Vacation pay looks harmless until payroll is already approved and someone notices that the leave dates, payment date, unused days or average-pay base do not match. Then a simple summer holiday becomes a correction in payroll, an employee complaint, or a late question to the accountant.
This guide is written for Estonian employers who approve payroll but do not want to become payroll technicians. The official starting points are Tööelu guidance on the holiday schedule and Tööelu guidance on holiday pay. The owner-level task is to make sure the accountant receives clean leave data before the salary file is closed.
The holiday schedule is a payroll control
The holiday schedule is not only an HR calendar. It is the first control point for vacation pay because it determines when leave is expected, whether the employee has enough unused days, and when payroll must prepare the payment.
Tööelu explains that the employer can prepare and communicate the holiday schedule until 31 March. If the schedule is not communicated by that date, the employee can choose leave time with 14 calendar days' notice, which can make payroll planning harder.
- Approve the annual holiday schedule by 31 March.
- Show unused previous-year leave separately from current-year leave.
- Mark employees who have a legal preference for leave timing.
- Send every approved change to payroll before the salary cut-off.
A clean schedule prevents the most common owner-level problem: payroll receives the holiday after salaries are already being calculated.
Check the entitlement before calculating the amount
Under the official Tööelu leave guidance, annual leave is normally at least 28 calendar days per year. Some employees, including minors and employees with partial or no work ability, have at least 35 calendar days. Public holidays are not counted as annual leave days.
For payroll, the practical question is not only how many days the employee requests. The accountant needs the opening balance, days earned in the current calendar year, days already used, and any carry-over that may expire.
| Payroll question | Control | Why it matters |
|---|---|---|
| How many days are available? | Check current-year accrual and carry-over | Avoid paying or approving more leave than exists |
| Are public holidays inside the period? | Exclude them from annual leave days | The employee may be absent longer than the deducted leave days |
| Is the employee in a protected group? | Check 35-day entitlement where relevant | Wrong entitlement causes payroll and schedule errors |
| Is the employment ending? | Calculate unused leave compensation | Unused leave is paid in money only at termination |
Payment timing and calculation must be visible
Tööelu states that holiday pay is paid no later than the penultimate working day before the holiday starts. The parties may agree on later payment, but not later than the payday following the start of the holiday.
The calculation is usually based on average calendar-day remuneration. If the employee was paid fixed wages during the six months before the calculation month, the average calendar-day pay is not calculated and the fixed wage can be paid as holiday pay.
| Situation | Payroll treatment | Owner check |
|---|---|---|
| Variable wages or bonuses | Average calendar-day pay | Ask whether the six-month base is complete |
| Fixed wage for the reference period | Fixed wage may be paid as holiday pay | Confirm there were no variable payments affecting the base |
| Later payment agreement | Allowed only within the legal limit | Keep the agreement with payroll evidence |
| Termination | Unused leave compensation in final settlement | Check unused, unexpired days before final pay |
The detailed calculation basis comes from the average-pay rules, including Tööelu average-pay guidance and the Government regulation on average wages.
A practical month-end checklist
Vacation pay should not sit outside the monthly close. It affects gross pay, net pay, employer tax cost, cash flow, and the monthly evidence file. If the company runs payroll through an accountant, the owner still needs a short approval routine.
I would run the check before approving the salary file, not after the payment batch is sent.
- Confirm approved leave dates and any changed dates.
- Check available leave balance and public holidays inside the period.
- Confirm whether holiday pay is paid before leave or under a valid later-payday agreement.
- Ask the accountant to confirm the average-pay or fixed-wage basis.
- Store the schedule, calculation, agreement and payroll approval together.
Holiday pay then flows into the normal salary and tax reporting process, including the TSD rhythm described by EMTA. The point is not to make the owner calculate every line; the point is to make the payroll file defensible before it is filed.
The mistake I see most often is paying holiday pay correctly in arithmetic terms but weakly in process terms: the leave change was verbal, the payment date agreement was not stored, or the unused-day balance was not checked. Payroll accuracy depends on evidence, not only formulas. Related topic: Board Member Salary vs Dividends in Estonia.
Vacation pay in Estonia is manageable when the company treats leave as part of payroll control: schedule first, entitlement second, payment timing third, calculation evidence fourth. See also: minimum social tax.
If your payroll includes leave, sick pay, part-time work or manual corrections, compare your routine with our accounting and payroll support in Estonia or contact Accounting Resources before the next payroll cut-off.