With the shift to remote work comes added interest in hiring international workers. Often, this is because countries like Latvia offer highly skilled talent at lower costs compared to their regional counterparts and North America.
Salaries are essential when budgeting for hires in Latvia, but there are numerous other costs to consider. From overtime and severance to social security contributions, hiring overseas employees requires more than calculating your new employee’s wage.
Employers should also keep supplementary benefits like coworking passes or gym memberships in mind. This can help with employee retention and satisfaction.
Overall, it can be challenging to determine total costs on your own. If you've found a candidate in Latvia, we'll guide you through the costs of hiring employees there.
Mandatory Costs
When hiring employees in Latvia, you’ll need to consider numerous mandatory costs. These include wages, taxes, benefits, overtime pay, and severance pay. Adherence to these costs will ensure you are compliant with local labor laws and regulations.
Salary
The minimum wage in Latvia will increase to €700 per month in 2024 — however, employers should consider offering higher salaries to gain a competitive edge.
For instance, the average salary in Latvia in 2022 was €1373, however, those who work in tech or marketing generally make above €2500 per month. If you’re looking to hire a software engineer or IT manager, you can expect to pay above €2800 — approximately USD 3030 — per month.
That being said, however, salaries in Latvia are still lower than in other Nordic countries, as well as Canada and the United States. Latvia’s cost of living index ranks 50th in the world, with an overall score of 50.9. This puts it far below Estonia, Belgium, and Sweden. Hiring employees from Latvia provides employers with the opportunity to acquire top talent while minimizing costs.
Taxes and Benefits
When hiring employees from Latvia, it’s essential to be aware of mandatory taxes and contributions. Employers are required to pay 23.59% of an employee’s salary, which goes towards National Social Insurance Contributions (NSIC). It is important to note that contributions are capped when an employee has an annual salary of €78,100.
Paid Leave
Employees in Latvia are entitled to take numerous types of paid leave if they meet the requirements. When it comes to annual paid time off, employees are entitled to 20 days, fully paid by the employer. Latvia also has 12 public holidays which are non-working days.
Employers need to consider the cost of parental leave when hiring in Latvia. New mothers are entitled to 112 days of fully paid maternity leave. New fathers are also entitled to 10 days of fully paid paternity leave.
Regarding sick leave, employers also need to be aware of additional costs they may face. Employees are entitled to 10 days of sick leave. For the first three days, they receive 75% of their wages; from days 4-10, they are paid 80% of their wages. The first 10 days are covered by the employer. However, from 11 days onward, employees are paid 80% of their wages, which is covered by social security. In this case, employers do not need to worry about the cost of extended sick leave.
Overtime Pay
The standard work week in Latvia consists of eight-hour days over five days. If an employee works overtime, they are to be paid 200% of their regular hourly wage. So, when you hire an employee from Latvia, keep in mind that your employee working overtime may be costly.
Severance Pay
Severance pay in Latvia is entirely dependent on the employee’s length of service with the company.
- 0-5 years of service: One month’s salary
- 5-10 years of service: Two month’s salary
- 10-20 years of service: Three month’s salary
- 20+ years of service: Four month’s salary
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Supplemental Costs of Hiring Employees in Latvia
In addition to statutory benefits, employers may also provide supplemental benefits. Offering additional benefits helps attract top talent, motivates staff, and increases retention.
Benefits
Making sure your new employees are happy and healthy is vital. You can support their health by offering a strong benefits package. While many employers choose to offer private health insurance for their employees, doing so comes at an extra cost.
The price will significantly vary depending on the type of private health insurance and coverage. Common health insurance providers in Latvia include Bupa and Pacific Prime.
You don't need to be an expert in Latvian benefits. An EOR like Borderless AI will know the best benefits packages for a Latvian candidate.
Bonuses and Extras
Latvia doesn’t have any mandatory bonuses, such as the 13th-month bonus that’s common in many other countries. However, performance-based bonuses and signing bonuses are typically offered. Additionally, employers may want to consider offering employees a lunch or coffee stipend.
Employers also need to take workspace costs into account when hiring employees in Latvia. Since new hires will typically be working remotely, they’ll need to set up a home office or access a coworking space.
Providing a home office stipend can be hugely beneficial. It can go towards a company laptop, ergonomic office chairs, or antivirus software.
Coworking offices have become the go-to for many employers. Not only do coworking spaces provide employees with a designated space to work, but they also encourage collaboration and networking. The costs of coworking spaces in Latvia vary by region. Coworking offices in Riga, such as Double9, start at €160 per month. In smaller cities, memberships don’t cost as much; Coworking Liepāja, in Liepāja, a small city on the west coast of Latvia, has memberships starting at a mere €70 per month.
Work With Borderless AI
Hiring employees in Latvia may feel overwhelming, especially with the costs that we mentioned. However, we have a legal entity in Latvia, so working with us ensures you can quickly and compliantly hire there.
To get started, book a demo today.
Disclaimer
Borderless AI does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
