Payroll and labour law

More and more Estonian companies prefer to outsource payroll functions rather than have a staff position. The reason is that it’s a time-consuming job and requires use of the latest software and keeping up to date with frequent changes to legislation.

Gaily Kuusik, head of Grant Thornton Baltic's business process solutions, gives an overview of the legislative amendments that have already come into effect or will soon come into effect.

In the end of 2022, Grant Thornton Baltic received the Partner Excellence Award from its cooperation partner, the global business services provider ADP, for 15 years of excellent cooperation in payroll processing for ADP clients in the Baltic countries.

In the business world, success comes from focusing on your field and working your way to the top. But that takes time and dedication. So if you are just going into business or expanding, it is wise to think about what sorts of support services are worth outsourcing – what happens if your accountant or computer person is not sitting in the next room but works for an external service provider?

Below we list eight main reasons why companies prefer outsourcing payroll operations instead of a dedicated in-house department.

More and more Estonian companies have ceased to perform their own payroll functions but rather outsource it to a service provider. The reason for this is the fact that payroll takes a lot of time and requires use of updated software and it also takes a knowledge of frequently changing laws.

A growing trend – outsourcing payroll accounting

The calculation of tax-exempt income changed in 2018. To avoid the obligation to pay additional income tax on the basis of tax returns, more attention must be paid to which categories of income are counted toward taxable annual income. One taxable type of income is the parental benefit, which will be calculated under new principles starting 1 September of this year.

Temporary employees are usually employed under fixed-term employment contracts, and it is important to note the differences compared to contracts with indefinite term.