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"The growth in minimum wage that is twice as fast as the growth of productivity is still creating pressure for increasing the efficiency of employers, while the notion included in the agreement, saying that wage growth cannot come from nothing but after all from the growth in productivity, is important," Toomas Tamsar, manager of the Estonian Employers Confederation, said.

The chairman of EAKL Peep Peterson said that the negotiations on agreeing on the minimum wage figures were more difficult than usual, as the prerequisite for an increase in minimum wage was to reach a joint understanding on the long-term methodology on how minimum wage should increase in the future.

"In the past five years we got used to a fast minimum wage growth of an average of 10% per year and it had a good impact on harmonizing wages. Now the tempo is decelerating but based on the agreed growth formula all employees can still get a fair share of the economic development," Peterson said.

The minimum wage agreement in essence is an expanded collective pay agreement on the highest level, which means that it must be fulfilled by all Estonian employers, thus from the new year a full-time employee must not be paid a lower monthly wage than 500 euros.

The minimum rate for wages in 2017 is 470 euros per month, of which a minimum wage earner will receive 398.46 euros was net salary.

From 2018 both the basic exemption of low and middle income workers and the minimum wage rate will be raised to 500 euros, which means that the net income of minimum wage earners will increase by 21.1% or 84 euros to 482 euros per month.