The Estonian Parliament has approved several amendments affecting employment relationships. Many of these will enter into force over the coming year and will alter the content of agreements related to work arrangements. This article provides an overview of the changes that will most significantly impact both employers and employees.
From 1 January, the Health Insurance Fund will apply an upper limit to temporary incapacity benefits. To calculate the daily maximum rate, the doubled Estonian average monthly income subject to social tax is divided by 30. The applicable maximum for an employee is calculated based on data from the calendar year preceding the previous one.
For example, if an employee opens a sick leave on 3 March 2026, the maximum benefit will be calculated using 2024 data.
The Health Insurance Fund will publish the maximum rate on its website by 1 December each year. In 2026, the maximum daily benefit is EUR 126.87. The limit applies to benefits paid by the Health Insurance Fund from the 9th day of sickness, and to care leave from the 1st day. It does not affect the part paid by the employer.
Under current legislation, an employer may voluntarily compensate the difference between the employee’s contracted wage and the benefit paid on the basis of a sick leave certificate (up to 30% of wages for sickness benefit and up to 20% for care benefits). In other words, the employer may choose to maintain the employee’s full salary during illness.
With the introduction of the new upper limit, employers may compensate the difference between the employee’s average wage and the capped temporary incapacity benefit without paying social tax on the additional amount. As a result, an employer may cover up to an additional 8% of the average wage if the capped rate reduces the benefit paid by the Health Insurance Fund from 70% to 62%. Employers must calculate this additional compensation based on each employee’s actual wage data.
From 1 April, the rules governing work during temporary incapacity (sick leave) will become more flexible. Under the current regulation, employees may return to work partially only after the 60th day of sickness, allowing them to receive partial wage compensation from day 61 to day 122. This system has been rigid, limiting employees’ ability to contribute and extending the employer’s burden of arranging cover for absent workers.
The amendment will allow employees to return to work on a part-time or adjusted basis starting from the 31st day of sickness and to work under such arrangements for up to 152 days. For employers, this offers more flexibility in scheduling, aids in preserving key skills and knowledge in daily work processes, and allows employees to maintain their income. The legislator’s goal is to ensure sufficient rest and recovery time for sick leaves lasting less than 30 days.
In light of changes to benefit ceilings, employers are encouraged to review their benefit and support packages that are intended to assist employees during periods of temporary or long-term reduced work ability.
Under current rules, parental benefit is recalculated if a parent earns more than half of the benefit ceiling in the month of payment. As the coefficient used to calculate the benefit ceiling is reduced from triple to double the average income, the restriction on income earned during parental benefit will be removed.
The purpose of removing the income threshold is to mitigate the impact of the lowered ceiling and to encourage parents to continue working. The change also simplifies the parental benefit system and reduces bureaucracy, as parents will no longer be required to constantly monitor and report their income.
Among the planned amendments to the Employment Contracts Act is a solution to the issue of working time limits for minors in connection with expanded compulsory schooling. The change will allow a 15–16-year-old who has completed basic school, or a 17-year-old, to work full time—8 hours per day and 40 hours per week—provided the minor wishes to do so and has the consent of their legal guardian.
The amendment to the Employment Contracts Act clarifies that the weekly rest period also includes the daily rest period. This returns the law to the practice in place before the decision of the European Court of Justice. Accordingly, an employee must have at least 48 consecutive hours of rest within a seven-day period, or 36 hours in the case of summarised working time.
The Employment Contracts Act will introduce an option for employers and employees to conclude flexible working time agreements. Under such agreements, the employee’s working time will consist of agreed working hours and additional hours. Employers must take into account that:
Implementing a flexible working time agreement increases employers’ administrative obligations, requiring technological upgrades and additional processes for accurate time tracking. Additional hours may only be worked with the employee’s prior consent in a reproducible written format. If these additional hours become permanent over a six-month period, the schedule and agreed working hours must be reviewed and adjusted.
Please note, patience is required regarding the entry into force of these amendments. Due to a technical error, the President of the Republic has not yet promulgated the law, and therefore the exact date of entry into force remains uncertain.
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