Labour market

The Estonian labour market experienced significant change in the 1990’s. The reason, on one hand, was economic restructuring which created new types of employment. On the other hand there were significant demographic changes.

Labour market dynamics

  2004 2005 2006 2007
Total labour force (thous) 659,1 659,6 686,8 687,4
Employed (thous) 595,5 607,4 646,3 655,3
Employment rate (%) 56,8 57,9 61,6 62,6
Unemployed (thous) 63,6 52,2 40,5 32,0
Unemployment rate (%) 9,7 7,9 5,9 4,7
Economically inactive (thous) 388,7 389,0 362,3 359,0

Source: Statistics Estonia

In 2006 and 2007 the demand for labour grew rapidly, resulting in falling unemployment and a return to the labour market by persons formerly non-active. The number of employed people increased in 2006 as much as 6,4% compared to 2005 and in 2007 1,3% compared to 2006. Unemployment fell from 7,9% in 2005 to 4,7% in 2007. Depending on methods of measurement however, the unemployment rate could be estimated at an even lower level.


Labour Legislation

The most important statues and rules regulating the activities in the labour market are the Constitution of Estonia, Conventions of International Organization of Labour, Employment Contracts Act, Holidays Act, Wages Act, The Working and Rest Time Act, Collective Agreements Act, Trade Unions Act and several enactments of the Government and ministries of Estonia.

A work contract is required to include some specific terms, in the absence of which, the contract is defective.

The following terms are mandatory:

  • work and its level of complexity, official or professional title and qualification requirements;
  • working hours, wage and the place of work;
  • period of the contract’s validity and the time for commencing the job (as a rule, a contract is concluded for an open-ended period). An oral employment contract may be entered into only for employment for a term of less than two weeks.

A contract is considered to be expired on the agreement between the parties on the following grounds:

  • end of the contract period;
  • the initiative of the employee;
  • the initiative of the employer;
  • demands on third parties and conditions not depending on the parties involved.

The notice of a contract termination by either party should be presented in writing, unless agreed otherwise.


Working Time and Vacation

The length of a working week 5 days
The length of a working day 8 hours
General vacation 28 days
Age of retirement (for both men and women) 63 years

Maternity leave – altogether 140 calendar days before and after childbirth. After that during the period of 15 months, mother receives from the state her last years’ average wage to the extent of 100%. The right to childcare vacation remains until the child is three years old.

Sickness – in case of sickness, the employee can be given up to 182 calendar days of paid vacation (max 250 days per year). The gross wage during this period is 60% (at hospital care) or 80% (not hospital care) of her/his last years` average salary, paid by the state.

Payment for overtime – additional remuneration of per hour of overtime paid to an employee shall not be less than 50% of the rate of hourly wage. Work during holidays could be compensated either by offering time off or by extra remuneration of at least 50% of wage rate. Work on public holidays has to be compensated at a double rate.

Social tax is paid by employers operating within the territory of Estonia on all payments in cash and in any kind made to individuals at a rate of 33% of total payments.

Unemployment insurance is 0.9% of the wage. Employer pays 0.3% of the wage and deduction from employees wage is 0.6%.

Unemployment benefit – those who are out of work are eligible to receive an unemployment benefit, as of 1 January 2007 a minimum of EEK 1 000 (EUR 64 per month) for a period of six months provided they have registered themselves with the Unemployment Office.



The minimum wage in Estonia is EUR 230 per month. In 2007 the average monthly gross salary was EUR 720. The highest gross salaries are paid in the financial intermediation sector, and the lowest in the hotels and restaurants sector.

Average monthly gross salary by economic activity, 3rd quarter 2008 (EUR)

Economic activity

Average salary

Financial intermediation

1 320

Public administration and defence

1 015

Mining and quarrying


Electricity, gas and water supply




Real estate, renting and business activities


Transport, storage and communication






Source: Statistics Estonia

Source: Estonian Investment and Trade Agency

Read also blog entries about EMPLOYMENT

One Response

  1. In 2010 is unemployment insurance 4,2% of the wage. Employer pays 2,8% of the wage and deduction from employees wage is 1,4%.

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