Key employment, tax and operational measures relating to COVID - 19 in Estonia

23.03.2020 Key employment, tax and operational measures relating to COVID - 19 in Estonia

Here you will find all key employment, tax and operational measures relating to COVID - 19 in Estonia.



Tax measures (deferrals, reductions):

  • Estonian Tax and Customs Board (ETCB) suspends the calculation of interests on tax arrears for the period of emergency with retroactive effect as from 1 March to 1 May. However, all tax returns must be submitted on time and taxes must be paid whenever it is possible.
  • Starting from May 1st, ETCB lowers the interest rate from the current 0.06% to 0.03%.
  • ETCB will allow tax arrears to be rescheduled at lower interest rates than are currently in force. ETCB may reduce the interest rate up to 100% in the event of a tax rescheduling. Currently, the maximum possible interest reduction is 50%. The company should apply for rescheduling of the tax arrears, if there is a need for continued interest relief after May 1 or difficulties with paying the tax after May 1.

Social Security measures (deferrals, reductions):

  • Salary compensation measure has been approved by the government with the aim to prevent large-scale redundancies in the economic crisis caused by coronavirus. It will take effect on March 23. The measure is available to any qualifying employer for a period of two months from March to May 2020. The employer must meet at least two of the three qualifying conditions to qualify for the measure. The salary compensation will be paid directly to the affected employee to whom the employer does not have the agreed amount of work and whose employer applies § 35 or § 37 of the Employment Contracts Act. The employer shall apply for the compensation. The state pays an employee compensation of 70% of the average wage of an employee, but the gross amount shall not exceed 1000 euros per calendar month. The employer is required to pay the employee who receives the salary compensation a gross salary of at least 150 euros.
  • For the period of March to May, the state will compensate the first three days of sick leave for all incapacity leave applications.

Grants and access to finance:

  • The following may be available via KredEx, a foundation set up by the Ministry of Economic Affairs and Communications:
    • Exceptional loan surety for easing repayment schedules of existing bank loans and issuing new loans. If the bank eases the repayment schedule of an existing loan or is ready to issue a new loan to the company, KredEx will give its surety for this loan.
    • Extraordinary loan. If banks are no longer financing companies, KredEx will provide the company with an emergency working capital loan to overcome liquidity problems caused by the coronavirus outbreak or an investment loan to take advantage of the new business opportunities created by the coronavirus outbreak.
    • Supplementary Surety Fund for the provision of loan sureties. While the maximum surety amount for KredEx was 2-5 million euros depending on the nature of the project, the maximum surety amount for all projects is now raised to 5 million euros.
  • More details are expected to be announced in the course of week 13.



Sick pay:

  • If an employee is sick or has come into direct contact with the COVID-19 infected person, a doctor can issue the sick leave certificate.
  • From March 16, as a temporary measure, employees can open a period of sick leave themselves online in the patient portal. Entries into the patients' portal will be forwarded to the Health Insurance Fund and the employer and family doctor; the record is also automatically opened and the employee will be contacted by the family doctor within a week to clarify their state of health and any presenting symptoms. The doctor can annul or close the period of sick leave.
  • Based on the sick leave certificate, the employer and the Health Insurance Fund will pay to the employee the sickness benefit. The first three days would normally be without payment, four to eight days would be paid for by the employer and beginning from the ninth day would be paid-for by the Health Insurance Fund. The government has decided that from March to May, the state will reimburse the employee for the first three days of sick leave.
  • The sickness benefit is paid at the rate of 70% of daily income. The sickness benefit is subject to income tax.
  • Sick leave certificates are not issued for people returning from abroad and are therefore obliged to self-isolate, but who are healthy. 

Enforced leave / use of holiday (paid vs unpaid):

  • Unilateral adjustments to the annual holiday schedule are possible, if the holiday schedule is not yet approved and communicated to the employees. The time of annual holiday is set by the employer in a holiday schedule which is drawn up for each calendar year and communicated to the employee within the first quarter of the calendar year. The employer does not generally have to accept the employees’ requests if these cannot be reasonably combined with the interests of the employer’s enterprise. The employer is also entitled to prescribe a collective vacation in the holiday schedule. 
  • Certain employees have the right to demand annual holiday at time suitable for them, e.g. parents raising small child.
  • If an annual holiday schedule has been approved, changes in annual leave times can only be made if mutually agreed.
  • Unpaid leave is possible upon mutual agreement.
  • In addition to the annual leave, there are also other types of leave that could be used. For example, a child leave (see below). However, the employer cannot force the employee to use these types of leave.

Temporary Lay-offs:

  • There is no such notion as “temporary lay-offs” in Estonian labour law.
  • If the employer is forced to shut down its operations temporarily or is otherwise temporarily unable to provide (enough) work to the employees otherwise ready and willing to work (in practice called as “idle time”), then the employer shall pay average wages to employees.
  • Failure to provide work to the employees may, depending on the circumstances (e.g. the length of the idle time, cause for the idle time), constitute a good reason for the employee to terminate the employment contract extraordinarily, with no prior notice. The employee may claim compensation upon extraordinary termination if the failure to provide work constitutes a fundamental breach of the employment contract by the employer. This is unlikely the case where the failure is due to the current emergency situation.

Reduction in pay and/or hours:

  • The spread of Coronavirus is one of the circumstances that allow the employer to reduce the salary of the employee for up to 3 months unilaterally, provided there is not enough work to provide to employees and paying the agreed salary is an unreasonably heavy burden for the employer.
  • It is not permitted to reduce the salary unilaterally if the employer does not have enough work for the employee to do, but still has enough liquidity to pay the salary; in this case the employer shall pay average wages for the „idle time“.
  • It is permitted to reduce the salary up to the minimum wage as determined by the Government of Estonia (584 Euros per month or 3.48 Euros per hour).
  • An employee has the right to refuse to perform work in proportion to reduction of the salary.
  • In order to reduce the salary unilaterally, the employer must follow the specific procedure which includes obligation to offer other job, if possible; obligation to inform the trustee of the employees, or in case there is no trustee the employees directly, at least 14 days in advance and obligation to give employees an opportunity to be involved in the decision. The employee must present their opinion within 7 days.
  • If the employee does not agree to a reduced salary, the employee has the right to terminate the contract with 5 working days advance notice. In the event of termination of the employment contract, the employer shall pay the employee one month’s average salary as compensation, in addition to the contractual final pay, which consists of earned salary and unused vacation pay.


  • If it is clear that the situation will not improve and the employer is not able to provide work nor pay a reduced salary, redundancy is an option. Redundancy is an extraordinary termination of the employment contract by the employer due to economic reasons, i.e. if following the agreed work conditions is impossible because of a reduced amount of work or the rearrangement of work. Redundancy also happens, when the employer terminates its operation or files for bankruptcy.
  • Employers must follow a redundancy procedure which includes obligation to offer other job, if possible; obligation to present termination notice in writing (signed manually or digitally) or in a format which can be reproduced in writing (e.g. e-mail). The notice must set out the justification for termination; obligation to give advance notice of termination or payment in lieu of notice. Depending on the length of the time the employee has been working for the employer, the advance notice period is 15-90 calendar days.
  • In case of collective redundancy, additional notification and consultation requirements apply, incl. obligation to notify the governmental authority – Unemployment Insurance Fund, and it will take more than 45 days before the employer may start handing over the termination notices.
  • Upon redundancy, the employer shall pay the employee compensation to the extent of one (1) month’s average wages of the employee. In addition, prior notification of 15-90 calendar days (depending on the length of service) OR equivalent monetary compensation is required.
  • Employees will be entitled to statutory redundancy benefit where they have worked for the employer at least 5 years. The amount of the statutory redundancy benefit is 1-2 months’ average salary depending on the duration of the employment relationship.
  • In addition, employees may be entitled to statutory unemployment insurance benefits.




  • The government has asked businesses to encourage employees to work at home wherever possible; in particular, employees from vulnerable groups. In order to facilitate this, employers should:
    • support employees to continue to work wherever possible, including providing technology where possible to facilitate remote working; and
    • maintain contact with employees and encourage staff members to support each other and be flexible whilst the workforce adjusts.

Travel (business and personal):

  • The government has strongly advised against all non-essential travel worldwide.
  • There are restrictions on entering Estonia and on movement between the islands and the main land.
  • As of March 17, everybody who do not fall under any exemptions must remain at home or at their place of stay for 14 calendar days when entering Estonia (obligation to self-isolate). This does not automatically mean that the employee is not required to work during the isolation. The employee must inform the employer and agree on new arrangement of work. The suggested solution is to enable the employee to work remotely from home. If this is not possible, both sides must reach an alternative agreement, e.g. agreement on unpaid or paid leave.
  • Employers should encourage staff to avoid unnecessary travel, including to and from the work place or work-related events. In the event of necessary travel, employers should encourage staff to comply with government guidance to minimise risks, including avoiding busy times, maintaining distance from other commuters and washing hands as soon as they arrive at their destination.
  • If employees cannot travel abroad as planned, it is likely that they will request a cancellation of booked annual leave. Employers are not obliged to allow employees to cancel leave, but should consider whether this would be appropriate in the circumstances.

Preventive actions (reception policy, public interactions, management of infected employees):

  • Employers should ensure the workforce is kept updated as to preventative actions being taken by the business and the latest guidance on how to reduce risk.
  • Where workplaces are open, employers should provide facilities for hand washing and hand sanitiser and encourage staff to use them regularly. People working in the office should take into account that the recommended distance in the open office is no less than 1-1.5m, it is important to air the rooms regularly, clean the surfaces regularly etc. The public sector also has a restriction that more than five people should not be present in the same room at a meeting. It is recommended to follow the same advice by the private sector.
  • Companies should ensure that managers are made aware of how to identify symptoms in staff and of procedures to follow in the event a staff member exhibits symptoms.

Employees with children or older dependents:

  • Employees may be entitled to reasonable time off to care for dependents. However, reasonable time off means usually 1-2 working days within which the employee could be expected to arrange for the care of their children or other dependents and if necessary, to find a mutually satisfactory solution and conclude an agreement with the employer for the new arrangement of work such as teleworking, part-time work for a fixed period, annual leave or otherwise.
  • The employer shall pay employees average wages for such reasonable time off (usually 1-2 working days) to care for dependents. An employee cannot claim an average wage from the employer for the entire period of time at home when the childcare facilities are closed for example.
  • Child leave may be an option. Each calendar year a mother or father (or a guardian or a foster parent) has the right to receive child leave up to 3 or 6 working days, depending on the number and age of children. This is compensated for with the minimum salary. On top of that, a (foster) parent or a guardian of a disabled child has the right to one extra working day off per month until the child reaches the age of 18 years, which is remunerated for on the basis of the average wages. The compensation is calculated and paid to the employee by the employer. The employer must file an application to the Social Insurance Board to have it compensated from the state budget.
  • In addition, unpaid child leave may be possible. A (foster) parent or a guardian who is raising a child of up to 14 years of age or a disabled child of up to 18 years of age has the right to child leave without pay of up to 10 working days every calendar year.
  • In case the employee needs to care for dependant who is sick, the employee may be entitled to statutory care allowance on the basis of a certificate for care leave which will be issued by a doctor. From March 16, as a temporary measure, employees can open a period of care leave themselves online in the patient portal (see above). The statutory care allowance rate is 80% from daily income and the allowance is paid by the state as of the first date of care leave. Income tax is withheld from the allowance amount.

Main contact:

Anu Kirss
Senior Associate