Estonia Tightens Employer Rules for Hiring Foreign Workers Amid Labour Shortages

New restrictions aim to balance fair hiring practices and economic necessity, with updated requirements entering into force in 2026.

Estonia has introduced a sweeping regulatory framework that will significantly reshape how employers and temporary work agencies hire foreign workers. Effective January 1, 2026, these measures are designed to curb abuse in the labour market while still addressing Estonia’s growing demand for international labor — particularly in sectors strained by chronic staff shortages.

According to Schengen.News, the Estonian government has approved a policy package requiring proof of at least six months of continuous business activity for companies and agencies applying for temporary residence permits to hire foreign nationals.

New Framework: What Changes in 2026

The most consequential reform targets temporary work agencies and business owners hiring on residence permits. Under the new law, agencies must demonstrate they have been operating for a minimum of six consecutive months, either in Estonia or another Schengen member state.

This replaces the previous requirement to guarantee a one-month salary in advance for leased foreign workers — a move that will ease financial strain on agencies but potentially reduce income security for employees.

Companies using short-term employment registration are exempt from the six-month activity requirement, offering some flexibility to seasonal sectors like tourism and agriculture. However, residence-based employment will now require documented evidence of sustained operations, a step that policymakers argue will favor stability and discourage speculative recruitment.

Regulatory Shift Aims for Accountability

Officials argue that the change promotes long-term planning and fair treatment for workers. Employers will also be required to be registered with Estonian authorities, irrespective of the type of permit used — a measure meant to streamline oversight and eliminate shadow employment.

Assignments will only be allowed under intra-corporate transferee permits after the 2025 transitional period ends.

Yet critics warn the rules may create bureaucratic delays for startups and small enterprises, limiting their ability to attract foreign talent during initial growth phases.

Behind the Reforms: Labour Market Pressure and Demographics

The new legislation coincides with growing alarm over labour shortages in Estonia. As noted by Prime Minister Kristen Michal, demographic shifts and an aging workforce are leaving gaps in key industries such as construction, manufacturing, and IT.

“Certainly, EKRE and its transfers in parliament are afraid that seven million people will come to Estonia,” said PM Michal, referencing anti-immigration rhetoric. “But I urge the public to discuss the needs of the economy.”

Michal pointed to the OSKA labour market report, which forecasts a need for thousands of additional workers across multiple economic segments. Estonia’s fertility rate is among the lowest in the EU, and emigration has historically outpaced immigration, raising concerns about long-term workforce sustainability.

Balancing Act: Reform Meets Reality

While the reforms are meant to foster a more transparent and sustainable employment ecosystem, their rollout will demand significant coordination across ministries, consulates, and business registration bodies. Critics in the private sector are already urging the government to clarify implementation procedures well ahead of the 2026 deadline.

Supporters of the reform maintain that such laws are necessary to ensure that foreign workers are treated fairly, and to prevent the creation of exploitative or unstable labor conditions that have plagued other European markets.

At the same time, calls are growing for more streamlined visa procedures, a centralized registry of authorized employers, and better integration pathways for foreign employees who want to contribute long-term to Estonia’s economy.