How Do I Hire Employees for My Estonian Company?

Are you thinking about hiring employees? Congratulations! That means your business is growing. 🤩

However, as an international business, it is normal that you have doubts when hiring. That is why we have written this article.

It is important to distinguish between hiring professionals or freelancers, employees, or people with geographical independence.

Let’s explain each case. 😉

Professionals or freelancers

If your employees are or can become professionals or self-employed in their countries of residence, this is a good option for your business.

In this case, even if you sign a work contract with them, these professionals will issue invoices regularly for their work, which means that you will not pay them a salary, but an invoice for their services.

Your company will declare these invoices as expenses, so as this money is reinvested in the company, it will be tax-free. Another advantage is that these people will contribute to their social security and pension as professionals in their countries.

Additionally, it’s essential to consider where your employees live and where they are tax residents.

Most countries determine tax residency based on the number of days an individual spends in the country each year.

It is advisable to verify their registration status. Still, your company should not encounter any issues if they are not correctly registered as self-employed, as it is their responsibility. On the other hand, they may face problems with local authorities if they are not registered.

Employees

When hiring employees for your company, several crucial aspects require careful consideration.

First and foremost, it’s essential to remember that you will be responsible for paying full taxes on the employee’s salary as an employer. These taxes include the basic income tax and various social benefits such as medical care, unemployment benefits, and pension plans.

By ensuring that these taxes are paid in full, you are complying with legal requirements and contributing to the overall social security and welfare system. This guarantees that your employees receive the necessary support and safeguards, which can ultimately foster a positive and stable work environment.

Additionally, it’s crucial to recognize that you must cover various other taxes related to your employees as an employer. This includes the corporation tax, which pertains to the overall financial operations of your business, and the income tax, which is specific to your employee’s earnings.

By accounting for these taxes, you contribute to the overall financial stability of your company and ensure that you are fulfilling your obligations as an employer.

While hiring international employees may appear daunting due to potential complexities, it can be smooth. That’s where Companio Work can assist you. Companio Work offers a streamlined approach to employee management by taking care of crucial tasks such as registration, payroll processing, and compliance with local laws and regulations.

People with geographical independence

When you have digital nomad employees with no fixed tax residence, their situation is unique and requires careful consideration. In this case, your company would pay them a contractor fee instead of a regular salary.

However, it’s important to understand that being a digital nomad or having no fixed tax residence does not exempt them from their tax obligations or the need to comply with the authorities in their country of residence.

To ensure that digital nomads have no tax obligations in their home countries or countries of residence or to determine if they need to register as freelancers and comply with local tax authorities, it is advisable for them to consult with a local tax advisor.

By seeking guidance from a professional specializing in tax matters, digital nomads can clarify their tax obligations and take the necessary steps to comply with local tax laws. This will help them avoid legal issues and ensures they can continue their digital nomad lifestyle with peace of mind.

Considerations when hiring employees

The most important aspects to consider when hiring employees is where they live and where they are tax residents.

Most countries (except the United States) levy taxes based on residence. This means that its citizens are considered tax residents of that country if they live in the country for 183 days or more a year, although this varies depending on the country.

This applies to company members (board members and shareholders) and external employees.

The law comes first

You have seen different options for hiring employees for your business, but before deciding, gather information and consider which option is most advantageous for your company.

No matter which option you decide on, rest assured that Companio is here to support you throughout the entire process. Our powerful solution, Companio Work, is designed to make your life easier regarding employee management.

With Companio Work, we take care of all the essential tasks for you. We handle everything from employee registration to payroll management and ensure compliance with relevant regulations. We aim to make registering, paying, and managing your employees’ payroll as smooth and seamless as possible.

Let us handle the complexities, so you can focus on what truly matters: growing your business and achieving success.