The final payroll run for an employee is easy to underestimate. A manager sees one departure date, while payroll sees worked hours, unpaid salary, unused annual leave, bonuses, expense claims and possibly statutory compensation. If those inputs arrive after access is closed or the normal payday, the company may already have missed the legal payment date.
In my 15+ years in Estonian accounting, the reliable approach is to treat the last day as a separate payroll event. The official Tööelu guidance confirms that all employment-related claims become due when the contract expires. This guide shows how to build that settlement, calculate unused leave and keep the tax treatment tied to the legal basis.
Build the settlement from amounts that are actually due
Start with earned wages through the final employment date. Add overtime, supplements and performance pay only when the employee has earned them and they have become due. Then add unexpired unused annual-leave compensation and other due items such as sickness benefit, an approved foreign-business-trip allowance or an agreed bonus.
Keep statutory compensation separate from ordinary pay. Redundancy compensation, compensation for insufficient notice or a payment agreed on termination may follow a different legal basis and tax code. A convenient label such as “final bonus” does not change what the payment is.
| Component | Payroll evidence | Decision before calculation |
|---|---|---|
| Earned wages and supplements | Timesheet, salary terms and approved variable pay | What was earned through the last day? |
| Unused annual leave | Leave balance and average-pay calculation | Which days are earned, unused and unexpired? |
| Other due amounts | Expense approval, sickness data or bonus terms | Has the amount become payable? |
| Termination compensation | Notice, agreement and legal basis | Is this ordinary pay or statutory compensation? |
Calculate unused annual leave as a separate line
Tööelu explains that unused annual holiday is compensated in money only when the employment contract ends. Only earned, unused and unexpired days are payable. For a standard 28-day entitlement, the official example for a 90-day employment period produces 6.9 days: 90 ÷ 365 × 28.
The compensation uses average calendar-day remuneration. The average-wage guidance normally looks at wages earned and fallen due during the preceding six calendar months, with statutory adjustments to the calendar-day denominator. Do not copy the employee's current daily rate without checking the calculation base.
For example, assume payroll confirms EUR 1,200 of final earned wages, 6.9 unused days at an average calendar-day remuneration of EUR 75, and a due EUR 120 performance payment. Unused-leave compensation is EUR 517.50, so the gross settlement before any separately classified termination compensation is EUR 1,837.50.
| Example line | Calculation | Gross amount |
|---|---|---|
| Final earned wages | Approved payroll input | EUR 1,200 |
| Unused annual leave | 6.9 × EUR 75 | EUR 517.50 |
| Due performance payment | Approved amount | EUR 120 |
| Gross final settlement | Total of the three lines | EUR 1,837.50 |
Treat the last employment day as the payment deadline
Under the Employment Contracts Act and Tööelu guidance, claims arising from the employment relationship fall due when the contract expires. The normal payday next month does not postpone the final settlement. Payroll therefore needs the confirmed last date, working time, leave balance and payment decisions before that day.
A narrow written exception exists for remuneration from transactions performed wholly or partly after employment ends. It is not a general right to postpone final wages or unused-leave compensation. If a payment is late, the employee may claim late-payment interest and pursue the amount through a labour dispute body or court.
The employment-register end entry and final payment are related but separate controls. The register records the relationship; the bank payment and payroll ledger settle the claim. Completing one does not prove that the other was correct.
Report each payment by its legal substance
EMTA states that wages and compensation for unused holiday under section 84 are subject to the usual labour taxes and are reported in Annex 1 of TSD with payment type 10. Statutory redundancy compensation under section 100 uses payment type 33 and is not subject to unemployment-insurance premium. The contract-ending reason and payment basis must therefore reach payroll together.
Give the employee a calculation that separates gross wages, leave compensation, other pay and deductions. Store the termination notice or agreement, leave balance, average-pay worksheet, approvals and proof of payment with the payroll month. This makes a later question answerable without reconstructing the departure from email fragments.
I ask managers for one dated departure handoff, not several messages: last employment date, final working time, leave balance, approved variable pay, expense claims and the legal basis for any compensation. Payroll can then calculate once and explain every line.
A defensible final settlement begins before the employee's last day. Confirm what has been earned, calculate only unexpired unused leave, separate compensation by legal basis and pay the amount when the contract ends.
If Accounting Resources handles your payroll, send the complete departure data before the final day. For help reviewing a final settlement or improving the handoff process, use our contact form.