially using their date of birth, they must obtain an ID card within five days. At the latest, employees must be registered at the beginning of employment.
• Information for the Employment Register must include Employee’s ID details; employer’s details and registry code; date of starting work and, if relevant, end date.
• Registering employees with the Tax and Customs Board. Employers supply non-tax resident data on TSD Annex 2, and for tax residents on TSD Annex 1.
• Individuals change tax residency by submitting Form R.
• Employees are automatically registered for the Health Insurance Fund and the Social Insurance Board once they have been entered into the Employment Register.

Note: Employees from EU/EEA nations will be exempt from social insurance contributions if they produce an A1 Certificate from their home country’s social insurance organization.

Legal Checks on Employees in Estonia

References: Employers need the applicant’s permission before asking for references from previous employers, although this is not usual.

Medical and Criminal History:  These can be requested by the employer only if strictly relevant to the role.

Privacy:  Any data gathered by employers must not contravene the Personal Data Protection Act, the Public Information Act, the Electronic Communications Act, the Cybersecurity Act or the European Union’s General Data Protection Regulation.

Basic Facts on Hiring in Estonia

Employment law in Estonia is generally governed by the Employment Contracts Act, which applies basic requirements for hiring employees. These include:

• There is no mandatory requirement for contracts to be in writing, though generally, they are in place if employment exceeds 14 days. Any oral agreement is not invalidated in the absence of a written version
• The contract should be given to the employee before work commences
• Contracts can be for a fixed or unspecified term
• Contracts must include Identities and full details of all parties; start date of employment and in the case of a fixed-term contract, the end date; job description and location; terms of employment such as salary, working hours, paid vacations; notice periods and termination/ severance terms, whether collective agreements apply
• Any probation period, up to a maximum of four months
• Employers and employees are free to negotiate the terms of their agreement, but cannot diminish any statutory minimums

After hiring and onboarding, employers must be aware of other considerations. Minimum standards apply to such as sick leave, working hours, maternity allowances, paid vacations, termination and severance, notice periods and social insurance payments. Other rules regulate workplace discrimination. 

To be able to operate, registration requirements include:

• A unique name for the company after checking availability on the e-Business Register and a legally registered Estonian address 
• Registration of the company through the Company Registration Portal and paying a fee of €265 (US$288) through the registration portal along with any share capital, although this can be deferred to later
• Confirmation from the registration portal that the application has been accepted
• Registration of employees on the Employment Register via the website of the Tax and Customs Board
• Required licenses depending on the area of business activities, checked with the Register of Economic Activities
• Registration for Value Added Tax (VAT) if necessary, with the Tax and Customs Board

Note: Estonians holding an ID card, or an e-Residency card can establish a private limited company online. This also applies to an increasing number of ID cards from fellow European Union member states.