• Vabariigi Valitsuse määrus ‘Töötasu alammäära kehtestamine’opens in new tab, [Government regulation: Establishing the minimum wage].

• ‘Töölepingu seadus’opens in new tab [Employment Contracts Act].

• Kollektiivlepingu seadusopens in new tab § 42. Collective Agreements Act.

• Töölepingu seadus. Selgitused töölepingu seaduse juurdePDFopens in new tab [Employment Contracts Act: Explanatory Memorandum].

The level of the minimum wage is set jointly by peak-level social partners. The Employment Contracts Act, § 29 (5), defines the actors involved in setting the minimum wage: the central employers' organisation and trade union confederation. Other social partner organisations cannot participate in the agreement. Therefore, each year, the peak-level social partners, the Employers' Confederation (ETKL) and the Trade Union Confederation (EAKL), negotiate the minimum wage rate and conclude an agreement for the following year. The Estonian government then establishes the minimum wage through a government regulation titled 'Establishing the Minimum Wage'.

The regulation is signed by the Prime Minister, Secretary of State, and a Minister responsible for employment relations and the labour market. It is signed annually and includes a clause revoking the previous regulation.

The national minimum wage agreement is negotiated annually by peak-level social partners. Between 1992 and 2001, a tripartite agreement set the minimum wage each year. Since 2002, bipartite collective agreements can be extended under the Collective Agreements Act, § 4. This allows social partners to extend the agreement to all employers and employees.

Since then, the Estonian Trade Union Confederation (EAKL) and the Estonian Employers' Confederation (ETKL) negotiate the minimum wage rate and then the government enacts it through a regulation titled 'Establishing Minimum Wage' (Vabariigi Valitsuse määrus 'Töötasu alammäära kehtestamine'). The regulation is signed annually and includes a clause revoking the previous one. It only sets the start date (usually 1 January) but not the end date. If no agreement is reached, the previous minimum wage regulation remains valid, and the rate stays the same.

Traditionally, social partners agree on both hourly and monthly minimum rates. Negotiations typically begin in spring and conclude in autumn. There's no set deadline for reaching an agreement. The timeline usually follows the publication of the Estonian Bank's Economic Forecasts, which serve as the basis for negotiations and are published in summer and autumn.

Between 2008 and 2010, due to the economic crisis, no agreement was signed, and the minimum wage was frozen. Biennial agreements were reached in 2013 and 2015. In 2023, the social partners concluded a goodwill agreement setting targets for increasing the minimum wage until 2027.

There are no mandatory criteria, but social partners have agreed on some guidelines.

In 2017, the peak-level social partners agreed on a method for setting the minimum wage from 2018 to 2022. The agreement stipulated that the basis for negotiations would be labour productivity and economic growth. The minimum wage increase would be twice the forecasted increase in labour productivity for the next year (based on the Estonian Bank's forecast), but no higher than twice the forecasted real economic growth. Additionally, the new minimum wage couldn't be lower than 40% of the forecasted national average wage.

In 2023, social partners concluded a non-binding agreement setting targets for increasing the minimum wage until 2027. According to the agreement, the minimum wage increase should be a progressively growing proportion of the average wage, with targets set at 42.5% in 2024, 45% in 2025, 47.5% in 2026, and 50% in 2027. However, social partner discussions will continue to determine the minimum wage each autumn. Consequently, an assessment of the economic outlook and unemployment indicators for the next year must be conducted and considered when finalising the agreed-upon minimum wage rate.

According to Article 2 of the non-binding agreement, social partners agree on the minimum wage each autumn, 'taking the most recent Estonian Bank Economic Forecast as the basis'. There are no specific criteria mentioned, and according to social partners, the Forecast is used as a basis for arguments and discussions. The Estonian Bank Economic Forecast typically includes GDP growth, unemployment rate, and average gross salary.

Article 4 outlines that the rate of growth 'will be reconsidered and may be changed' if one of the following scenarios occurs:

• The latest economic forecasts suggest a decline in the overall economy in the current or future year.

• Unemployment has significantly increased in the previous three quarters compared to the previous period.

• The number of companies with envelope wage risk has increased significantly, attributable to the rapid growth of the minimum wage.

• The assumptions of the goodwill agreement, such as the definition of unemployed, the level of benefits, or the gross wage structure, have changed significantly.

Social partners also consider the economic forecast by the Ministry of Finance, which includes all major macroeconomic indicators such as gross domestic product (GDP), unemployment rate, labour shortages, employment rate, consumer price index, consumption, export, investments, etc.

The Estonian Bank publishes forecasts quarterly.

• Ministry of Finance: Economic forecast (Ministry of Finance)opens in new tab

• Estonian Bank: Economic forecast (Estonian Bank)opens in new tab

• Hea tahte kokkulepe (goodwill agreement) on minimum wages 2024–2027opens in new tab 2024-2027. aasta töötasu alammäära suuruse ja metoodika kohta. Tööandjate Keskliit ja Ametiühingute Keskliit [non-binding agreement for the amount and method of minimum wages 2024-2027. Employers Confederation and Trade Union Confederation].

The minimum wage is universally binding for virtually everyone.

Variations of statutory minimum wages There is no sub-minimum wage or higher statutory rates. No worker in Estonia should be paid less than this minimum pay rate.

The minimum wage is set both monthly and hourly. The law states that the monthly rate applies to full-time employment, which is 40 hours a week. Workers are entitled to 12 monthly payments a year.

The minimum wage is not divided into components.

All additional benefits, such as bonuses, company car, additional benefits, on-call time, other subsidies such as reimbursement for prescription glasses, etc. must be fixated in the employment contract and do not count towards wage.

In Estonia, there are no regular reports on how the minimum wage is set. Developments in the negotiations are usually covered by Estonian Public Broadcasting (Eesti Rahvusringhääling, ERR).

• Masso, J., Roosaar, L., Lees, K., Võrk, A., Pulk, K., Espenberg, S. (2021), Alampalga mõju Eesti sotsiaalmajanduslikule arengule.PDFopens in new tab

• Ferraro, S., ja Soosaar, O. (2020), Minimum Wage, Employment and Firm Productivity. Tallinn University of Technology.

• Ferraro, S., Hänilane, B. and Staehr, K. (2018), Minimum wages and employment retention: A microeconometric study for Estonia. Baltic Journal of Economics, 18(1), 51-67.

• Ferraro, S., Meriküll, J. and Staehr, K. (2018), Minimum wages and the wage distribution in Estonia. Applied Economics, 50(49), 5253-5268.