Information for this page was compiled during December 2023 and January 2024. As Member States are currently transposing the EU minimum wage directive, national legislation can be subject to change. Eurofound intends to update these profiles in early 2025. Users are invited to contact Eurofound if they are aware of changes.
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The minimum wage is implemented by a government regulation, ‘Establishing the Minimum Wage’. The regulation is established on the basis of the Employment Contracts Act § 29, article 5, which stipulates that the government of the Republic establishes the minimum wage on the basis of a collective agreement concluded between peak-level social partners: the central employers' organisation and trade union confederation. According to the explanatory memorandum of the Employment Contracts Act (point 10 of the commentary of § 29), the government is bound by the agreement reached by social partners and must not deviate from it.
The Collective Agreements Act, § 4, should be mentioned too, as it provided the legal basis for the extension of the agreements to all employers and employees.
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 goodwill 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 Goodwill 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:
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.
| Criterion | How is this defined/operationalised? | Regulation or practice |
| Unemployment increases | Percentage of unemployment of labour force (%) Source: Economic Forecast by Estonian Bank, Statistics Estonia. | Goodwill agreement for the amount and method of minimum wages 2024-2027 Article 4.2 |
| Number of companies at risk of envelope wages increases | Goodwill agreement for the amount and method of minimum wages 2024-2027 Article 6 says that the ‘state conducts regular statistical monitoring of unpaid taxes and supplies social partners with relevant information for minimum wage negotiations.’ Source for statistical data on taxes is usually Estonian Tax and Customs Board. | Goodwill agreement for the amount and method of minimum wages 2024-2027 Article 4.3; Article 6 |
| Average gross salary | Average monthly gross salary in EUR and yearly change in % Source: Economic Forecast by Estonian Bank, Estonian Statistics | Goodwill agreement for the amount and method of minimum wages 2024-2027 Article 1 |
| GDP | “the economy on the whole is in decline”: Growth of GDP (yearly change in %) Real gross domestic product Source: Economic Forecast by Estonian Bank. | Goodwill agreement for the amount and method of minimum wages 2024-2027 Article 4.1 |
| Consumer price index | Change in consumer prices. This is one of the main indicators of the Economic Forecast that social partners base their minimum wage arguments and discussions on. Source: Economic Forecast by Estonian Bank Estonian Bank | Goodwill agreement for the amount and method of minimum wages 2024-2027 Article 2 |
The minimum wage is universally binding for virtually everyone.
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).