Overview
Payroll Cycle
Employer Contributions
Employee Contributions
Minimum Wage
Hiring
Hiring Employees
Hiring Contractors
Hiring Expats
Background Checks
Employment Contracts
Onboarding
Employee Benefits
Social Security
Healthcare and Insurance
Leave Policy
Public Holidays
Work Permit and Work Visa
Probation Period
Notice Period
Termination and Severance
Personal Income Tax
Employer of Record services in Latvia encompass various aspects of payroll, employment, and compliance, including payroll cycles, employer and employee contributions, minimum wage regulations, hiring processes for employees, contractors, and expatriates, background checks, employment contracts, onboarding procedures, employee benefits, social security obligations, healthcare and insurance provisions, leave policies, public holidays, work permit and work visa requirements, probation periods, notice periods, as well as termination and severance considerations, along with personal income tax obligations.
| Overview | |
| Continent | Europe |
| Country | Latvia |
| Capital | Riga |
| Time zone | UTC+02:00 (EET) |
| Total Time zones | 1 |
| Working hours per week | 40 |
| Working week | Monday–Friday |
| Typical hours worked | 8 |
| Personal Tax filing deadline | 1 June or 1 July, depending on annual income level. |
| Financial Year | NA |
| Date format | dd/mm/yyyy |
| Currency | Euro (EUR) |
| VAT | the standard rate is 21% |
Employer and Employee Payroll Contributions
There is a 3 pillar pension system in Latvia. Social security contribution is based on the selection of the pillar.
| Category | Name |
| Pillar 1 | State Compulsory Unfunded Pension Scheme/ Notional Defined Contribution Pension Scheme – NDC PAYG |
| Pillar 2 | State Funded Pension Scheme / State Mandatory Funded Pension Scheme – FDC |
| Pillar 3 | Private Voluntary Pension Scheme |
| Employers | % of Gross Salary |
| National Social Insurance and Solidarity Tax (NSIC) | |
| Pillar 1 | 23.59% |
| Pillar 2 | 20.77% (employee eligible for retirement) |
| Total Employment Cost | 20.77% to 23.59% |
| Employees | % of Gross Salary |
| National Social Insurance and Solidarity Tax | |
| Pillar 1 | 10.5% |
| Pillar 2 | 9.25% (employee eligible for retirement) |
| Total Employee Cost | 9.25% to 10.50% |
| Minimum Wage | |
| Minimum Wage | The monthly minimum wage ranges between industry as well as geographical location. |
| Payroll | |
| Payroll Cycle | Monthly |
| 13th Salary | Not required by law. |
| Income Tax | |
| Taxable Income | Tax Rates |
| Up to 20004 EUR | 20% |
| 20005 - 62800 EUR | 23% |
| Over 62800 EUR | 31% |
Mandatory Employee Benefits in Latvia: Pensions, Leaves, and Unemployment Benefits
Legislated Leaves: Paid Annual Leave in Latvia
In Latvia, all employees are entitled to receive paid annual leave. The duration of this leave must be at least 4 calendar weeks, excluding public holidays. It is generally granted as a continuous period of time off from work.
In certain cases, the employer and employee may reach an agreement to grant the paid annual leave in installments throughout the year. However, it is mandatory that at least one annual leave period is uninterrupted and lasts for a minimum of 2 weeks.
It is important to note that cash compensation in lieu of taking annual leave is not permitted, except when the employment relationship is terminated and the employee has not utilized their entitled paid annual leave. In such situations, the employee may be eligible for cash compensation for the remaining unused leave days.
Procedures for Granting Paid Annual Leave in Latvia
In Latvia, paid annual leave is usually scheduled and granted annually based on mutual agreement between the employer and employee, or as per a predefined leave timetable. When granting paid annual leave, the employer is required to take into consideration the employee's preferences to the extent possible.
In the first year of employment, employees have the right to request paid annual leave if they have been continuously employed by the same employer for a minimum of 6 months. In such cases, the employer is obligated to grant the full entitlement of annual leave.
Additional leave may be granted to employees under specific circumstances. If an employee has three or more children under 16 years of age, or a disabled child under 18 years of age, they may be eligible for an additional leave period of 3 working days. Similarly, if an employee's work involves a specific risk, they may be granted additional leave of up to 3 working days. In cases where an employee is responsible for the care of one or two children up to 14 years of age, the additional leave may not exceed 1 working day.
The collective agreement or employment contract may outline other scenarios in which additional leave can be granted, such as for night work, shift work, or long-term work arrangements.
Upon the employee's request, an employer has the option to grant unpaid leave, considering the circumstances and needs of the employee.
Work on Public Holidays
In Latvia, employees are prohibited from working on official public holidays. These holidays are designated as non-working days for all employees.
Maternity and Childbirth Leave
Maternity leave and childbirth leave are combined in Latvia. A total of 112 calendar days are granted, regardless of the number of maternity leave days taken before the birth.
Leave taken due to pregnancy and childbirth is separate from and not counted as part of the paid annual leave entitlement.
During maternity and childbirth leave, a woman typically retains her position. However, if retaining the exact position is not feasible, the employer is required to provide a similar or equivalent job to the woman with equivalent working conditions and terms of employment.
Paternity Leave
Fathers in Latvia are entitled to 10 calendar days of paternity leave. This leave can be taken immediately after the birth of the child or within two months following the birth.
Childcare Leave
Every employee in Latvia has the right to childcare leave upon the birth or adoption of a child. Childcare leave lasts for a duration of 18 months and can be requested at any time until the child reaches the age of 8.
The period spent on childcare leave is considered as part of the employee's total work service.
When an employee takes childcare leave, they generally retain their previous job. However, if retaining the same position is not possible, the employer is obliged to provide a similar or equivalent job to the employee with equivalent working conditions and terms of employment.
Study Leave
In Latvia, employees who are pursuing studies at an educational institution while maintaining their employment may be eligible for study leave, which can be either paid or unpaid based on the terms outlined in the collective agreement or employment contract.
If employees are preparing for state exams or engaged in writing and defending theses, they have the right to paid study leave for a minimum of 20 working days per year. Employees who receive lump sum remuneration are granted study leave with either average income or no income, as specified in the applicable provisions.
Unemployment Insurance
Employees who lose their job in Latvia have the right to claim unemployment benefits, subject to certain conditions. To be eligible, employees must have worked for at least one year, and social insurance contributions must have been paid for at least 12 months within the last 16 months.
Employees who have recovered their work capacity after a disability or have been responsible for the care of a disabled child for up to 18 years can also qualify for unemployment benefits, even if they have not made social insurance contributions or have made contributions for less than 12 months.
To be eligible for unemployment benefits, employees must obtain unemployment status from the State Employment Agency (SEA) and have been covered by social insurance for a minimum of one year, with at least 12 months of social insurance contributions paid within the last 16 months.
If an employee regains work capacity after a disability, they must obtain unemployment status within one month of regaining work capacity to be eligible for unemployment benefits. If an employee has been caring for a disabled child, they must obtain unemployed status within one month of the child reaching 18 years of age.
If an employee terminates their employment or is dismissed due to an infringement, unemployment benefits will be granted and paid no earlier than two months after obtaining unemployment status.
Unemployed individuals are expected to cooperate with the State Employment Agency and fulfill the tasks specified in their individual plan.
Amount of Unemployment Benefits
Unemployment benefits in Latvia are granted for a duration of nine months. The amount of benefits depends on the employee's employment history and the wage level from which social insurance contributions have been paid.
The average contribution wage is calculated based on the employee's earnings over the 12-month period that ended two months before claiming unemployment benefits. The percentage of the average contribution wage varies depending on the length of the employee's employment history:
- 1 to 9 years of employment: 50% of the average contribution wage
- 10 to 19 years of employment: 55% of the average contribution wage
- 20 to 29 years of employment: 60% of the average contribution wage
- 30 years or more of employment: 65% of the average contribution wage
Unemployment benefits gradually decrease in increments of three months, with different percentages applied during different periods of unemployment:
- From the first two months: 100% of the granted benefit
- From the third to fourth month: 75% of the granted benefit
- From the fifth to sixth month: 50% of the granted benefit
- For the last two months: 45% of the granted benefit
If an employee was caring for a child under 18 years of age before becoming unemployed or regained work capacity after a disability, the granted benefits will be 60% of twice the amount of the state social insurance benefit in effect when the unemployment benefit is claimed. The specific amount decreases in subsequent months based on the algorithm mentioned above.
Starting from July 1, 2023, individuals with a temporary residence permit who permanently live in Latvia during its validity and have received alternative status, including family members within the meaning of the Asylum Law, have the right to state social benefits.
Baltic States: EOR Estonia | EOR Latvia | EOR Lithuania