Gross salary

Gross salary is the remuneration agreed in the employment contract before any taxes are withheld. It includes base pay, supplements, bonuses, holiday pay and other payments treated as salary. Under Estonian Employment Contracts Act (TLS) § 29, the remuneration must be stated as a specific amount in the contract.

Gross salary, net salary and employer cost

The same wage seen from three angles:

  • Gross salary – the figure written in the employment contract (e.g. €1500)
  • Net salary – gross minus income tax, unemployment insurance and funded pension contributions
  • Employer cost – gross plus employer-side social tax (33%) and unemployment insurance (0.8%)

Example: a gross salary of €1500 means the employer pays a total of €2007 (1500 + 495 + 12), and the employee takes home about €1281.88 with the €700 tax-free allowance. See the full calculation in Net salary or verify with the calculator.

What is included in gross salary

All monetary payments with the character of remuneration for work:

  • Base pay – monthly or hourly rate agreed in the contract
  • Supplements – night work, overtime, public holiday work, on-call time
  • Bonuses and performance pay – additional pay for results
  • Holiday pay – pay for statutory and supplementary holiday periods
  • Profit-based pay – e.g. an annual result bonus
  • Commission – sales-based payments

All of these are subject to income tax, social tax and unemployment insurance. Income Tax Act (TuMS) § 13

What is NOT part of gross salary

The following payments are not gross salary and are taxed differently:

  • Per diems for foreign business trips – up to the tax-free limit set by law
  • Travel expenses – transport, accommodation and other employer-reimbursed costs
  • Fringe benefits – e.g. private use of a company car, health cost reimbursements; taxed at employer level with income tax (22/78) and social tax. TuMS § 48; practical guidance from the Estonian Tax and Customs Board.
  • Dividends – owner’s share of profit; taxed at the legal entity level (22/78), not as salary

Monthly vs hourly pay

Gross salary can be specified two ways in the employment contract:

  • Monthly salary – fixed amount per calendar month regardless of the number of working days (e.g. €1800/month)
  • Hourly salary – paid per hour worked (e.g. €12/hour)

In either case the statutory minimum applies: for full-time work (40 hours/week) in 2026 the monthly minimum cannot be less than €886 (January–March) or €946 (from April), with hourly minima of €5.31 / €5.63. More detail: Minimum wage.

Taxes withheld from gross salary

For each payment the employer withholds:

  • Funded pension (II pillar) – 0%, 2%, 4% or 6% of gross depending on the employee’s choice. Pension Centre lookup
  • Employee unemployment insurance – 1.6% of gross
  • Income tax – 22% of taxable income after prior deductions and the tax-free allowance

Full worked example from gross to net: see Net salary.

Gross salary and the social tax minimum

Even if the employee’s gross salary is low, the employer must pay social tax on at least the statutory minimum base. In 2026 the monthly social tax minimum is €292.38 (33% × €886), meaning this amount is an employer cost under an employment contract even when the gross is lower. Exceptions apply for part-time work and certain groups — see Social tax.