Estonian payroll for a Swedish group

What an employee costs in Estonia

An Estonian employer pays social tax and unemployment insurance on top of gross pay. Pay and contributions together make up the employer's total cost. Social tax is what funds the employee's state pension and health insurance.

The multiplier 1.338 comes from adding 33% social tax and 0.8% unemployment insurance to gross pay. On gross pay of 1,000 EUR, social tax is 330 EUR and the employer's unemployment insurance is 8 EUR. The total cost is therefore 1,338 EUR. The employee's own 1.6%, which is 16 EUR, is withheld before the net pay is paid out.

On low pay, the minimum social tax of 292.38 EUR a month can be more than 33% of pay. The employer then pays the minimum. The example is only an illustration. The employee's income tax depends on their circumstances, for example whether the 700 EUR monthly basic exemption applies. The workings are in our article on the total cost of an employee in Estonia.

What we do each month

1. We receive pay data, working time and any changes.
2. We calculate gross pay, the employee's unemployment insurance, income tax and net pay.
3. We calculate the employer's social tax and unemployment insurance.
4. We prepare the Estonian payroll filings and the payment instructions for the board to approve.
5. We book the payroll cost and deliver a monthly summary.

The board approves the payroll data and the payments itself. We prepare everything and make sure the Estonian filings go in on time, but the decision and the signature stay with the company. If anything differs from the previous month, we tell you before pay goes out.

How the cost reaches the Swedish accounts

The Estonian company books the payroll cost in its own ledger. So that your Swedish accounts can consolidate it, we break it down in the format you have agreed:

• gross pay, social tax and the employer's unemployment insurance as separate lines,
• liabilities for taxes and contributions still unpaid at month end,
• a reconciliation between payroll data, the ledger and the bank,
• a monthly summary in English that the auditor can trace back to the supporting documents.

Figures are delivered in euro. Your Swedish accounts team translates them into kronor and places them within group staff costs. The calculation itself is part of our payroll service.

Where the person works and is insured

If someone lives in Sweden, works partly in Sweden or is seconded from a Swedish company, some questions come up that we do not answer. We do not cover Swedish social security rules. These are some of the questions for your Swedish adviser:

• Where does the person actually work, and where do they live?
• Which country's social security covers the person, and who has to show it?
• Does the Estonian company have any employer obligations in Sweden?
• How is the employee's pay taxed in Sweden?

A second worked example

On gross pay of 2,000 EUR a month, social tax is 660 EUR and the employer's unemployment insurance is 16 EUR. The employer's total cost is 2,676 EUR, which is 2,000 times 1.338. The employee's 1.6% unemployment insurance is 32 EUR, withheld from gross pay. Income tax comes on top and depends on the employee's circumstances.

Changes during the year

Please tell us about new hires, pay changes and leavers before the agreed day each month. We add the change to the payroll run, compare it with the previous month and tell you if anything looks unusual. That way there are fewer surprises in the staff costs of the Swedish group accounts.

When the group sends people to Estonia

Sometimes a Swedish company sends an employee to work in Estonia, or the Estonian company hires someone who lives in Sweden. In either case, these points should be settled before the first pay run:

• which company is the employer and which company carries the pay cost,
• how pay is split if the person works in both countries,
• who pays the salary and in which country it is booked,
• what your Swedish adviser needs from us for their assessment.

We book and calculate under Estonian rules, based on what you decide. Which other rules apply to the person is for your Swedish adviser to say.

What we need from you

• The employment contract and where the person works.
• Gross pay, benefits and other payments each month.
• Contact details for your Swedish accountant and the reporting format you want.
• The date each month by which payroll data has to be ready.