Business trips within Estonia
- An employer has the unilateral right to send an employee on a business trip.
- A pregnant woman, an employee raising a child under three years of age or a disabled child may be sent on a business trip only with his or her consent
- An employee has the right to demand compensation for expenses relating to a business trip.
An employer has the unilateral right to send an employee on a business trip.
An employee shall perform his or her duties at the employer’s place of business which has the strongest connection with the employment relationship (location of the company’s management body), unless the place of performance of work has been agreed on. Usually the place of work is agreed on.
Pursuant to the Employment Contracts Act, an employee is on a business trip if the employer sends him or her to perform duties outside the regular or agreed place of performance of work, including within Estonia, i.e. domestically, or business travel abroad.
For example, if the place of performance of work prescribed by the employment contract, i.e. agreed on, is a foreign country (e.g. Finland, Norway) where the entire work is performed, the time spent there is not considered a business trip.
If a job requires business trips, this should be explained to the employee upon employment. The parties should also agree in the beginning if and how the time spent on going to and returning from a business trip is compensated, as this is not defined as working time in the Employment Contracts Act and is therefore not subject to compensation. However, if travelling for this purpose is done during the agreed working time, it may be considered performing the orders of the employer and agreed wages shall be paid for it.
Prior consent is required for a business trip if:
- a pregnant woman and an employee raising a child under three years of age or a disabled child is sent on a business trip;
- an employee who is a minor is sent on a business trip (consent of the minor and his or her legal representative is required);
- the business trip lasts for more than 30 consecutive calendar days.
Compensation for business trip expenses
An employee has the right to demand compensation for possible expenses relating to a business trip within a reasonable time before the beginning of the business trip. The employee has the right to refuse to go on a business trip if the employer has not made an advance payment within a reasonable time.
Payment of daily allowance
The Employment Contracts Act does not provide for the obligation to pay a daily allowance in the case of a domestic business trip. Government of the Republic Regulation No. 110 of 25 June 2009, “Procedure for the payment of compensation for the expenses relating to business trips and the minimum daily allowance rate, conditions and procedure for the payment” provides for the procedure for reimbursement of expenses incurred in the course of the performance of duties and the minimum daily allowance for business travel abroad.
Therefore, it is not possible to pay employees a tax-free daily allowance for business trips within Estonia. If the employer does decide to pay a daily allowance for a domestic business trip, this payment is considered part of the wages and shall be taxed and declared as wages.
Compensation for damage
Section 40 of the Employment Contracts Act regulates the compensation for expenses by and damage to an employee in the performance of work duties, including during a business trip. The Employment Contracts Act does not specify the types of expenses that are subject to compensation, as it is not possible to compile an exhaustive list. Instead, the common nature of the costs to be compensated shall be identified and the need to compensate for them shall be decided on. An employer shall reimburse the employee for any reasonable expenses which the employee has incurred in performing the duties and which the employee could have deemed to be necessary in the circumstances (subsection 628 (2) of the Law of Obligations Act). Reasonable expenses are those that are necessary for the performance of the duty, i.e. without which the duty could not be performed or its quality would suffer significantly.
On the example of a business trip, such expenses would be:
- travel expenses to the destination;
- accommodation expenses;
- other expenses related to the business trip that are required for the business trip, such as expenses related to communication with the employer or organisation of negotiations with a contractual partner.
It is advisable to agree on which expenses will be reimbursed to avoid later disputes.
The Supreme Court has clarified in judgment No. 3-2-1-175-11 that it can be concluded from subsection 40 (1) of the Employment Contracts Act and subsection 628 (2) of the Law of Obligations Act that an employer shall reimburse the employee for any reasonable expenses which the employee incurs in performing the duties and which the employee could deem to be necessary in the circumstances. Reasonable expenses are considered expenses that are necessary for the performance of the duty, i.e. without which the duty could not be performed or the quality of the work would suffer. In deciding on the reasonableness of expenses, it is necessary, in particular, to clarify what the relevant usual necessary costs are.