By Sally Makreff
BLOG OVERVIEW:
Estonia’s Riigikogu adopted amendments to the Employment Contracts Act on June 17, 2026, effective July 13, 2026, that transpose only the recruitment transparency portions of the EU Pay Transparency Directive. Estonia has deliberately left the Directive’s heavier obligations untransposed, citing administrative burden and a preference for its market-driven wage-setting system, and has signaled it would rather absorb EU-level fines than impose those requirements on employers now. No penalty schedule has been published for the provisions currently in force, though the Labour Inspectorate (Tööinspektsioon) is expected to monitor compliance. Employers operating in Estonia must update job postings and hiring practices immediately, and should use the interim period to build defensible pay structures ahead of the reporting requirements still to come.
On June 17, 2026, Estonia’s parliament, known as the Riigikogu, adopted amendments to the Employment Contracts Act that transpose portions of the European Union’s (EU) Pay Transparency Directive (the Directive). The amendments became binding law on July 13, 2026, fulfilling Estonia’s commitment to transposing at least part of the Directive and giving employers a clear effective date for implementing the newly approved requirements.
Although Estonia has transposed portions of the Directive’s framework, it has not yet transposed the pay reporting provisions, citing concerns about the administrative burdens these requirements would place on employers and the limited amount of discretion available in determining how pay equality objectives should be achieved.
Requirements Transposed on July 13, 2026
With the passage of the amendments to the Employment Contracts Act, employers in Estonia are required to implement the recruitment transparency provisions that align with the Directive. Specifically, the amendments include the following:
- Pay disclosure before interviews: Under Section 11 Precontractual Negotiations, employers must give job applicants pay or pay-range information in a format that can be reproduced in writing. Employers may publish pay information in the job ad or communicate the pay information to the applicant prior to the job interview. If there are additional remuneration terms based on a collective bargaining agreement, the employer must also provide the applicant with information on those terms.
- Ban on asking about pay history: Under Section 11 Precontractual Negotiations, questions regarding pay history of a candidate’s previous or current employment relationships are now banned. While Estonian law already restricts employers from asking candidates questions related to pay if they have no legitimate interest, the amendments now clearly state that asking about previous or current pay is not permitted.
- Protection for employees who talk about their own pay: Under Section 28 Obligations of Employer, employers cannot restrict an employee from disclosing or discussing the amount of their pay.
In addition to the items above, the amendments, Section 29 Amount of Wages, state “the employer must ensure equal pay for equal work or work of equal value between women and men”. While Estonia’s Gender Equality Act has included this requirement since 2004, it is now also incorporated into the Employment Contracts Act. The law doesn’t mandate a specific method for ensuring compliance with this requirement; instead, it allows employers to determine how they will satisfy it.
Requirements Not Currently Transposed
As discussed in a previous DCI blog, Estonia's government announced that additional time and flexibility will be needed to implement certain elements of the Directive, primarily those related to pay structure development and reporting. As a result, Estonia is deferring full implementation of the Directive until a later date, and no legislation is currently before parliament. Specifically, the following provisions have not yet been transposed:
- Structured pay framework: The Directive expects employers to develop defined pay structures; however, Estonia has raised concerns with the mandatory prescribed pay structures set by the Directive.
- Mandatory gender pay gap reporting: Estonia has requested a delay in mandatory gender pay gap reporting until 2028. It believes this will give businesses enough time to adapt to the new pay reporting requirements. Under the Directive, employers with 100–249 employees would report every three years, and those with 250+ would report annually.
- Employee requests for comparative pay data: Per the Directive, an employee is entitled to request from their employer the average pay of colleagues performing work of equal value broken down by sex.
- Accessible pay-setting criteria: Employees don't yet have a legal right to see the criteria used to set pay levels and progression.
- Joint pay assessments: Joint pay assessments are triggered when a reported pay gap cannot be explained by objective, gender-neutral factors and remains unresolved six months after the report is submitted. This portion of the Directive can’t take effect until the pay gap reporting itself is implemented, since one depends on the other. Additionally, once the requirement is transposed, Estonia intends to rely on its existing legal system for enforcement actions and remedies rather than the Directive’s required process of joint pay assessments involving employee representatives.
The delay in implementing these requirements reflects Estonia's stated position that the Directive's reporting and structural requirements do not align with its flexible, market-driven wage-setting system, which allows for individually negotiated pay. The government is aware that it may incur fines as a result of the delay in implementation but has indicated it would rather risk EU-level fines than impose what it views as excessive administrative burdens on Estonian employers.
Penalties and Risks of Non-Compliance
With the transposition of the recruitment transparency provisions, which include pay disclosure before interviews, the salary-history ban, and the protection for employees discussing their own pay, violations are now enforceable in Estonia. However, while the Directive's Article 23 requires fines that are effective, proportionate, and dissuasive, Estonia has not yet specified penalties for violations of the portions of the Directive that are now in effect. Details on fines are expected to be published once full implementation of the regulations is finalized.
Even without a published fine schedule, Estonia is enforcing the recruitment transparency requirements through the Labour Inspectorate (Tööinspektsioon), which is expected to serve as the primary monitoring body for violations related to salary history questions and missing pay ranges in job ads. Companies found in violation of these laws will be reported to the Labour Inspectorate.
Other Preparation Measures
In an effort to help employers prepare for the eventual pay reporting requirements, Estonia is encouraging companies to voluntarily use a tool called Pay Mirror (Palgapeegel). This tool allows employers to analyze their gender pay gap data on a quarterly basis using existing state data. It is important to note that this tool cannot be used to file an actual gender pay gap report, as its indicators do not match what the Directive requires and the underlying state data provided doesn't capture working hours or types of remuneration. Despite these limitations, the government considers it a useful tool for helping organizations monitor their gender pay gap.
Another way that Estonia is helping companies to prepare for the upcoming pay reporting requirements is through a program called Project PALK, a joint initiative of the Ministry of Economic Affairs and Communications, the Labour Inspectorate, and the Office of the Gender Equality and Equal Treatment Commissioner. The project’s mission is to provide free job-evaluation and pay-structure training through the end of 2026, with the goal of ensuring that participating companies are ready for the mandatory pay structure framework and pay gap analysis that will eventually be required.
Next Steps for Employers
With the transposition of the Directive’s recruitment transparency provisions on July 13, 2026, employers in Estonia must now comply with these requirements. Compliance includes adding pay ranges into every job posting or pre-interview communication, eliminating salary history questions from hiring practices, and removing any policy or contract language that discourages employees from discussing their own pay.
While there is no active reporting obligation yet, employers should use this time to prepare for the pay reporting requirements coming in 2028. Preparation involves building a defensible pay structure by taking advantage of the free government-sponsored job-evaluation training offered through Project PALK, as well as using the Palgapeegel (Pay Mirror) tool to identify where gender pay gaps exist before mandatory reporting and other Directive requirements take effect. DCI is also able to assist in creating defensible pay structures and conduct pay gap analytics.
DCI Consulting helps employers turn complex EU Pay Transparency requirements into clear, defensible pay decisions before reporting becomes mandatory. We provide software and consulting solutions to organization to establish or review worker categories, conduct required gender pay gap analyses, develop targeted remediation strategies, and provide guidance on right to information requests. Visit our EU Pay Transparency Directive page to learn how your organization can prepare to confidently meet upcoming deadlines and subsequent reporting requirements.
