Estonia, Labour-market, Markets and Companies

The amendments will also make sure that income tax paid on the remuneration of foreigners working in Estonia flows into the budget of Estonia and can be used for the good of the Estonian society, spokespeople for the Interior Ministry said.  

The number of registrations of short-term employment in Estonia has grown nearly 30-fold compared with 2015. Where in 2017, the Police and Border Guard Board issued 7,509 permits of short-term employment, in 2018 the number of such permits grew to 19,805. In 2019, a record 32,262 instances of short-term employment in Estonia were registered.

Interior Minister Mart Helme said that increased demand for foreign labor has created a situation where more and more employers are ignoring the terms set forth in the Aliens Act.

"The number of violations related to the employment of foreigners registered by the Police and Border Guard Board has been growing since 2014. To gain an unfair advantage in competition, attempts are made to find ways to avoid paying the wage required under Estonian law, which currently is 1,407 euros. Such unfair possibilities undermine the competitive advantage of Estonian residents on the labor market, which they are entitled to," Helme said. 

According to the legislative amendments, the party responsible for the lawfulness of the employment of a foreigner and proving thereof from now on is the company that actually benefits from the work of the foreigner.

Hence the obligation of ensuring employment on proper grounds and proving thereof is expanded also to the companies using agency workforce. This means that as long as the party commissioning the work or any other company responsible for the performance of the work has not proven that they are entitled to use use a more favorable scheme of the European Union, meaning to pay a third country employee in short-term employment in Estonia a wage smaller than that set forth in the law, the foreigner must stop working.  

The foreigner must stop working as long as the employer has registered their employment on the right grounds, which requires paying the Estonian national average wage to the foreigner for their work.  

"When the requirements concerning employment in Estonia are violated and a smaller than required remuneration for work is paid, or is not paid, the Estonian state forgoes revenue that is used to finance the social welfare system, among other things," the minister of the interior said.

According to the Tax and Customs Board, estimated tax damage resulting from the evasion of labor taxes totaled over 17.7 mln euros in 2019.