Hiring your first employee in Estonia, in order

Hiring your first employee in Estonia is not difficult. It is sequenced, and the sequence is unforgiving at one specific point. A company that has only ever paid a board member fee, or nothing at all, suddenly has an employment register entry, a withholding obligation, a declaration date, a payslip duty and a holiday clock, and none of them start on the same day. What follows is the order we actually take a client through, with the traps marked where they sit.

The order of operations, from the offer to the first declaration

1. Agree the terms and sign the employment contract. The pay has to clear the minimum wage in force on the day the work is done, not the day you signed the paper
2. Make the employment register entry, at the latest by the moment the employee starts work. Not the end of the first day, not the first payroll run
3. Collect the written basic exemption application, if the employee wants the exemption applied at your company rather than somewhere else
4. Set the payroll up before the first payment: the payment date, the funded pension status of the person, and whether the minimum social tax floor or one of its exemptions applies to them
5. Pay the first salary and issue a payslip showing the gross, each withholding and the net
6. File the first TSD by the 10th of the month following the month of payment, and pay the withheld taxes together with it
7. Let the holiday clock run. It started on the first day of employment, whatever arrangement you have for the early weeks

The register entry is the step that gets missed

This is the one. The commencement of employment must be recorded in the employment register at the latest by the moment the employee starts work. A first-time employer hears the phrase "register the employee", files it mentally alongside the payroll tasks, and is therefore two or three weeks late by default. The entry belongs with the signing of the contract, not with the first payment.

What goes into it is modest: who the person is, who the employer is, the type of employment and the date work begins. When the employment ends, the end date goes in as well. There is one different deadline worth knowing in case your first hire is a summer job. For a child aged 7 to 12, the entry has to be made ten working days before work starts, which is a planning requirement rather than a same-day one.

Simplified registration by SMS or phone is not a finished entry

There is a simplified route, and it exists precisely because real hiring does not always happen in front of a computer. You can register by SMS or by telephone. It is a valid start and it is not the end of the job: the entry must be completed with the type of employment within seven calendar days. An incomplete entry sitting in the register is not a registered employee, and the seven days are calendar days rather than working days.

There is also a safety net worth knowing about before anyone panics. An employer may correct its own data in the register within three months. That covers the mistyped start date, the wrong employment type spotted during the first payroll run, the detail that was guessed at on a Friday afternoon. Penalties for failures in this area exist, and we are not going to quote amounts we have not verified ourselves. The practical advice does not change either way: make the entry on time and fix any error inside the three months.

The basic exemption application, in writing and to one employer only

The basic exemption for 2026 is 700 euro a month, 8,400 a year, and from 1 January 2026 it is universal. The income taper is gone, so a higher salary no longer shrinks the exemption, which is a real simplification for anyone who had to explain the old curve to staff. For a person who has reached pensionable age the figure is 776 euro a month.

Two practical consequences. First, the exemption is applied on the employee's free-form written application. There is no official template and there does not need to be one, but there does need to be something in writing in your file, because you are the one applying it. Second, only one employer may apply it. A person with two jobs picks one of them. If both employers apply it, the shortfall lands on the employee at their annual return, and they will not be pleased to find it there. Ask the question at signing, not in month three.

The minimum wage trap, which caught people this year

The minimum wage was 886 euro a month and 5.31 euro an hour from January to March 2026. It became 946 euro a month and 5.67 euro an hour from 1 April 2026, set by Government Regulation of 23.03.2026 No. 36.

Here is how that turns into a problem. A contract signed in February at 900 euro a month was perfectly lawful in February and below the floor in April. The pay in that contract had to be amended, and the employer who signed it, filed it and moved on did not notice, because nothing in the process raises its hand at you. If you signed anything in the first quarter of 2026 at between 886 and 946 euro a month, go and look at it now. If you are hiring today, 946 is the floor for full-time work and 5.67 is the floor per hour.

The wage floor is also where the cost of the hire starts behaving in ways that surprise people, because the social tax monthly rate for 2026 is 886 euro while the minimum wage now sits above it. There is a separate article on this site about what an employee actually costs an Estonian employer, built from the gross upward, which covers the employer multiplier, the minimum social tax and the part-time arithmetic. Read this page for the process and that one for the money.

The first TSD, and why the payment date decides the month

The TSD declaration for a month is due by the 10th of the following month, together with payment of the withheld income tax, the unemployment insurance premiums, the funded pension contribution and the employer social tax. One form, one payment date, and it is the rhythm your month now runs on.

The detail that matters most for a first hire is this: Estonian payroll taxation is cash-based. The month a salary belongs to, for tax purposes, is the month it was paid and not the month it was earned. A December salary paid in January is a January payment. It goes into the January TSD, due on 10 February, and it is taxed under the new year rates and the new year exemption.

So choosing your payment date is a tax decision as well as a cash-flow one. Paying on the last working day of the month and paying on the fifth of the next month put the same work in different tax months, and at a year end they put it in different tax years. Pick one, write it in the contract and keep it, because moving the payment date later shifts an entire payroll forward and the TSD follows it.

Payslips and the holiday clock both start immediately

Two obligations that begin on day one and get forgotten precisely because nobody chases you about them at the beginning.

The employee is entitled to understand how the pay was calculated, which in practice means a payslip for each payment showing the gross, each withholding line and the net. Any payroll system produces this automatically, and the point is to build the habit in the first month rather than to reconstruct six payslips in June because someone finally asked.

The holiday clock also starts on the first day. The statutory minimum annual holiday is 28 calendar days a year. It is 35 days for minors and for people with partial or no work ability, and 35 to 56 days for educational staff under a government regulation. Entitlement accrues pro rata: the annual entitlement divided by 365, multiplied by the days worked. The official worked example is 90 days of employment giving 90/365 x 28 = 6.9 days. An employee normally has to have worked six months before taking leave, unless you agree otherwise, but the entitlement has been accruing since the first day either way, and it is a liability in your books from that day.

What this page deliberately does not tell you

Being straight about the edges is more useful than sounding complete. We are not stating probation lengths, notice periods or the list of mandatory contract terms on this page. We have not verified them against the current statutory text in this round, and a figure we are unsure of is worse than no figure at all, because you would act on it.

Those terms come from the Employment Contracts Act. For a specific contract they should be read in the Act itself or checked with a lawyer, rather than taken from an accounting firm blog, ours included. We will tell you what the payroll and the filings require. The contract law behind the document is somebody else's expertise and we would rather say so than improvise.

The same applies to two further cost items. Occupational health and safety obligations, including the health check, exist and cost money, and we are not quoting amounts we have not confirmed. Budget for a cost there and get the figure from the provider you will actually use.

And if the person you are hiring will live and work in another country, this page is not the right map. Their social security, and often their income tax, belong where they work rather than where you are registered, and that needs an adviser in that country alongside the Estonian payroll at this end. We will say plainly when a case is outside what we handle.

A short checklist for the week before the start date

• Contract signed, with pay at or above 946 euro a month or 5.67 euro an hour for full-time work
• Employment register entry made, with the type of employment filled in and not left as a simplified stub
• Basic exemption application collected in writing, or confirmed as being applied by another employer
• Funded pension status of the person known, so the first calculation is right
• Minimum social tax position checked, including whether any exemption applies
• Payment date set, with the matching TSD date in the calendar
• Payslip output ready for the first run

We set this up for new employers regularly, and when the company itself is also new the two jobs tend to land in the same month. If that is where you are, company formation support and the payroll setup are better done together than three weeks apart. Send us the start date and the gross and we will tell you what has to happen before it. Our email is timoffei@spatial-eye-finance.com.

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