Estonia: New Rules Forthcoming for Businesses Seeking to Hire Foreign Workers

New business activity requirement.

• Companies operating in Estonia applying for a temporary residence permit will need to prove at least six consecutive months of actual business activity in Estonia immediately prior to submitting the permit application.
• Currently, employers do not need to prove any business activity in Estonia.
• This rule will not apply to companies that employ foreign nationals based on a short-term employment registration (which is a special process involving registering short-term employment with the Police and Border Guard Board without applying for a temporary residence permit).

• This reform will favor established entities, but will delay the ability of newly-established businesses to hire foreign workers on a long-term basis.
• After this rule comes into effect, a business that needs to engage foreign talent during this initial six-month period will only be able rely upon the short-term employment registration exception. This may not always be suitable for all job roles or the needs of every business, especially where they require an employee more quickly.
• To the extent that they cannot resolve talent shortages via the local workforce, affected businesses may therefore need to postpone the scaling up of operations.

New related rule for temporary work agencies.

• The rule requiring temporary work agencies leasing out foreign workers to provide a guarantee of at least one month's salary for a foreign worker will be eliminated.
• Instead, such agencies will need to prove six months of actual business activity in either Estonia or another European Economic Area Member State.

• The elimination of the one-month salary guarantee will ease financial pressure on temporary work agencies, but raises concerns about wage security for employees. The regulation appears to seek to offset this risk by making it harder to be an eligible agency.
• Viewed together with the new six-month activity requirement, the regulatory focus of the government is shifting from a concern with financial guarantees to concerns about business track records.

New business registration rule.

• Employers will only be able to employ foreign workers – whether on a temporary residence work permit or registered for short-term employment – if the employer is registered in the Estonian business register, where there is currently no such requirement.
• This change will not apply to state or municipal institutions.

• This reform will close the current practice of non-resident employers sending employees to work in Estonia while the employee remains on the payroll of the office in the home country (under which employers only have to register the employee for short-term employment in Estonia, which is a simple procedure).
• Once the reforms are in effect in 2026, assignments will only be possible via an intra-corporate transferee permit.