What is salary calculation and why does it matter?

Salary calculation involves determining the relationship between gross salary (before taxes), net salary (take-home pay), and employer costs. This process is essential because what an employer pays and what an employee receives are significantly different due to various taxes, social contributions, and insurance premiums. Understanding these calculations helps employees negotiate salaries, plan budgets, and compare job offers accurately, while employers use them for budgeting, payroll processing, and workforce planning.

What changed in Estonian taxes for 2026?

Starting January 1, 2026, Estonia abolishes the so-called "tax hump" (maksuvaba tulu regressioon). Previously, people with medium incomes effectively paid higher tax rates because the tax-free allowance decreased as income rose between €1,200 and €2,100 monthly. Now, all Estonian residents receive a flat €700/month tax-free allowance regardless of their income level. Pensioners retain their higher tax-free amount of €776/month. This change benefits middle-income earners the most, who previously lost their tax-free allowance as their salary increased.

Tool Description

This net salary calculator for Estonia is a comprehensive salary and tax calculator designed to calculate wages in Estonia using the new 2026 tax rules with the flat tax-free allowance system. Whether you need a gross salary calculator for Estonia or want to determine your salary after tax in Estonia, this Estonia wage calculator handles all scenarios. It allows you to calculate in three directions: from employer cost to net salary, from gross salary to net salary, or from desired net salary backwards to required gross and employer cost. The Estonia net salary calculator accounts for all mandatory taxes and contributions, including income tax, unemployment insurance (both employee and employer portions), social tax, and optional funded pension contributions.

Features

  • Flat tax-free allowance: €700/month for all employees regardless of income (no more tax hump regression)
  • Pensioner support: Higher €776/month tax-free allowance for pensioners
  • Three calculation modes: Calculate from employer cost, gross salary, or net salary
  • Monthly and annual calculations: View results for both time periods simultaneously
  • Flexible tax options: Toggle employer and employee unemployment insurance contributions
  • Customizable pension rate: Choose between 0%, 2%, 4%, or 6% funded pension contribution
  • Adjustable income tax rate: Modify the income tax percentage if needed (default 22%)
  • Custom tax-free allowance: Override the default allowance with a custom amount
  • Comprehensive breakdown: See detailed monthly and annual figures for all salary components

Use Cases

  • Job seekers: Compare multiple job offers using this net salary calculator for Estonia to convert all to the same metric (net, gross, or total cost)
  • Middle-income earners: See how the abolished tax hump affects your take-home pay compared to 2025
  • Salary negotiations: Use the gross salary calculator for Estonia to understand what gross salary you need to achieve your desired take-home pay
  • Pensioners who work: Calculate net income with the higher €776/month tax-free allowance
  • Employers and HR: Calculate total employment costs when hiring or adjusting salaries with this salary and tax calculator

Calculation Details

The calculator uses the following Estonian tax rates and thresholds for 2026:

Employee Contributions:

  • Income tax: 22% (calculated after basic allowance deduction)
  • Unemployment insurance: 1.6% of gross salary (optional toggle)
  • Funded pension: 0%, 2%, 4%, or 6% of gross salary (user selectable)

Employer Contributions:

  • Social tax: 33% of gross salary
  • Unemployment insurance: 0.8% of gross salary (optional toggle)

Flat Tax-Free Allowance (2026 change):

  • Regular employees: €700/month for everyone regardless of income
  • Pensioners: €776/month
  • No more regression: The allowance no longer decreases as income rises
  • Custom override: You can specify a fixed allowance amount instead of the default