01.11 2021

Attorney-at-Law Kaia Kuusler: when going to work abroad, be aware of local opportunities

How much should I get paid, who pays the taxes, do I keep my health insurance in Estonia? Working abroad can seem tempting and exotic, but if you do not know the answers to these and many other questions, you may return with your tail between your legs.

Cross-border employment means, in particular, having a job in a foreign country or living in one country and working in another. If an employee is sent to work abroad for a longer period of time and moves, for example, between branch offices in different countries, it is also considered cross-border employment.

According to Kaia Kuusler, Attorney-at-Law at KPMG Law, there are several important aspects to keep in mind when going to work abroad. Broadly speaking, the legal issues related to cross-border employment can be divided into three fields:

1. employment law

2. tax law

3. migration law

With regard to employment law, the first thing to understand is which country’s legislation applies to the employment relationship. Such an agreement on applicable law is often already included in the employment contract and you should look for it in the general section at the end of the contract.

However, this does not always mean that the application of the agreed law is the only option, since the law of another state may also apply from time to time without being expressly agreed on.

For example, it is worth knowing that if an employee is posted to another country to work for a contractual partner, they will be subject to local occupational health and safety requirements, which may be very different from the ones in Estonia. In general, the company where the employee is working is responsible for ensuring that occupational health and safety requirements are met. However, there is not as much clarity with respect to other terms and conditions of employment contracts.

According to Kuusler, it has happened, for instance, that the employer has not agreed with the contractual partner on the exact terms regarding the remuneration of the employee and the person responsible for fulfilling them. This situation naturally led to misunderstandings and a dispute.

“When the employee was posted abroad again, the employer contacted us to avoid a similar situation. We were able to successfully establish the rights and obligations of all parties under a tripartite agreement and this time there were no problems,” Kuusler explains and encourages companies to seek help from a lawyer before posting employees abroad, as it is always easier to prevent disputes than to resolve them.

Know your contractual rights

If a person working under a contract governed by Estonian law is sent to another country, their employment relationship will be governed by the rules of private international law. “These rules state that, in the case of an employment contract, the application of the agreed law may not lead to the employee being deprived of the protection afforded to them in the country where they usually carry out their work,” Kuusler explains.

For example, if a person has been working in Estonia, has a contract under Estonian law and is sent to work in Finland, it is important to find out whether they would enjoy more favourable conditions under Finnish law.
“In Finland and Sweden, there are collective agreements in quite a number of sectors that set minimum wages for employees in that sector,” Kuusler says, giving a typical example.

Thus, according to her, there have been cases where employees sent from Estonia to Finland do not actually receive the remuneration provided for by local law. “In such cases, the rules of private international law are applied. These say that if the employment contract is most closely linked to Finland or Sweden, the rules of that country, including collective agreements, apply,” Kuusler explains.

She says that this will allow employees to receive equal pay with locals, regardless of the fact that in the employment contract it has been agreed to apply Estonian law. There are also similar cases in Estonian case law – the employer is ordered to pay the employee the sums that cover the difference with the prescribed remuneration.
In the case of cross-border contracts, it is also necessary to assess where the work is carried out. This is important, because if an employee is posted outside their contractual place of work to carry out duties, it is regarded as a business trip.

“If the place of work is in Estonia and the employee is sent abroad, the employer is obligated to cover the costs of living abroad and pay a daily allowance for each day of the trip, with a minimum of 22 euros per day,” Kuusler gives an example.

The Supreme Court processed a case where an employee was sent to Sweden on the very first day. “The employment relationship lasted for about ten months and at the end of that period, the employee considers it to have been a business trip and claimed daily allowance for the time spent in Sweden. The court found that the employee was right and ordered the employer to pay the employee a daily allowance for these ten months,” Kuusler said.

Who pays my taxes?

Kuusler notes that when it comes to tax law, it is important to consider where the employee is a resident for tax purposes and where taxes are due.

“However, if you work in more than one country and wish to keep your health insurance in Estonia under the same conditions as before, you can apply for an A1 certificate which confirms that social tax is paid in Estonia and in this case health insurance will remain valid in Estonia under the same conditions,” she explains.

Today, working and moving around the EU is very easy. You can live and work for up to three months without essentially having to do anything. If a person stays in another country for a longer period, they must register their place of residence in that country.

Coming to work in Estonia from outside the European Union is more complicated; it is possible based on a visa for a short period, but a residence permit is required to work for a longer time.

For more information, see: the Tax Board, the Labour Inspectorate and the Police and Border Guard Board

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