Payroll company in Estonia: payroll services and TSD filing

What do payroll services in Estonia cover?

Monthly payroll covers three things: the salary calculation, the TSD declaration filed by the 10th, and a payslip for each person.

• Calculation. Gross to net for each employee, with the basic exemption applied where the employee has asked for it in writing.
• TSD. Prepared and filed by the 10th of the following month, with annexes for fringe benefits and non-resident payments.
• Payslips and payment file. A payslip for each person and a file you upload to your bank.
• Registrations. Entries and exits in the Employment Register, handled within the legal deadline.
• Board member fees. Treated correctly, including for non-resident board members.

How much does a payroll company in Estonia cost?

Payroll costs from 15 EUR per employee a month on its own, and it is included in the monthly bookkeeping plans from 45 EUR a month, depending on headcount.

Prices exclude VAT. A single board member fee is the cheapest case. A larger team with variable hours, fringe benefits and holiday sits at the top of the range. See monthly bookkeeping for what the plans cover beyond payroll.

What does a salary cost the employer?

An employee costs the employer 1.338 times the gross salary, so a gross salary of 2,000 EUR costs 2,676 EUR a month.

In plain terms, the employer pays roughly another third of the gross salary in taxes on top. The multiplier applies to a normal full-time salary. For low or part-time salaries, the minimum social tax of 292.38 EUR a month can apply, and the calculator handles that case. The rates behind the multiplier are explained in the Estonian payroll taxes article, and you can test any figure in the payroll calculator.

Which payroll details need the most care?

Three details cause most payroll errors: the 292.38 EUR minimum social tax, the 700 EUR basic exemption and the employment register entry.

• Minimum social tax. It applies to part-time hires as well, and there is a list of exemptions that we check person by person.
• Basic exemption. It is a flat 700 EUR a month, applied by one employer only and only on the employee’s written application.
• Employment register. The entry is due at the latest when the person starts work.

What should you settle before hiring your first employee?

Settle four things before the first working day, and the first payroll month goes smoothly.

1. Agree the employment contract, the gross salary and the payday.
2. Budget for the employer taxes on top of the salary, roughly another third.
3. Register the employee in the employment register (TÖR) before work begins.
4. Agree a simple monthly routine for sending hours, leave, bonuses and any changes.

Gross salary is the amount before the employee's taxes. Net salary is what lands in their bank account. The two are easy to mix up in a first job offer, so we show both before you agree a figure.

The register changes with the team. A new start, a leaver and longer breaks such as parental leave are entered. Ordinary holiday is not.

What does the monthly payroll cycle look like?

Each month follows the same four steps, and we ask for your input only when something has changed.

1. You confirm hours, bonuses, leave or any change in the team.
2. We calculate each salary and send the payslips and a payment file.
3. You pay the salaries from your bank.
4. We file the TSD by the 10th of the following month and keep the confirmation.

If we take over part way through a year, we start from the year to date figures already declared. We check them and amend anything that needs it before we continue. We review non-resident employees before the first payment, because their payments go on a separate TSD annex and often raise a tax treaty question.

What if an employee works outside Estonia?

Where a person works can change where income tax and social security are due, so we first check where the work is done and for how long.

Say an Estonian agency has a designer working from Thailand. The Estonian payroll is only part of the picture, and the rules of the other country need checking too. We run the Estonian side and tell you which questions to take to an adviser there.

Can payroll cover a company with only a board member fee?

Yes, a board member fee is the cheapest payroll case, at the bottom of the 15 EUR range, and it still needs a monthly TSD.

Most e-Residency companies are in this position. The board member relationship is not employment, so no employment contract is needed. Income tax and social tax apply, but unemployment insurance does not. If you are not sure which case applies to you, email timoffei@spatial-eye-finance.com with the number of people and the amounts, and we will send you a written price.