Small employers usually meet holiday as a calendar question: when is the person away, and who covers. The payroll side arrives later and with a surprise. The holiday pay is not the person's monthly salary, it is due before the holiday starts rather than at the next payday, and the days the person has not yet taken are a liability the company is carrying. This page covers those three things and the rules behind them.
How many days an employee is entitled to
The statutory minimum annual holiday is 28 calendar days. Some groups get more, and the figure depends on who the person is rather than on what the contract says.
| Employee group | Minimum annual holiday | Note |
|---|---|---|
| Employees in general | 28 calendar days | Accrues pro rata from the first day of work |
| Minors | 35 calendar days | Same pro rata accrual on the higher figure |
| People with partial or no work ability | 35 calendar days | Same pro rata accrual on the higher figure |
| Educational staff | 35 to 56 calendar days | Set by government regulation, so we check it for the person's actual role |
The days are calendar days. That matters more than it looks, because a calendar day includes weekends and the holiday pay is computed per calendar day as well. Both halves of the calculation use the same unit, which is why they fit together, and why neither is the same thing as a month.
Accrual is pro rata from the first day
Holiday builds up as the person works. The formula is the annual entitlement divided by 365 and multiplied by the days worked. The official worked example is a person employed for 90 days: 90/365 x 28 = 6.9 days.
Two consequences follow. A person who starts mid-year has a proportionate entitlement for that year, not a full 28, and a person who leaves has accrued exactly the days they were employed for. And accrual begins on the first day of the relationship. It does not wait for a probation period or for the first payslip, so from the first day there is a balance of holiday earned and not yet taken.
Six months of service before leave, unless agreed otherwise
An employee normally has to have worked six months before taking leave. The parties can agree otherwise, and in a small company they often do, by letting a new hire take a few days early. Note what this does and does not do. It governs when leave can be taken. It does not stop the entitlement accruing from day one, so a person who is permitted leave in month three simply draws on a balance that was already building.
Holiday pay is not a month of salary
This is where small employers get a surprise. Holiday pay is the average calendar day remuneration over the preceding six months, multiplied by the number of holiday days. The method comes from Government Regulation No. 91 on average wage, together with the Employment Contracts Act. The averaging period excludes public holidays and days with no remuneration under section 19 of that Act.
Holiday pay is a six-month average per calendar day times the holiday days. It is almost never the same figure as one month of salary. Budget it from the calculation, not from the monthly gross.
Several things push it away from the monthly figure, and it can land above or below.
- It is a per day figure times calendar days. Twenty-eight calendar days of average pay is a different quantity from one calendar month of salary, and the two coincide only by accident.
- It looks back six months. A pay rise made last month is only partly in the average. A fall in pay over the period lowers it.
- Excluded days change the window. Public holidays and days with no remuneration under section 19 are taken out, so the averaging period is not simply the last six calendar months.
- What counts as remuneration is set by the regulation. If the person had variable pay during the period, how it enters the average is a point we check against Regulation No. 91 for each payroll, and we do not list the components here.
The practical advice is short. Let the payroll calculation produce the number, show the employee how it was reached, and do not promise a figure in advance based on their salary. A person told that holiday pay equals a month will remember it when the payslip says otherwise.
When holiday pay must be paid
Holiday pay is due no later than the penultimate working day before the holiday starts. The parties can agree a later date, but never later than the payday following the start of the holiday. So by default the money leaves the account before the person leaves the office, and not at the end of the month.
That has a tax consequence worth knowing. Estonian payroll taxation is cash based, so the payment falls into the month in which it is actually paid, with the TSD due by the 10th of the following month. A holiday starting in early January may have to be paid in December, and in that case it is a December payment for the TSD and for the year end. We schedule holiday pay when it is paid, not when the holiday is taken, so the month and the year come out right.
There is one more interaction with the cost of a low-paid hire. The minimum social tax obligation does not apply where the person is absent for a whole calendar month on leave. That is the floor only, it concerns people paid below the monthly social tax rate, and it is a relief rather than a rule you can plan around, so we check the month in question rather than assume.
Unused holiday expires, but not as fast as people fear
Holiday not taken expires one year after the end of the calendar year it was earned for. Holiday earned for 2026 therefore runs until the end of 2027. The period pauses during maternity leave, paternity leave, adoptive parent leave, parental leave and military service, so the clock does not run against a person who could not have taken the holiday.
In a payroll file this is a balance with a date on it. A good payroll record shows, for each person, the days earned, the days taken, the days remaining and the date they expire. An employee who has quietly accumulated three years of unused days is a bookkeeping problem and, for the employee, a deadline.
Cash instead of leave is allowed only on termination
Estonia does not allow paying out unused holiday while the employment continues. Cash compensation for unused holiday is allowed only on termination. If an employee asks to be paid for the days instead of taking them, the answer is no, however convenient it would be for both sides, and we decline to process it.
On termination, the unused entitlement may be compensated in cash. That is also why the balance matters: a person who leaves with a large untaken balance produces a payment the company should have seen coming.
The holiday reserve in the books
Because the days earned and not yet taken are an obligation, Estonian accounting practice is to carry a holiday reserve, a liability in the balance sheet for holiday earned and not yet used. We treat this as standard practice. Its statutory status is something to confirm, and we do not present it as law.
The reserve is only as good as the payroll record under it, which is why the balance of days per person is worth keeping from the first month. Where the books are done by monthly bookkeeping and the payroll by a payroll service, the two have to agree on that number, and a year end that has to rebuild it from scratch costs more than a monthly record would have.
A checklist for each holiday that gets booked
- Find the entitlement group. 28 days, 35 days, or the educational range, which is set by regulation.
- Check the balance and the permission. Days accrued so far, and whether six months of service or an agreement allows the leave.
- Compute the pay. The six-month average per calendar day, with public holidays and no-remuneration days taken out, times the holiday days.
- Fix the payment date. The penultimate working day before the start, unless a later date is agreed, and never later than the payday after the start.
- Record the result. Days taken, days remaining, the expiry date and any pause that applies.
- Pass the balance to the books so the year end reserve is built from a record and not from memory.
What we do not cover here
Employment law questions beyond these rules sit outside this page, for example how holiday may be split or what happens when leave and sickness overlap. For those, read the Employment Contracts Act itself or ask an employment lawyer. And for an employee working in another country, holiday rules and holiday pay are for an adviser in that country, not for us.
What we do is the payroll and bookkeeping side: the accrual per person, the pay computed on the six-month average, the date it is due, the expiry of old balances and the reserve at year end. If you want those run for you, our email is timoffei@spatial-eye-finance.com.
Frequently asked questions
How many days of holiday does an employee get in Estonia?
The statutory minimum is 28 calendar days a year. Minors and people with partial or no work ability get 35 days, and educational staff get 35 to 56 days under a government regulation. The days are calendar days, not working days.
How is holiday pay calculated in Estonia?
It is the average calendar day remuneration over the preceding six months multiplied by the number of holiday days, under Government Regulation No. 91 and the Employment Contracts Act. Public holidays and days with no remuneration under section 19 of that Act are excluded from the averaging period. The result is almost never the same as one month of salary.
When must holiday pay be paid?
No later than the penultimate working day before the holiday starts, unless the parties agree a later date. It can never be later than the payday following the start of the holiday. Because payroll tax is cash based, a payment made in December for a January holiday belongs to December.
When does unused holiday expire in Estonia?
One year after the end of the calendar year it was earned for. The period pauses during maternity, paternity, adoptive parent and parental leave and military service. Holiday earned for 2026 therefore runs to the end of 2027.
Can an employer pay cash instead of holiday?
Only on termination of the employment. While the person is still employed, unused holiday cannot be paid out in money instead of taken. At termination the unused entitlement may be compensated in cash.
How much holiday does a new employee accrue, and when can they take it?
Holiday accrues pro rata from the first day: the annual entitlement divided by 365 and multiplied by the days worked. The official example is 90 days employed, which gives 90/365 x 28 = 6.9 days. An employee normally needs six months of service before taking leave, unless the parties agree otherwise.
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General information, not tax advice
This article reflects Estonian law as it stands on the date shown. Rules change and individual circumstances differ - confirm your own position with us before acting.