Employer of Record in Latvia

Expanding your team into Latvia in 2025 offers access to a skilled workforce and a strategic location in the Baltic region. When considering hiring employees in Latvia, companies typically navigate several pathways to ensure compliance with local labor laws and regulations. Understanding these options is crucial for a smooth and legal expansion.

Businesses looking to hire in Latvia have a few primary avenues:

• Establishing a local legal entity: This involves incorporating a subsidiary or branch office in Latvia, which requires significant time, financial investment, and ongoing administrative overhead for registration, accounting, tax, and legal compliance.
• Utilizing an Employer of Record (EOR): Partnering with an EOR like Rivermate allows you to hire employees in Latvia without establishing your own entity, as the EOR acts as the legal employer.
• Hiring independent contractors: This option is suitable for project-based work and requires careful classification to avoid misclassification risks under Latvian labor law, which could lead to penalties.

How an EOR Works in Latvia

An Employer of Record (EOR) simplifies international hiring by taking on the legal and administrative burdens of employment. In Latvia, an EOR handles all aspects of local employment for your team, allowing you to focus on managing their day-to-day work. Specifically, an EOR in Latvia takes care of:

• Payroll processing: Ensuring timely and accurate payment of salaries in compliance with Latvian regulations.
• Tax withholding and remittances: Managing all local income tax (IIN) and social security contributions for employees.
• Social security contributions: Calculating and remitting employer and employee contributions to the Latvian social insurance system.
• Employment contract compliance: Drafting and managing legally compliant employment contracts that adhere to Latvian labor law.
• Benefits administration: Facilitating statutory and supplementary benefits, such as health insurance or pension schemes, as required or desired.
• Termination compliance: Handling all aspects of employee termination in accordance with Latvian labor laws, including severance and notice periods.

Benefits of Using an EOR in Latvia

For companies looking to quickly and compliantly hire in Latvia without the complexities of establishing a local entity, an EOR offers significant advantages:

• Rapid Market Entry: Hire employees in Latvia within days or weeks, rather than the months typically required for entity setup.
• Guaranteed Compliance: Mitigate risks associated with Latvian labor law, payroll, and tax regulations, as the EOR assumes legal responsibility.
• Reduced Administrative Burden: Eliminate the need to manage local HR, legal, and tax complexities, freeing up your internal resources.
• Cost Efficiency: Avoid the substantial costs and ongoing expenses associated with incorporating and maintaining a local subsidiary.
• Flexibility and Scalability: Easily scale your Latvian workforce up or down as business needs evolve, without the fixed overhead of a local entity.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Latvia includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Latvia.

Employers in Latvia must contribute 34.09% of employees' gross salaries to social security, split as 23.59% paid by the employer and 10.50% withheld from employees. These contributions fund pensions, unemployment, health, disability, maternity, sickness, and work injury benefits. Employers are also responsible for withholding personal income tax (PIT) on a progressive scale: 20% up to EUR 20,004, 23% for income between EUR 20,005 and EUR 78,100, and 31% for income exceeding EUR 78,100. PIT must be remitted to the State Revenue Service (VID) by the 15th of the following month.

Employees benefit from deductions such as a EUR 500 non-taxable minimum, EUR 250 per dependent, and expenses related to education, medical costs, or private pension contributions. Employers must submit monthly reports on withheld taxes and social contributions by the 15th of each month, with annual summaries due by January 31, and employees file personal tax returns by June 1. Foreign workers' tax obligations depend on residency status, with non-residents taxed only on Latvian-sourced income. Latvia's double taxation treaties and specific rules for expatriates and foreign companies should be considered to ensure compliance.

In Latvia, salary levels vary by industry and role, with high-demand sectors such as IT, finance, and engineering offering more competitive compensation. For example, software developers earn between EUR 30,000 and EUR 60,000 annually, while marketing managers earn EUR 28,000 to EUR 50,000. The minimum wage in 2025 is EUR 620 per month, which employers must meet or exceed, with overtime typically requiring a 50% premium.

Additional benefits are common, including bonuses (annual, performance, holiday), allowances (transport, meals), health insurance, pension contributions, and training opportunities. Salaries are usually paid monthly via bank transfer, with employers responsible for tax and social security deductions. Salary trends indicate rising demand for IT professionals and skilled trades, with expected wage growth influenced by inflation, remote work, and market competition.

Latvian labor law guarantees employees a minimum of 4 calendar weeks (20 working days) of paid annual leave, with some categories eligible for longer durations. Leave can generally be carried over by mutual agreement, but employees are encouraged to take their full entitlement annually. Employees are compensated at their average daily earnings during leave, which is scheduled through mutual agreement.

Public holidays are observed with paid days off, including dates like New Year’s Day, Labour Day, Midsummer Day, and Christmas. If a holiday falls on a weekend, it is typically not transferred to a weekday.

Sick leave is paid by the employer from days 2 to 10 at 75% of average earnings; from day 11 onward, the State Social Insurance Agency (SSIA) provides benefits. Employees must notify employers and provide medical certificates.

Parental leave includes maternity (56 days before and after birth, extendable in complications), paternity (10 days within two months of birth), and parental leave (up to age two, with benefits from SSIA). Adoption leave is 70 days with corresponding benefits. Other leave types include bereavement, study, and potentially sabbatical leave, depending on agreements.

Employers in Latvia must adhere to a comprehensive legal framework that mandates core employee benefits, including at least 20 days of paid annual leave, paid public holidays, sick leave benefits, maternity and parental leave, and mandatory social security contributions covering pensions, healthcare, and unemployment. Termination notices are also regulated to ensure fair employment practices. These statutory benefits establish a baseline of employee security and well-being.

Beyond legal requirements, many companies enhance their compensation packages with optional benefits such as supplementary health insurance, life insurance, private pension contributions, training programs, wellness initiatives, transportation allowances, meal vouchers, and flexible work arrangements. Supplementary health insurance is particularly valued, addressing gaps in the public healthcare system with faster access and broader coverage.

Key data points include:

Large firms tend to offer comprehensive packages, including health, life, and pension benefits, while SMEs may focus on mandatory benefits with some supplementary options. The cost of benefits varies, with social security contributions being a significant expense. Offering attractive benefits provides a competitive edge in talent retention and productivity enhancement.

In Latvia, employment agreements are fundamental for defining employer-employee rights and obligations, requiring compliance with labor law. There are two main contract types: fixed-term (max five years for successive contracts) and indefinite-term, with the latter being most common. Essential clauses include details on parties, job description, start date, work location, hours, remuneration, leave entitlements, termination procedures, and applicable collective agreements.

Probationary periods typically last up to three months, allowing employers to evaluate performance with a short three-day notice for termination during this time. Confidentiality clauses protect sensitive information, while non-compete clauses, enforceable for up to two years with reasonable scope and compensation, restrict post-employment competition. Contract modifications require written consent, and termination depends on legal grounds, with notice periods ranging from one to three months and potential severance pay based on service length.

Remote work in Latvia is increasingly adopted by employers, driven by benefits like higher productivity and access to broader talent pools. Latvian labor law treats remote work similarly to traditional employment, requiring clear employment contracts that specify work hours, performance expectations, and data security protocols. Employees have the right to request remote work, and employers must ensure safe, healthy remote work environments, including risk assessments and equipment support.

Key flexible arrangements include flextime, compressed workweeks, job sharing, telecommuting, part-time work, and remote work itself. Data protection is critical, with employers needing to implement security measures such as encryption, VPNs, and compliance with GDPR. Equipment and expense policies should be clearly defined, covering provision, reimbursement, and tax implications. Reliable internet, communication tools, IT support, and cybersecurity are essential infrastructure components for effective remote work.

Employers in Latvia must follow strict legal procedures when terminating employees, including adherence to specific notice periods, severance pay obligations, and procedural steps. Notice periods vary based on tenure, ranging from 1 month for less than 6 months of service to 4 months for over 10 years. Severance pay is mandatory for redundancies, calculated as 1 to 4 months' average salary depending on service length.

Termination can be with or without cause, with valid reasons including misconduct or lack of skills. Employers must provide written notice, consult with employee representatives in collective redundancies, and document all steps. Employee protections include rights against unfair dismissal, with potential reinstatement or compensation if unlawfully terminated. Ensuring compliance is crucial to avoid legal disputes and penalties.

Latvia's economy increasingly embraces freelancing and independent contracting, offering businesses flexibility and access to specialized skills. Understanding the legal and tax frameworks is crucial for compliant engagement with independent professionals. Proper classification between employees and contractors is essential, as misclassification can lead to significant legal and financial consequences. Key factors include control, integration, economic dependence, nature of work, and risk. Contracts should clearly define the scope of work, payment terms, confidentiality, intellectual property rights, and termination conditions to reflect a genuine business-to-business relationship.

Independent contractors in Latvia manage their own tax and social security obligations, with options like Personal Income Tax, Micro-enterprise Tax, and Flat-rate Income Tax. They must register with the State Revenue Service and file annual tax declarations. Insurance, while not mandatory, is recommended. Common sectors utilizing independent contractors include IT, creative services, consulting, education, and construction, driven by the demand for specialized expertise and project-based work.

Latvia, as an EU member, requires most non-EU/EEA nationals to obtain a work permit and appropriate visa for employment. The visa options vary based on stay duration and purpose. Short-term stays (up to 90 days) typically use a Schengen Visa (C Visa), suitable for business trips or conferences, requiring proof of funds, travel insurance, and valid passport. For longer stays, a Long-Stay Visa (D Visa) is necessary, often coupled with a work permit, and is used for extended employment.

The EU Blue Card is available for highly qualified professionals, offering streamlined residence and work authorization. Key visa types and their details are summarized below:

Employers should stay updated on Latvian immigration laws, as procedures can be complex and subject to recent changes.