Employer of Record Guide in Latvia
Expanding your team to Latvia opens doors to exceptional talent in the Baltics, but navigating local employment laws and compliance requirements can feel overwhelming. Our comprehensive guide simplifies the process, helping you hire confidently while staying compliant with Latvian regulations.
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Latvia's growing economy offers access to skilled professionals across tech, healthcare, and manufacturing sectors, with Riga serving as the primary business hub. Understanding the local market dynamics—from the €700 minimum wage to the 25.5% tax environment—sets the foundation for successful hiring decisions.
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Your EOR guide in Latvia
Getting the details right matters when it comes to Latvian employment law, from payroll cycles to leave entitlements. This practical guide walks you through the essential compliance requirements that keep your hiring process smooth and your team protected.
Minimum Wage
Latvia's national minimum wage is €700 per month as of 2024, applicable to all full-time employees working 40 hours per week. This translates to approximately €4.38 per hour based on standard working hours.
The minimum wage is reviewed annually by the government and typically adjusted based on economic conditions and inflation rates.
Payroll Cycle
Latvian labour law requires employers to pay salaries at least once per month. Common payment schedules include:
- Monthly: Most common, typically paid on the last working day of the month
- Bi-weekly: Less common but legally acceptable
- Weekly: Rare, mainly for temporary or seasonal workers
Salaries must be paid in euros and transferred to the employee's bank account or paid in cash with proper documentation.
Individual Income Tax
Latvia operates a progressive income tax system with the following brackets for 2024:
| Annual Income (EUR) | Tax Rate |
|---|---|
| Up to €20,004 | 20% |
| €20,004 - €78,100 | 23% |
| Above €78,100 | 31% |
Tax Residency Criteria: Individuals are considered Latvian tax residents if they:
- Spend 183 days or more in Latvia during a 12-month period
- Have their centre of vital interests in Latvia
- Are Latvian citizens with permanent residence in Latvia
Non-residents pay a flat 20% tax rate on Latvian-sourced income.
Employer Payroll Contributions
Employers in Latvia must make mandatory social security contributions on behalf of their employees:
| Contribution Type | Employer Rate | Employee Rate | Total |
|---|---|---|---|
| Social Security | 24.09% | 10.50% | 34.59% |
| - Pension Insurance | 20.00% | 10.00% | 30.00% |
| - Unemployment Insurance | 0.80% | 0.50% | 1.30% |
| - Work Accident Insurance | 0.28% | 0.00% | 0.28% |
| - Maternity/Sickness | 2.01% | 0.00% | 2.01% |
| - Solidarity Tax | 1.00% | 0.00% | 1.00% |
Total Employer Cost: Approximately 24-25% above gross salary
Working Hours
The standard working week in Latvia is 40 hours, typically distributed as 8 hours per day over 5 days (Monday to Friday).
Maximum Working Hours:
- Daily maximum: 8 hours (can extend to 12 hours with employee consent)
- Weekly maximum: 48 hours (including overtime)
- Night work: Limited to 8 hours per 24-hour period
Exempt Categories:
- Senior management positions
- Employees with autonomous work schedules
- Certain professional roles (with written agreement)
Overtime Pay
Overtime compensation in Latvia follows these rules:
- Rate: 150% of regular hourly wage for the first 2 hours daily
- Extended overtime: 200% for hours beyond 2 hours daily
- Weekend work: 200% of regular rate
- Holiday work: 200% of regular rate plus compensatory time off
Annual Overtime Limits:
- Maximum 144 overtime hours per year
- Requires employee written consent
- Must be documented and approved by management
Employment Classifications
Full-time Employment:
- 40 hours per week standard
- Full benefits and protections under labour law
- Indefinite or fixed-term contracts available
Part-time Employment:
- Less than 40 hours per week
- Pro-rated benefits and protections
- Same hourly wage protections as full-time workers
Fixed-term Contracts:
- Maximum 3 years duration
- Can be renewed once for additional 2 years
- Automatic conversion to indefinite after 5 years total
Vacation Leave
Annual Leave Entitlement:
- Minimum: 20 working days per year (4 weeks)
- Enhanced: 24 working days for employees under 18 or over 50
- Accrual: Earned monthly (1.67 days per month for standard entitlement)
Vacation Pay:
- Paid at 100% of average monthly salary
- Must be paid before leave commences
- Unused leave must be compensated upon termination
Sick Leave
Latvia's sick leave system operates in two phases:
Employer-Paid Period:
- First 10 calendar days of illness
- 80% of average daily wage
- Medical certificate required from day 1
State Benefit Period:
- From day 11 onwards
- 80% of average salary (capped at state maximum)
- Funded by State Social Insurance Agency
Maternity Leave
Duration: 112 calendar days total
- 56 days before expected birth date
- 56 days after birth
Compensation: 80% of average salary for previous 12 months, paid by state social insurance
Job Protection: Position must be held open, with right to return to same or equivalent role
Parental Leave
Childcare Leave: Up to 18 months following maternity leave
- Can be shared between parents
- Paid benefit available (income-tested)
- Job protection continues throughout
Paternity Leave: 10 calendar days within 2 months of birth
- 80% salary compensation
- Can be taken flexibly within the period
Other Statutory Leave
Bereavement Leave:
- 3 working days for immediate family members
- Paid at 100% salary
- Additional unpaid leave may be granted
Marriage Leave:
- 3 working days
- Paid at 100% salary
Study Leave:
- For work-related education and training
- Paid leave for examinations and thesis defence
- Unpaid leave for general studies (with employer agreement)
Leave Summary
| Leave Type | Duration | Compensation | Funding Source |
|---|---|---|---|
| Annual Leave | 20-24 days | 100% salary | Employer |
| Sick Leave (1-10 days) | 10 days | 80% salary | Employer |
| Sick Leave (11+ days) | As needed | 80% salary | State |
| Maternity Leave | 112 days | 80% salary | State |
| Parental Leave | 18 months | Variable benefit | State |
| Paternity Leave | 10 days | 80% salary | State |
| Bereavement | 3 days | 100% salary | Employer |
| Marriage | 3 days | 100% salary | Employer |
Termination Categories
Termination by Employer:
- With cause (disciplinary dismissal)
- Without cause (economic reasons, redundancy)
- Mutual agreement
- End of fixed-term contract
Termination by Employee:
- Voluntary resignation
- Immediate termination (for serious employer breaches)
Notice Period Requirements
Standard Notice Periods:
| Employment Duration | Notice Period |
|---|---|
| Probation period | 3 days |
| Less than 5 years | 1 month |
| 5-20 years | 2 months |
| Over 20 years | 3 months |
Immediate Termination (No Notice):
- Gross misconduct by employee
- Criminal conviction affecting work
- Serious breach of employment duties
Severance Pay
Without Cause Termination:
- 1 month's average salary
- Additional compensation for long service (varies by collective agreement)
Redundancy:
- 2 months' average salary minimum
- Additional payments based on length of service
- Priority re-employment rights if position reopens
No Severance Required:
- Termination with cause
- Voluntary resignation
- End of probation period
- Mutual agreement (unless specified)
Final Pay Requirements
Employers must provide final payment within 10 working days of termination, including:
- Outstanding salary
- Accrued vacation pay
- Overtime compensation
- Any contractual bonuses or benefits
Legal Protections
Protected Categories:
- Pregnant employees and those on maternity leave
- Employees on sick leave
- Trade union representatives
- Employees who have filed complaints
Wrongful Dismissal:
- Employees can challenge termination in labour court
- Remedies include reinstatement and compensation
- Claims must be filed within 1 month of termination
National Public Holidays
Latvia observes 12 official public holidays annually:
| Holiday | Date | Type |
|---|---|---|
| New Year's Day | January 1 | Fixed |
| Good Friday | Varies | Religious |
| Easter Monday | Varies | Religious |
| Labour Day | May 1 | Fixed |
| Independence Restoration Day | May 4 | National |
| Midsummer Day | June 23 | Cultural |
| Midsummer Day | June 24 | Cultural |
| Independence Day | November 18 | National |
| Christmas Eve | December 24 | Religious |
| Christmas Day | December 25 | Religious |
| Boxing Day | December 26 | Religious |
| New Year's Eve | December 31 | Fixed |
Holiday Pay Rules
Eligibility: All employees are entitled to public holiday compensation
Payment Options:
- Day off with full pay, or
- Work on holiday with 200% pay plus compensatory time off
Calculation: Based on average daily wage over previous 6 months
Weekend Holidays
When a public holiday falls on a weekend:
- Monday becomes a compensatory day off
- No additional compensation required beyond regular holiday pay
Required Documentation
Employment Contract Must Include:
- Job title and description
- Salary and payment terms
- Working hours and location
- Probation period (if applicable)
- Notice periods
- Confidentiality clauses
Employee Documentation:
- Valid passport or national ID
- Social security number
- Tax residency certificate (if applicable)
- Educational certificates (for certain roles)
- Work permit (for non-EU citizens)
Work Authorization
EU/EEA Citizens: No work permit required, can work immediately upon employment
Non-EU Citizens: Must obtain work permit before starting employment
- Employer must demonstrate no suitable EU candidate available
- Process takes 1-3 months
- Temporary residence permit also required
Tax Registration
Personal Income Tax: Automatic registration upon first salary payment
Social Security: Employer registers employee with State Social Insurance Agency within 3 days of employment start
Banking Requirements
Employees must provide Latvian bank account details for salary payments. International transfers are possible but may incur additional costs and tax complications.
Language Requirements
While not legally mandated for all positions, Latvian language proficiency may be required for:
- Public sector roles
- Customer-facing positions
- Safety-critical jobs
Employment contracts and key workplace policies should be available in Latvian.
Onboarding Timeline
| Step | Timeline |
|---|---|
| Job offer acceptance | Day 0 |
| Contract preparation | Days 1-3 |
| Work permit application (non-EU) | 30-90 days |
| Employment contract signing | Day of start |
| Social security registration | Within 3 days |
| Tax registration | First payroll |
| Probation period completion | Up to 3 months |
Worker Classification
Latvia distinguishes between employees and independent contractors based on:
Employee Indicators:
- Regular working hours and location
- Use of employer's equipment and materials
- Integration into business operations
- Subordination to employer's instructions
- Regular monthly salary
Contractor Indicators:
- Independent work schedule
- Own tools and equipment
- Separate business operations
- Invoice-based payments
- Multiple clients
Misclassification Risks:
- Back payment of social contributions
- Tax penalties
- Employee rights claims
- Administrative fines
Collective Bargaining
Approximately 15% of Latvian employees are covered by collective agreements. Key sectors include:
- Manufacturing
- Transportation
- Healthcare
- Education
Collective agreements may provide enhanced benefits beyond statutory minimums, including higher severance pay, additional leave, and improved working conditions.
Cultural Considerations
Work-Life Balance: Latvians value clear boundaries between work and personal time. Overtime should be exceptional rather than routine.
Communication Style: Direct but polite communication is preferred. Hierarchy is respected but not rigid.
Professional Development: Employees expect opportunities for skill development and career advancement.
Diversity and Inclusion: Latvia has strong anti-discrimination laws covering age, gender, ethnicity, religion, and disability.
Remote Work Framework
Remote work is legally recognised in Latvia with specific requirements:
Employer Obligations:
- Provide necessary equipment or compensation
- Ensure workplace safety standards
- Maintain regular communication
- Respect right to disconnect
Employee Rights:
- Same protections as office-based workers
- Reimbursement for work-related expenses
- Flexible working arrangements (where possible)
Cross-Border Considerations: Remote work from other countries may trigger tax and social security obligations in multiple jurisdictions.
What Borderless AI Handles
When you hire through Borderless AI in Latvia, we manage:
- Contract Management: Compliant employment agreements in Latvian
- Payroll Processing: Monthly salary payments and tax withholdings
- Social Security: Registration and contribution management
- Compliance Monitoring: Ongoing regulatory updates and adherence
- Local Representation: Acting as legal employer for all statutory purposes
- Employee Support: HR guidance in local language and cultural context
Our AI-native platform ensures accurate, timely processing while our North American support team provides strategic guidance for your Latvian expansion.
Built-in benefits packages for Latvia
When the world is your competition, it pays to incentivize new hires and existing alike. Borderless AI benefits packages typically inlucde:
Medical Insurance
Dental Insurance
Retirement Contribution
Life Insurance
Vision Insurance
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