How to move employees to another country on the case of Estonia
One day an employer is faced with the question of employees’ relocation. Relocation may be temporary or long-term, within one country or to another country. In this article, we’ll focus on the situation when a company chooses to move an employee to Estonia for the long term.
Moving to another country can be a pain both for an employee and an employer. At some point, you’ll be likely to use a relocation service to facilitate the process. Still, it’s good to get your own perception and objective guidelines to manage the limitations and difficulties. Here we go!
When Cases of Relocation Take Place
Let’s arrange the figures on the board before you make a move. You’ve probably got a workforce unit outside of Estonia to be relocated in. But where are you as an employer physically based? Who plays the role of employee?
*employer is a member of Estonia e-Residency program which includes access to many of the e-services available to citizens, digital ID cards for a company’s founders, but no personal residency permits for them
Reasons for a relocation vary among the cases. When a company based in Estonia launches a relocation of an existing employee from abroad, it usually comes to business feasibility and an objective shortage of personnel on the Estonian market. In IT, for example, the lack of staff will amount to around 7,000 employees in the next decade, as Work in Estonia mentions.
Along with staff shortage, Estonian companies may consider that an employee from outside, i.e. outside EU and EEA, creates fewer costs, even put together with relocation costs, than a local employee. Again, it’s popular among IT specialists. To settle: a min wage in Estonia in 2022 is €654, and an average wage in IV of 2021 is €1625.
The interest of any entrepreneur to reduce business costs is natural. But in this case, you have to be prepared to meet legal requirements to relocate in Estonia and keep labor market protection rules in mind. The same applies to foreign businessmen who have got Estonian companies through the e-Residency program and consider relocation for their employees or themselves.
Startups, niche IT companies as well, and other e-residents of Estonia are looking for a more sustainable environment to live in. No wonder, some of them begin to consider Estonia as a place of physical residence as they experience its convenient services and safe environment.
A relocation process takes more resources for e-resident companies than for those who are already on the ground. But there are, for instance, preferential terms for startups to get a visa and move to Estonia.
While you’re not going to relocate the whole team from another country to Estonia, at least at once, you might be thinking about moving a couple of others. It can be worthy to have a company representative in the country of juridical residence, for example, for life talks with your partners in Europe.
Legal Arrangements for Relocation
A residence permit is a main bureaucratic issue you have to deal with in a relocation process. If an employee is an EU citizen coming to work longer than 3 months, they will need to register their Estonian address in the population register of Estonia.
If an employee is a non-EU citizen, they will need to get a temporary residence permit to live and work in Estonia. Skipping a seasonal job, an employer has two basic options: a residence permit for employment and a Startup visa.
*for more information you can visit Move to Estonia page of the e-Residency program
In most cases, an employer should meet the salary criterion at the level of the average wage and get approval from the Estonian Unemployment Insurance Fund that a vacant position cannot be filled from the existing labor resources.
There are some exemptions as mentioned above or, for example, for top specialists. But what’s more important is that this permit is a subject to the immigration quota (for 2022 it was 1,311) and often filled in the first weeks of a year.
No salary level or fund approval is required for a Startup visa. Also, you don’t have to take into account the immigration quota. In this case, you have to concentrate on being qualified as a Startup company and then use the simplified process of getting visas for employees.
Relocation Service Providers
Since a residence permit law is a minefield with limits protecting a labor market and exemptions attracting new talents, you can just outsource the relocation process to one of the service providers. The e-Residency Marketplace offers several companies for HR&Relocation services.
Rights and Responsibilities of Relocated Persons
Whereas we keep going with the relocation process on our own, a next stop is an employment contract. It may include the ‘mobility clause’ specifying relocation rights of an employee or not. If a contract doesn’t include the clause, an employee has the right to refuse a relocation.
Meanwhile, an employee who has a mobility clause in her/his contract can refuse a relocation if an employer doesn’t provide reasonable terms. Basically, it means that in any case, you ought to give a warning about a desirable relocation in advance and offer compensation for probable losses in money or free time.
Note that relocation should not result in a decline in the employee’s quality of life.
Another point is the type of employment. To be added, the topic discussed here is that your Estonian company actually can have an independent contractor living in Estonia.
However, such a tax backdoor would not be suitable for most moving employees who need to get a residence permit. Thus, it’s recommended to switch from recurrent contract to full-time employment by the relocation.
The responsibilities of a relocated employee constitute a list of bureaucratic tasks to be completed in the first weeks of a stay in Estonia. An employee may apply for a temporary residence permit from their country and then travel to Estonia. Or, an employee may first come to Estonia with a travel visa and then apply for a residence permit.
Either way, after that an employee will need to register their Estonian address, open a bank account, change a tax residency by submitting a form R and register at a general doctor. You can use a checklist prepared in the Relocation Guide.
Employee Relocation Package
Even young singles don’t usually move to another country empty-handed. Did you know that, for example, a fully-fledged PC can take over 25 kg by the air company standard 20-23 kg luggage paid?
Any relocation goes along with a number of losses: a comfortable apartment you settled in for years, a weekend you lost for bagging, etc. Thus, an employer is expected to offer a ‘relocation package’ to compensate it.
First and foremost, a relocation package is about financial assistance. It usually includes transportation reimbursement, temporary housing, and some pay adjustments or bonuses. Referring to SMEs, there are two basic approaches to relocation packages:
Tiered Packages - a relocation package is matched to the employee, her/his level of seniority, and living arrangements.
Managed Budget Packages - a relocation package is designed around the limit on what an employer is willing to spend on an employee’s move.
Let’s not forget non-financial assistance! It will be actually less painful for your accountant, and also it’s a simple way to show your care to an employee. Popular non-financial measures are as follows:
flexible start date,
adaptation period,
familial support,
community support (as Tallinn’s Expat Community),
and others.
In the end, the relocation of an employee from another country is not an easy process. It requires a lot of planning, making financial decisions, but afterward, it results in business growth and higher satisfaction among employees.
So, what an SME founder can do to excel in the relocation process? You can save a lot of energy by having essential business services automatized and set on the sole Control Panel.
