Other remuneration and benefits
- Payment of other benefits must be agreed in writing.
- The employee has no right to claim other benefits in money.
- Remuneration for on-call time and compensation for restraint of trade clause are not part of the wages.
Agreement for payment of other benefits
In addition to the wages, the employer may provide the employee with other benefits, such as the use of a car, mobile phone, etc. and/or bearing the associated costs. If other benefits are provided to the employee, they must be recorded in writing in the employment contract, work organisation rules, collective agreement or other internal documents.
Agreed benefits cannot be claimed in money and must be clearly distinguished from the wages. The distinction between benefits and the wages helps to avoid situations in which the employer considers (in-kind) benefits as part of the employee’s wages that are not taken into account, for example, when calculating sickness benefits or pension insurance, thereby misleading the employee about their expectations.
Agreement on remuneration paid on financial results
The employer may pay the employee additional remuneration based on the company’s financial results (i.e. part of the company’s profit or turnover). An employee has the right to demand remuneration for financial results only if it has been agreed to pay it. The agreement must include the cases of payment, frequency, method and bases for calculation. For example, remuneration paid on economic performance may be paid to an employee either monthly or once a year.
The period used as the basis for calculating remuneration paid on economic performance is presumably the company’s approved annual report for the year for which the employee is entitled to remuneration. Note that the time of conclusion of the agreement to pay remuneration based on economic performance is irrelevant in such cases. For example, if the agreement was concluded in the middle of the financial year, the remuneration must still be calculated based on the entire financial year. However, agreements between an employee and an employer for basing the calculation on a longer or shorter period are not prohibited.
If an employee and an employer agree on the payment of remuneration based on economic performance, it must be clearly stated under what conditions and to what extent claims for remuneration are valid even after the end of the employment relationship. This helps avoid disputes as to whether and to what extent an employee should be paid the agreed remuneration if the employment relationship ends before the relevant annual report is approved.
Remuneration based on economic performance must be delivered to employees no later than six months after the approval of the employer’s annual report. The parties may also agree to pay the remuneration earlier.
Agreements on remuneration paid on transactions
Employers may pay their employees additional remuneration for contracts concluded between the employer and a third party. For example, an employee may be remunerated for their contribution to the drafting of a contract or other activities related to the conclusion of a contract. In such a case, the agreement must also cover the terms and conditions for the remuneration payable for the transactions, including the circumstances in which the remuneration is payable and the basis on which it is calculated.
In general, the employee will be entitled to remuneration from the moment the employer has fulfilled their contractual obligations to the third party. If the parties have decided to agree on a later time for payment of the remuneration, the employee has the right to demand a reasonable advance payment. At the same time, the employee will automatically receive the right to demand to remuneration once the third party has fulfilled their contractual obligations towards the employer. Note also that the employee will become entitled to remuneration even if the contract between the employer and the third party is not performed for reasons attributable to the employer. However, if the contract is not performed for reasons beyond the employer’s control, for example if the third party changes their mind, the employee will not have the right to demand remuneration.
Remuneration paid on transactions is calculated on the basis of the amount payable. For example, an employee and their employer may agree that the employee will receive 10% of the amount paid by the employer’s client. In the absence of an agreement on the amount of the remuneration to be paid on transactions, the amount of the remuneration shall be deemed to be the local standard amount of remuneration or a reasonable amount of remuneration.
Remuneration paid on transactions is calculated on a monthly basis and the employer is obliged to submit the calculation to the employee at the end of the month at the latest. The calculation must include an indication of the amount of the remuneration and the reasons for its determination.
On-call time remuneration
Remuneration paid for on-call time agreed on the basis of section 48 of the Employment Contracts Act, which may not be less than 1/10 of the agreed wages, does not classify as wages, as on-call time is not considered working time and duties are not performed during that time. Therefore, remuneration for on-call time may not be included in or be part of an employee’s wages.
Compensation for restraint of trade clauses
Where an agreed restraint of trade clause is valid only for the duration of the employment relationship, the employer is not obliged to pay a premium for the clause. Where, however, a restraint of trade clause remains in force after the termination of the employment relationship, the employer is obliged to pay the employee reasonable monthly compensation after the termination of the employment contract.
The Employment Contracts Act does not prescribe the amount of compensation for maintaining a restriction of trade, as the content and effect of each restriction depends on the specific contract. The amount of compensation will depend on the content of the agreement, i.e. the temporal, spatial, and material definition of the restriction, as well as on other factors that the parties consider relevant (e.g., the remuneration that the employee could receive by working for a competitor, the employee’s experience, knowledge, education, etc.). As such non-compete agreements constitute a restriction of an employee’s choice field of activity or place of employment, the amount of special remuneration paid in compensation must be fair and must compensate for the restriction of the choice of place of employment (judgment of the Supreme Court No. 3-2-1-39-11).
Reimbursement of business trip expenses and payment of daily allowances for business trips abroad
Regulation No. 110 of the Government of the Republic of 25 June 2009 (establishing the procedure of daily allowances for business trips abroad) provides the procedure for payment of compensation for expenses incurred in the performance of job duties and the minimum rate, conditions, and procedure for payment of daily allowances for business trips made abroad.
For reimbursement of business trip expenses and payment of daily allowances, the employer must draw up a written decision. This document that serves as the basis for the payment of business trip expenses must indicate the destination, duration, and purpose of the business trip as well as the rates of the reimbursable expenses and the daily allowance. Employees have the right to demand compensation for expenses that may be incurred due to a business trip within a reasonable time before the start of the business trip, including:
- travel and accommodation expenses in connection with the business trip;
- expenses incurred in connection with the purchasing of transport tickets;
- travel insurance;
- visa processing costs;
- luggage delivery costs.
If the employer fails to make an advance payment to compensate for such expenses within a reasonable period, the employee will have the right to refuse to go on the business trip. All expenses related to business trips are reimbursed on the basis of a document certifying the expenses. Under the abovementioned regulation, daily allowances are not required to be paid for time spent on domestic business trips.
The minimum daily allowance for business trips abroad is €22.37 per day. The maximum tax-free amount is €50 for the first 15 calendar days of a calendar month and €32 for the remaining days. Daily allowance must be paid for a business trip abroad if the destination is located at least 50 kilometres from the border of the settlement where the place of work is located.
Employers may reduce the rate of the daily allowance for business trips abroad by up to 70% if free meals are provided for the employee during the stay abroad.
Daily allowance must be paid for the day of departing on a business trip abroad if the vehicle travelling to the foreign country departs no later than at 21:00. Daily allowance must be paid for the day of arrival from a business trip abroad if the vehicle arrives after 3:00. In other words, if at least 3 hours of the business trip fall within the relevant date.
Daily allowance for business trips abroad must be paid both to employees on a business trip as well as to posted workers. Thus, if the place of work agreed with the employee is Estonia and the employee is temporarily working outside of Estonia under the conditions laid down in Directive 96/71/EC of the European Parliament and of the Council concerning the posting of workers in the framework of the provision of services, i.e. they are a posted worker, the employer must pay them a daily allowance for the period of posting in addition to their wages. Read more here
Compensation for spectacles
The employer must reimburse the cost of spectacles or other visual acuity correcting equipment if an examination by an occupational health doctor, ophthalmologist, or optometrist reveals that an employee needs spectacles or other visual acuity correcting equipment to work with a monitor.
If an employee spends at least half of their working time working with a monitor, the employer must arrange for the employee to undergo a medical examination, which must include at least an eye and vision examination and a musculoskeletal examination. The medical examination must be carried out within four months of taking up employment and thereafter at intervals determined by the occupational doctor or at the request of the employee in the event of visual disturbances or musculoskeletal disorders. The costs related to the medical examination must be borne by the employer. The medical examination must be performed during working hours and the employee must be paid the average working day wage during that time.
The exact procedure for reimbursement of the cost of spectacles must be laid down by the employer in their internal procedures (for example, by specifying the maximum amount of compensation for spectacles, or the amounts for lenses and frames separately, or other variations, as well as which documents the employee has to submit in order to be compensated). The compensation must cover the cost of both lenses and frames, because spectacle lenses cannot be used without frames. The amount of compensation for the cost of spectacles is determined by each employer according to their capabilities, as legislation does not specify the amount of compensation. The amount of compensation must be sufficient to enable the employee to purchase their spectacles.
Employers are not obliged to reimburse the cost of an employee’s spectacles every time the employee loses them, breaks them, they become unusable for other reasons, or the employee simply wishes to replace them with new ones. When reimbursing spectacles, employers must follow the principle of reasonableness and reimburse the cost of spectacles if the employee suffers from visual disturbances and if new spectacles or other visual acuity correcting aids are necessary for the performance of their job duties when working with a monitor. In certain cases, reimbursement of spectacles or other visual acuity correcting equipment multiple times a year may be justified; for example, because it may no longer be possible to work in November with spectacles purchased in January.
If an employee uses spectacles only for work, the employer is obliged to reimburse the full cost of the spectacles (up to the established maximum amount). In such a case, the employer may lay down the procedure for storage of the spectacles intended only for work in their internal procedures. If the employee wishes to also use the spectacles for non-work-related activities (e.g. reading at home or using a computer at home), the proportions of the work-related and non-work-related activities must be established and the employee must pay the corresponding share.
Reimbursement of health and sports expenses
Employers can reimburse health and sports expenses tax-free in an amount of up to €100 per employee per quarter.
Tax-exempt health promotion expenses include:
- fees for participation in a public sports event;
- expenses directly linked to the regular use of a sporting or physical activity facility;
- employers’ expenditure on the maintenance of their existing sports facilities;
- expenditure on services provided by a rehabilitation doctor, physiotherapist, occupational therapist, clinical speech therapist, or clinical psychologist registered in the national register of healthcare professionals or holding the corresponding professional certificate;
- health insurance premiums.
Read more on the website of the Tax and Customs Board.
Compensation for use of a private car
Employers may pay their employees tax-free compensation for use of a private car on the basis of the procedure set out in Regulation No. 164 of the Government of the Republic of 14 July 2006.
This compensation may be paid tax-free in an amount of up to €0.3 per kilometre travelled for the performance of job duties, but not more than €335 per calendar month per natural person receiving the compensation. If a natural person is paid the compensation by more than one employer for journeys made in the same calendar month, each of the employers may pay up to €335 of the compensation tax-free.
Read more on the website of the Tax and Customs Board.
A health day is a paid day off work without taking sick leave. The Medical Insurance Act that was in force before 2002 provided for three health days per year to employees. While there is still interest in health days today, the current acts do not provide for them.
Health days should not be confused with statutory sick leave, where the first three days are unpaid, the employer pays compensation in the amount of 70% of the employee’s wages for days 4 to 8, and the Health Insurance Fund pays 70% from the 9th day onwards.
Providing health days is an option to motivate employees. Normally, the right to health days is established in the employer’s rules on organisation of work, which should also indicate how many health days are provided and how they are compensated, whether health days can expire, how to report the taking of a health day, etc.
When concluding an employment contract, it is always a good idea to thoroughly discuss all of the options offered by the employer – paid health days and a family-friendly company may be just the thing the employee values.
Benefit for incapacity for work
Benefits for temporary incapacity for work include:
- sickness benefit, which is paid in the event of sickness, injury, or quarantine;
- care benefit, which is paid for nursing care;
- maternity benefit, which is paid for maternity leave;
- adoption benefit, which is paid for time spent on adoption leave.
The benefit for temporary incapacity for work is financial compensation paid by the Health Insurance Fund to an insured person on the basis of a certificate of incapacity for work (sick leave certificate, care certificate, maternity certificate, adoption certificate).
The Health Insurance Fund is allowed to pay sickness benefit within 30 calendar days of the date of receipt of the properly prepared sick leave certificate by the Health Insurance Fund.
Employers are required to pay sickness benefit on the employee’s payday or within 30 calendar days after being notified by the employee of the termination of the electronic sick leave certificate or the submission of a properly prepared sick leave notice or certificate in paper format to the employer.
- For days 4 to 8 of sickness, sickness benefit is paid by the employer. The benefit equals 70% of the employee’s average wages for the last six months. In the case of contracts under the law of obligations (contract for services and authorisation agreement), the contracting entity does not pay sickness benefit to the contractor or mandatary for days 4 to 8 of sickness.
- Starting from day 9 of sickness, the Health Insurance Fund pays sickness benefit to both employees working under an employment contract and to service providers working on the basis of a contract under the law of obligations. The benefit equals 70% of the employee’s average income subject to social tax per calendar day in the previous calendar year.
The employer does not have to pay benefit if the reason for leave is:
- occupational disease,
- an accident at work,
- a traffic accident at work,
- a complication/illness resulting from an accident at work,
- an injury suffered in the protection of the interests of the state or society or in the prevention of crime,
- transfer to lighter work,
- illness or injury suffered during pregnancy.
In such cases, sickness benefit is paid by the Health Insurance Fund from day 2.
The benefit for incapacity for work is regulated by the Health Insurance Act.
Additional information can be found on the website of the Health Insurance Fund.