Running payroll

Run Estonian payroll in Arvello: 22% income tax, 33% social tax and unemployment insurance calculated per person, with PDF payslips and TSD-ready figures.

A payroll run is one month's worth of salaries and board fees, calculated with full Estonian taxes. You enter gross amounts; Arvello works out what each person receives, what the company owes EMTA (the Estonian Tax and Customs Board), and what the month really costs.

One run covers one calendar month. Once it's approved and you've recorded the payments, each person's pay goes on the TSD return for the month it was actually paid.

Creating a run

Choose the period

Go to Payroll & Dividends → Payroll Runs, select Create Payroll Run, and pick the year, the month worked and the payment date. The month is the one the work was done for: its salary and taxes are booked on that month's last day (see Which date the cost is booked on below). Early in a month the form suggests the previous month, from the 16th the current one; check it before you continue. The payment date matters too: it determines which tax rates apply. If the date is in a year whose rates Arvello hasn't confirmed yet, the form says so and uses the latest known rates; check the social-tax minimum and the pension-age basic exemption before approving. If a run already exists for the period, Arvello points you to it instead — one run per month.

Pick people and amounts

Arvello pre-fills a payment for every person with pay set: their monthly board fee, their salary, or both if they hold both roles. A board member with no fee set gets no row. An employee with no salary set gets a €0.00 salary row, unless they're exempt from the minimum social tax. Edit any gross amount, or remove people who aren't being paid this month. For an employee who gets no salary this month, set the salary to €0.00 instead of removing the row: the minimum social tax is still due, and the €0.00 row declares it (see Minimum social tax below). Leave recorded on the Holidays page is filled in for you: the salary row pays the working days not on leave, a holiday whose pay falls due in the month (the second-to-last working day before it) gets a holiday pay row, a sick certificate gets a sick pay row for your days 4–8, and the Days off (TLS § 19) are entered. Choosing another month builds the rows again for that month. If an employee was off work on holiday, sick leave or another reason under the Employment Contracts Act (TLS § 19) that isn't recorded there, enter the Days off (TLS § 19) on their salary row. Days off can't be more than the days they were employed that month. Add a payment adds a bonus, holiday pay, compensation on termination, an income-tax-only payment, or salary for an earlier month — see Other payments below. Add sick pay adds an employee's sick-leave payment — see Sick pay below. Keep an employee's €0.00 salary row when you add sick pay for them: the minimum is still owed for the days they worked, and the sick days go in as days off (see Sick pay).

Review the calculation

The review step shows a per-person tax breakdown, the totals, and a tax payment summary — the exact amount to pay EMTA. Create payroll run saves it as a draft: nothing is posted yet.

Approve the run

On the run's page, click Approve Payroll Run. This locks the run and posts the journal entry to your accounts. Approval needs two things first. Every Estonian resident paid wages, a board fee or a service fee needs a recorded II pillar register check that covers the payment date (see People). And if the run pays a non-resident employee, you confirm the work was done in Estonia (see Non-resident employees). Locked means locked — approved runs can't be edited or deleted. Approving recalculates every line and the run totals with the rates and person settings in force that day. If what's stored no longer matches, the run page warns you that the posted amounts will differ from those shown. That happens when the draft was made before the year's rates were confirmed, for example, or when another run paid in the same month was approved after it (see Two runs paid in the same month).

ℹ️Which date the cost is booked on

The journal entry is dated the last day of the pay period, not the payment date: the salary, social tax and unemployment insurance are a cost of the month the work was done for (RTJ 2 counts the period's wages as its labour cost whether or not they've been paid). So December's salary paid on 5 January is a December cost, and at 31 December the books show it as owed. The payment itself is booked when you reconcile the bank transfer, on its own date, and the TSD follows the payment date as before: that December salary goes on January's TSD. The one exception is a period that ends on or before your opening-balance date, or in a year whose annual report is already marked submitted or locked: then the entry is dated the payment date.

A draft's payments can't be edited from the run's page. If something is wrong before you approve, click Delete draft on the run's page: the draft and its payments are deleted, nothing else changes because nothing was posted, and the month is free for a new run. Once a run is approved and its TSD submitted, a mistake is corrected by filing an amended TSD for that month in e-MTA — Arvello doesn't file TSD corrections yet.

How the calculation works

Take an employee on €2,500 gross in 2026, an Estonian resident applying the €700 monthly basic exemption, not enrolled in the II pillar pension:

Step	Amount
Gross salary	€2,500.00
Employee unemployment insurance (1.6% of gross)	−€40.00
Basic exemption applied	−€700.00
Taxable amount	€1,760.00
Income tax (22% of taxable)	€387.20
Net paid to employee (gross − unemployment insurance − income tax)	€2,072.80
Social tax (33% of gross, employer-paid)	€825.00
Employer unemployment insurance (0.8% of gross)	€20.00
Total employer cost	€3,345.00

Payroll run breakdown

Everything between net pay and total employer cost — €1,272.20 in the table above — goes to EMTA. Unemployment insurance is deducted before income tax is worked out, so it lowers the taxable amount. If the person is enrolled in the II pillar, their 2%, 4% or 6% contribution is also withheld from gross, and it too is deducted before income tax. Board member fees follow the same pattern minus unemployment insurance: income tax and any II pillar contribution withheld, social tax on top.

ℹ️Minimum social tax

For employees, social tax is due on at least the minimum base — €886 in 2026, so a minimum of €292.38 a month. Pay an employee €400 gross and Arvello tops the social tax up to the minimum automatically, flags that it has done so, and prorates the base when employment starts or ends mid-month (from the dates on the person form): the days employed that month divided by 30, as the Ministry of Finance regulation sets, so 10 days of February is 10/30 of the base. The minimum is skipped for people marked exempt on their person form (state pension recipients, students and the other Social Tax Act exemptions), and it does not apply to board member fees — a board member who wants health insurance needs an actual fee of at least the base. A board fee's social tax doesn't count toward the minimum on a salary either: someone paid both is topped up on the salary as if the board fee weren't there. The minimum is owed for the month even if the employee gets no pay at all, for example during agreed unpaid leave or when an owner-employee skips a month's salary. Set their salary to €0.00 (an employee with no salary on their person form starts at €0.00): Arvello keeps the row, adds the minimum social tax (€292.38 in 2026) and declares it on the TSD as a zero payment with the minimum as the base increase. The minimum belongs to the month of the agreed payday, and Arvello declares it on the TSD of the run's payment date, so set the payment date to the payday you skipped, not the day you create the run. Nothing is declared for a month with no run, so create one with the €0.00 row. If another approved run paid in the same month already met the minimum, the €0.00 row has nothing to declare and Arvello leaves it out (see Two runs paid in the same month below). If the employee was released from work for part of the month on holiday, sick leave or another Employment Contracts Act § 19 reason (but not agreed unpaid leave), enter the days on the salary row: the minimum is then the days worked that month divided by 30, so 10 days off in a 30-day month leaves 20/30 of the base. A whole month away waives it, and the €0.00 row then has nothing to declare. If you pay the skipped month's salary later, see Wages paid late below.

Two runs paid in the same month

The basic exemption is a monthly amount per person that counts by the month the money is paid, not the month the pay is for, and the TSD works the same way. The social-tax minimum is monthly too, but it belongs to the month of the agreed payday, which Arvello takes from the run's payment date. Pay that goes out later still belongs to the agreed month's minimum (see Wages paid late). So if December's run has its payday on 5 January and January's run on 31 January, both share January's €700 basic exemption and January's €292.38 social-tax minimum (2026 figures). For the exemption, Arvello uses the date you record the payment on; until then it holds the run's planned payment date.

⚠️Wages paid late

The social-tax minimum belongs to the month of the agreed payday. If a month was declared at the minimum (a €0.00 row, or pay below the minimum) and its salary is paid in a later month, add it to the later run with Add a payment → Salary for an earlier month and pick the earlier payroll run it belongs to. What counts is that run's agreed payday month, not the month worked: September wages normally paid on 10 October belong to October. Arvello deducts the part already declared at the minimum (TSD code 1080, Ministry of Finance regulation no. 17, § 3(2)), so it isn't taxed twice, and the payment doesn't count toward the later month's own minimum. One case Arvello doesn't split: a run that was due on its payment date but whose transfer went out in the next month. Its pay, and any top-up to the minimum, is declared in the month the money left. Strictly, the minimum belongs on the agreed month's TSD and the later payment takes the 1080 deduction; the total is the same, one month later.

Arvello calculates a run with what the person's other approved runs paid in that month have left:

When you create a run whose payment date falls in a month that already has an approved run, the form says so, and the preview gives each person only the exemption that's left. In the example, an employee whose December pay already used the €700 gets no exemption on the January run, and its income tax is 22% of the whole amount after unemployment insurance and any II pillar contribution.
Social tax on wages already paid in that month by the other run counts toward the minimum, so the month is topped up once, not once per run. A board fee's social tax doesn't count.
Draft runs don't count against each other. Whichever run you approve first keeps the exemption it was calculated with. When you then open the other draft, it warns that its figures will change, and approving it recalculates it with what's left.

An approved run is locked, including any top-up to the social-tax minimum, so the order you approve runs in changes how the month's figures fall:

Order of approval	Basic exemption	Social-tax minimum
In the order they're paid	Sits on the earlier payment, so each run's net pay matches what was paid out at the time	If the earlier run was below the minimum, its top-up stays even after the later run takes the month above the minimum, so the month declares more social tax than the minimum requires
Later, larger run first	Sits on the later payment, so the earlier run's figures change from what was paid out	The earlier run sees the minimum already met and gets no top-up

From 2026, either way the month never declares less than the exemption cap and the minimum allow. For 2024 and 2025 the cap shrank as the month's income grew, so back-filled runs for those years can't reach that: an earlier approved run keeps the exemption it took before the later run's pay was known, and the month can declare more exemption than its income allowed. Check those months against the cap and correct the TSD in e-MTA if they're over. Say a December run of €400 paid on 5 January and a January salary of €2,000 paid on 31 January (2026, no II pillar): approved in payment order, January declares €292.38 + €660.00 = €952.38 of social tax; approved the other way round, €132.00 + €660.00 = €792.00. Arvello can't change a locked run, so the extra top-up can only be undone outside it, with a corrected TSD.

Other payments

The payments step fills in one board-fee row and one salary row per person, from their settings in People. Add a payment adds more rows for an employee:

Bonus and Holiday pay. Both are TSD payment type 10 and taxed like salary. If an employee was paid only a fixed salary for the six months before, their holiday pay isn't worked out as an average: they're paid that fixed salary, and the salary row already covers it. Otherwise holiday pay is based on the average wage: what the employee earned in the six calendar months before the month in which the need arose (for holiday pay, the month of the second-to-last working day before the leave starts). Arvello works both out for a holiday recorded on the Holidays page, and you can switch between them on the row. Holiday pay added here by hand is the amount you enter. Compensation for unused holiday when someone leaves is holiday pay too.
Compensation on termination, such as redundancy pay under TLS § 100. TSD payment type 33 (138 for a non-resident): income tax, social tax and the II pillar, but no unemployment insurance. It counts toward the month's social-tax minimum.
Other payment, income tax only: late-payment interest on wages, or compensation for withholding a final settlement. TSD payment type 16: income tax only, no social tax, unemployment insurance or II pillar. Estonian residents only.
Salary for an earlier month, with the earlier payroll run it belongs to: see Wages paid late above. A bonus, holiday pay or compensation can be late pay for an earlier run too.

The rules are in the government regulation on paying average wages (§ 1 lg 1¹ and § 2 lg 2); the payment types are in EMTA's guide to TSD Annex 1. Official text: Keskmise töötasu maksmise tingimused ja kord.

Sick pay

Sick pay has its own page: Sick pay.

Payslips

Once a run is approved, the Payslips tab appears. Generate PDF payslips for everyone in one click, download them individually, or email them out — each in the person's chosen language, Estonian or English.

Email sends one payslip and Email All sends every payslip in the run that hasn't gone out yet. Someone with no email address on their profile is skipped, and Arvello tells you how many weren't sent. On a large run it may stop part-way and tell you how many are left; press Email All again to send the rest. Each email goes to the address on the person's profile with their PDF payslip attached, so they don't need an Arvello login to open it. The payslip shows their pay, their bank account and part of their personal ID code, so check the address before you send.

Non-resident employees

Estonia taxes a non-resident employee's pay only for work done in Estonia (Income Tax Act § 29(1), Social Tax Act § 3 p 7). When you approve a run that pays a non-resident employee, Arvello asks you to confirm the work it pays for was done in Estonia, and records who confirmed it. If it was done abroad, Arvello can't run that pay: no Estonian income tax is due on it, and no social tax unless an Estonian A1 certificate applies, in which case Estonian social tax and unemployment insurance are due (Annex 2 code 122) and you declare them in e-MTA. Delete the draft, create it again without that person's pay, and ask a tax adviser about the country where the work was done. A board fee is different: it is taxed in Estonia wherever the work is done, so it needs no confirmation.

Recording payments

The TSD is cash-based: each person's pay is declared for the month the money actually left the company's account, not the run's planned payment date. So once the transfers have gone out, open the run and use Record payment in Payments made. Enter the date of each transfer and the amount. You can pay someone in parts. Their whole pay is declared on the TSD of the month of the first part: Arvello can't split one payment's taxes across two TSD months, so a part paid after that month's end (half on 30 October, the rest on 2 November) is declared early, with the October part, never late. The run page notes it. A payment can't be dated in the future. If you reconcile the transfer in Banking as a Payment to a Person, the net pay is recorded here for you, dated the transfer, and shows as Bank transfer: it goes when you undo that transaction, not with Remove payment.

Until you record payments, no one owed pay in an approved run is on a TSD, and the TSD page reminds you which runs are waiting. Someone owed no net pay (a €0.00 row carrying the minimum social tax) is declared for the payment-date month without a payment.
People in the same run can be paid in different months. If Bob's transfer goes out on 1 October for a run planned for 30 September, Bob's pay goes on October's TSD and everyone paid in September stays on September's.
The run's withholding was worked out for its planned month. If recording someone's payment in another month gives them more basic exemption there than one month allows (another run already used it), Arvello still records the date, since the money has gone, and tells you to correct that month's TSD in e-MTA: lower the exemption on their row and pay the income tax that wasn't withheld.
The same goes for a payment dated under other withholding rules than the planned date: a new year's rates, a II pillar change date (1 January, 1 May or 1 September), a pension change, or a residency certificate that has run out or been revoked by the payment date (for a non-resident's basic exemption). Arvello can't recalculate an approved run, so it records the date, declares the withholding worked out for the planned date and names the people affected. Correct their rows on that month's TSD in e-MTA.
The run turns paid once everyone is paid in full. A run that only declares the social-tax minimum (€0.00 rows) owes nothing, so Mark as Paid finishes it; its minimum goes on the TSD of the run's payment date.
A wrong date or amount: remove the payment and record it again. If that month's TSD was already filed, Arvello says so, and you correct it in e-MTA.

The journal entry is linked from the run page if you want to see the accounting. The month's TSD is due by the 10th of the following month — see TSD returns for filing.

⚠️Disclaimer

For informational purposes only. Not tax advice. Consult a qualified advisor.