Sick leave looks like a small payroll event until the first unclear month arrives. The employee is absent, payroll is waiting for dates, management wants the salary file closed, and the accountant has to decide whether the payment is sick leave compensation, ordinary salary, or an exception that changes the tax treatment.
In my work with Estonian employers, the expensive part is rarely the formula itself. The expensive part is late information. A sick leave period that is not marked before payroll approval can distort net pay, TSD reporting, employer cost and the internal monthly close. This guide is written for owners and payroll approvers who need a practical control routine, not a medical-benefit manual.
What the employer usually pays
For an ordinary sickness or household injury case, the employer-side payroll task usually starts from days 4-8 of the sick leave period. The official Tööelu guidance states that the employer pays sick leave compensation for those days at 70% of the employee's average pay. From day 9, the public health insurance side takes over the benefit calculation, but the employer still has payroll and data duties.
Do not turn this into a simple calendar shortcut. Payroll should first confirm the reason for the leave, the start and end dates, whether the person is under an employment contract, and whether the case falls into a special category where the employer payment is not handled in the ordinary way.
| Payroll question | Normal control | Why it matters |
|---|---|---|
| Days 1-3 | Usually no employer sick leave compensation | Avoid paying ordinary salary by mistake |
| Days 4-8 | Employer compensation at 70% of average pay | This is the key payroll amount |
| From day 9 | Benefit side continues outside normal salary payroll | Employer data must still be clean |
| Special reasons | Check before paying | Some cases are not ordinary sickness payroll |
Average pay must be checked before payroll closes
The weakest control is to copy last month's salary into the payroll sheet and adjust by feel. Sick leave compensation is based on average pay, so the payroll file needs a clear calculation base. Tööelu's average-pay guidance is useful because it ties the calculation to the same practical family of payments as holiday pay and sick leave compensation.
The owner does not need to recalculate every line personally. The owner does need to ask whether the accountant had the correct absence dates, whether the average-pay base is complete, and whether unusual payments in the reference period were reviewed before the payroll draft was approved.
- Confirm the first and last day of the sick leave period before salary approval.
- Separate sick leave compensation from ordinary working days.
- Check whether the employee had irregular bonuses, unpaid leave, or a partial month in the average-pay period.
- Store the calculation together with the payroll approval evidence.
This is especially important when the same month also includes a new hire, termination, unpaid absence, or a low salary that triggers a separate social-tax review.
TSD treatment is not the same as salary
For payroll reporting, sick leave compensation should not be buried inside ordinary salary without review. EMTA's TSD example shows the practical tax split: employer sick leave compensation up to 100% of average pay is declared with payment type 24 and is subject to income tax treatment, while an amount above that boundary is treated like salary for the excess part.
For a standard 70% employer payment, the control point is simple: the payment type, withholding, and payroll software mapping must match the sick leave compensation logic. If the company voluntarily pays more than the statutory level, the tax treatment must be checked before the payment file is released.
| Payment decision | Payroll risk | Owner check |
|---|---|---|
| 70% of average pay | Wrong TSD payment type | Confirm type 24 treatment |
| Up to 100% of average pay | Still not ordinary salary | Confirm income-tax handling |
| Above 100% | Excess may become salary-like | Ask for the split before approval |
| Late correction | TSD amendment and employee confusion | Catch the issue before filing |
Owner checklist before approving payroll
A good sick leave payroll process is small and boring. It does not require a new policy document every time someone is absent. It requires a monthly cut-off, a named owner for absence data, and a short exception list before payroll is approved.
I would use this sequence in any company where payroll is outsourced and the owner still approves the salary file.
- Collect sick leave dates before the payroll cut-off.
- Mark which days are ordinary working days and which days are sick leave compensation days.
- Ask the accountant to confirm the average-pay base and TSD payment type.
- Separate voluntary top-ups from statutory sick leave compensation.
- Keep the calculation and approval together with the monthly payroll archive.
If you already use a monthly close routine, sick leave should be one line in that routine, not a separate emergency conversation after salaries are paid.
The mistake I see most often is operational, not technical: nobody owns absence data until payroll is already being closed. Assign that responsibility before the month starts, and sick leave becomes a controlled payroll item instead of a correction. Related topic: Board Member Salary vs Dividends in Estonia.
Sick leave payroll in Estonia is manageable when the workflow is clear: dates first, calculation base second, tax mapping third, approval last. The payment itself is only one part of the control. See also: payroll calculator Estonia 2026.
If your payroll includes sick leave, part-time work, unpaid absence or manual corrections, compare your routine with our accounting and payroll support in Estonia or contact Accounting Resources before the next payroll cut-off.