Changes in Estonian Employment Regulations 2025

Ketlin Peterson, attorney-at-law at PwC Legal Services, highlights changes in legislation that are of paramount importance for employees, employers, and accountants. 

Increase in the minimum wage

From 1 January 2025, the new minimum hourly wage will be 5.31 euros (gross) and the minimum monthly wage for full-time work will be 886 euros (gross).

Increase in income tax rate

As of January 1, income tax withholding from wages will be 22% (instead of the previous 20%). Tax-free income remained the same, i.e. its amount depends on income and is a maximum of 654 euros per month and 7,848 euros per year.

Increase in the tax-free limit for travel allowances and daily allowances

The new limit for tax-free reimbursement for using a personal car for work trips is 50 cents per kilometer and up to 550 euros per month.

Employees can receive a daily allowance for their overseas business trips of up to 75 euros tax-free. This limit applies to the first 15 days, after which the compensation limit drops to 40 euros per day.

Change in tax exemption for health services

From 1 January 2025, employers can also use the tax exemption to pay for dental care, massage and nutritional counseling for employees. Instead of the previous quarterly limit of 100 euros, an annual limit of 400 euros will now apply to such expenses.

Expansion of whistleblowing regulation to smaller employers

In autumn 2024, the Act on Protection of Persons Who Report Work-Related Breaches of European Union Law came into force in Estonia. Among other things, it obliged larger employers to introduce a reporting channel through which employees can inform the employer about violations of various requirements arising from European Union legislation in the company. As of 1 January, the obligation to establish such an internal reporting channel also applies to employers with 50-249 employees.

Although the law explicitly only requires the establishment of a reporting channel, it is also essential to establish internal rules or guidelines for responding to potential reports of violations and investigating alleged violations. Such rules should regulate who within the company has the authority to receive reports of violations, how the investigation of alleged violations is carried out, the implementation of corrective measures if necessary, and the provision of feedback to the whistleblower.

Novel practice of the Estonian Supreme Court regarding the calculation of working and rest time

On 11 October 2024, the Estonian Supreme Court issued a ruling in case no. 2-22-16497, which drew a clearer line between an employee's working and rest time. In the said ruling, the Supreme Court found that the time for changing clothes, including putting on work clothes and personal protective equipment, and the time for moving and washing necessary for this must be included in working time.

Change in employer's obligations when approving sick leave certificates

From 1 February 2025, employers are no longer required to make their own entries if the continuation of a sick leave begins after the employment relationship has ended. The change reduces the burden on former employers, as they no longer have to deal with sick leave that is not related to an active employment relationship. The employer's only obligation remains to confirm the sick leave valid at the time of the employment relationship's end.