Strategically located in the Baltic region, Latvia is a member of both the EU and the Eurozone, which means its employment framework aligns with broader European labor standards while maintaining distinct national regulations. The country's labor law, Darba likums, first enacted in 2002, governs virtually every aspect of the employment relationship, from contracts and working hours to termination and severance pay.
For foreign companies hiring in Latvia, understanding the minimum wage, the payroll tax structure, and the social insurance system is essential for achieving and maintaining compliance. This guide covers the key facts about Latvian employment law, the types of employment contracts used, payroll and tax obligations, statutory benefits, working-hour rules, leave entitlements, the hiring and onboarding process, and termination requirements.
Key Facts About Employment in Latvia
Information Category | Details |
Minimum Wage in Latvia | €780 per month. |
Standard Workweek | 40 hours standard. |
Payroll Frequency | At least once per month. |
Fiscal Year | Calendar year (January-December). |
Main Employment Laws | Darba likums, 2002 |
Employment Contracts in Latvia
Latvian employment law requires all employment agreements to be concluded in writing. Every employment contract must include a defined set of mandatory clauses to be legally enforceable.
Types of Employment Contracts:
- Indefinite (Permanent) Contract: This is the most common form of employment in Latvia. It has no expiry date and can only be terminated on grounds specified in the labor law. Employees under indefinite contracts enjoy the broadest protections, including full notice and severance entitlements.
- Fixed-Term Contract: This type of contract is permitted for a maximum duration of two years (can be extended to 5 years under specific circumstances). After this period, if the employment continues, the contract is automatically converted into an indefinite agreement. Fixed-term contracts are appropriate when the work is project-based, seasonal, or tied to a temporary need.
- Part-Time Contract: Under this contract type, employees may work reduced hours by agreement with their employer. Part-time workers retain the same statutory rights as full-time employees, calculated on a pro-rata basis.
Under Latvian employment law, every written employment contract must contain the following information:
- Full identification details of the employer and the employee, including registration numbers and personal identification codes.
- Date of commencement of employment and the place of work.
- The employee's job title, profession, or a clear description of the type of work to be performed.
- Remuneration details, including base salary, any applicable bonuses or allowances, and the payment schedule.
- Daily or weekly working hours and any applicable shift arrangements.
- Duration of paid annual leave entitlement.
- Notice period required for termination by either party.
- Reference to any applicable collective agreement.
- Duration of the fixed-term contract, if the contract is not for an indefinite period.
- Probation period terms.
Payroll, Taxes, and Social Security in Latvia
Latvia operates a structured payroll system built on a combination of progressive personal income tax (PIT) and mandatory social insurance contributions (VSAOI). Employers must register with the State Revenue Service (VID) before processing payroll and must file monthly payroll declarations by the 17th of the following month, with tax payments due by the 23rd.
Employer Contributions
Contribution Type | Rate | Notes |
|---|---|---|
State Social Insurance (VSAOI) | 23.59% of gross salary | Paid on top of gross salary; covers pensions, disability, unemployment, maternity, and sickness benefits. |
Risk-Based Occupational Accident Insurance | Included in VSAOI rate | Rate varies by industry risk level, assigned by the State Revenue Service. |
Total Employer Cost Above Gross Salary | ~23.59% | Employer social contributions do not appear on the employee's payslip. |
Employee Contributions
Contribution / Tax | Rate | Details |
|---|---|---|
State Social Insurance (VSAOI) | 10.5% of gross salary | Deducted from gross salary before income tax is calculated. |
Personal Income Tax (PIT) — Standard Rate | 25.5% | Applied to annual income up to €105,300; calculated after deducting social contributions and the personal allowance. |
Personal Income Tax (PIT) — Higher Rate | 33% | Applied to annual income above €105,300. |
Additional PIT rate | Additional 3% | Applied to income exceeding €200,000 annually. |
Non-Taxable Personal Allowance | €550/month (€6,600/year) | Applies to employees earning below €1,800/month; phases out to zero above €3,600/month. |
Dependent Child Allowance | €250/month per child | Reduces taxable income; submitted to primary employer via the EDS tax booklet. |
The employee must submit a tax booklet to their primary employer through the State Revenue Service's Electronic Declaration System (EDS) by January 15 each year. Without a submitted tax booklet, PIT is withheld at 25.5% from the very first euro, without applying any personal allowance. The payroll cycle is monthly, and annual income tax returns (Declaration D) must be filed between April 1 and July 1.
Compensation & Benefits in Latvia
In addition to the minimum wage Latvia has established at €780 per month for 2026, employers typically offer a range of statutory and supplementary benefits to attract and retain talent in a competitive labor market.
Benefit Type | Requirement |
|---|---|
13th Month Salary / Annual Bonus | Not legally mandated, but commonly offered in corporate and international company environments as a competitive practice. |
Health Insurance | Not statutorily required above mandatory social contributions; supplementary private health insurance is a common employer-provided benefit, particularly in multinational companies operating in Latvia. |
Meal / Transport Allowances | Not legally required; offered voluntarily as part of benefits packages, particularly in Riga-based roles. |
Non-Compete Compensation | A post-termination non-compete is valid only if it meets labor law requirements, is agreed in writing, does not exceed two years, and provides adequate monthly compensation for the duration of the restriction. |
Social Security Benefits | Funded through VSAOI contributions; covers state pension, unemployment benefit, sickness, maternity/paternity pay, and work accident compensation. |
Working Hours and Overtime in Latvia
The Labour Law establishes clear limits on daily and weekly working time. Employers must maintain detailed records of actual working hours for at least three years, and employees must provide written consent before any overtime is scheduled.
Category | Rule / Limit |
|---|---|
Standard Workday | 8 hours per day |
Maximum Overtime | 8 hours per week on average; total overtime must not exceed 200 hours per year |
Overtime Compensation | Minimum 100% premium above the regular hourly rate (i.e., double pay); alternatively, compensatory time off may be agreed upon in writing |
Night Work Premium | At least 50% additional pay above the regular rate for work performed between 10:00 PM and 6:00 AM |
Rest Between Shifts | Minimum 12 consecutive hours of rest between working days |
Weekly Rest | Minimum 42 consecutive hours per seven-day period |
Flexible / Remote Work | Permitted by agreement; the labor law allows hybrid and remote arrangements, provided working time records are maintained and statutory limits are observed |
Written Overtime Consent | Required; employers cannot require overtime without prior written agreement from the employee |
Leave and Statutory Time Off in Latvia
Latvia's labor law provides employees with a comprehensive set of statutory leave entitlements. Employers must account for these when managing payroll in Latvia and scheduling staff resources throughout the year.
Leave Type | Entitlement | Payment |
|---|---|---|
Paid Annual Leave | Minimum 20 working days (4 weeks) per year; at least 14 consecutive days must be taken in a single block; accrued from the start of employment, with full entitlement available after 6 months. | Full average salary, paid by the employer. |
Additional Annual Leave | 3 extra days for workers in hazardous roles; 3 extra days for parents of 3+ children under 16 or a disabled child; 1 extra day for parents of fewer than 3 children under 14. | Full average salary, paid by the employer. |
Sick Leave — Employer Period | For ordinary sickness, the employer pays sickness certificate A for the first nine calendar days: days 2–3 at not less than 75%, and days 4–9 at not less than 80%. | Paid by the employer. |
Sick Leave — State Period | For ordinary sickness, VSAA pays sickness benefit from the 10th day. The continuous maximum is generally 26 weeks, extendable to 52 weeks, with separate rules for intermittent sickness. | Paid by the State Social Insurance Agency (VSAA) at 80% of average salary. |
Maternity Leave | 112 days total (56 days before and 56 days after birth); extendable to 140 days if there are complications or multiple births. Must notify the employer at least 1 month in advance. | 80% of average salary, paid by the VSAA. |
Paternity Leave | 10 working days, to be taken within 2 months of the child's birth; may be divided into portions by agreement. | 80% of average salary, paid by the VSAA. |
Parental Leave | Available to either parent until the child reaches 8 years of age; parental leave may be shared; maximum combined duration is 19 months per family. | State benefit paid by VSAA at rates set by social insurance regulations. |
Child Sick Leave | Parents may take sick leave to care for an ill child under 14: up to 14 days for home care; up to 21 days if the child is hospitalized. | Paid by VSAA at standard sick-pay rates. |
The following are Latvia's official public holidays:
- New Year's Day (January 1)
- Good Friday (April 3)
- Easter Sunday (April 5)
- Easter Monday (April 6)
- Labor Day / May Day (May 1)
- Independence Restoration Day (May 4) — commemorates Latvia's restoration of independence from the Soviet Union in 1990
- Whitsunday / Pentecost (May 24)
- Midsummer Eve / Līgo (June 23)
- Midsummer Day / Jāņi (June 24)
- Proclamation Day of the Republic of Latvia (November 18) — marks the declaration of independence in 1918
- Christmas Eve (December 24)
- Christmas Day (December 25)
- Second Day of Christmas (December 26)
- New Year’s Eve (December 31)
Note: If May 4 or November 18 falls on a Saturday or Sunday, the following Monday is treated as the public holiday.
Hiring and Onboarding Process in Latvia
- Confirm the hiring structure: Determine whether you will set up a Latvian legal entity, work through an EOR provider, or engage the worker as a properly classified independent contractor. Misclassification in Latvia carries significant financial penalties, including back taxes and retroactive social contributions.
- Draft a compliant employment contract: Prepare a written employment agreement in Latvian (or bilingual format) that includes all mandatory clauses required under the labor law, including remuneration, working hours, probation period, and notice terms.
- Register the employee with the State Revenue Service (VID): Before the employee starts work, the employer (or EOR) must register the employment relationship with the VID. This registration is required for payroll tax withholding and social insurance contributions.
- Obtain the employee's tax booklet: The employee must submit their tax booklet electronically via the EDS portal, which enables the personal allowance to be applied to their monthly payroll. Without the booklet, 25.5% PIT applies from the first euro.
- Set up payroll and VSAOI contributions: Establish a payroll schedule (at minimum monthly), calculate VSAOI (23.59% employer, 10.5% employee), and ensure monthly declarations are filed by the 17th and payments remitted by the 23rd of each following month.
- Onboarding documentation: Provide the employee with their signed contract, an explanation of workplace safety policies, and any relevant company policies. Employers must retain employment records for a minimum of three years.
- Work permits for foreign nationals: Latvian nationals do not require a work permit to work for a foreign employer within Latvia. However, if an American employer wishes to bring a non-EU national into Latvia to work, that person will need a residence permit with work authorization from the Office of Citizenship and Migration Affairs (OCMA), or an EU Blue Card if they meet the salary threshold. Processing typically takes four to eight weeks.
Termination & Notice Periods in Latvia
At-will employment does not exist under Latvian employment law. Employers must have a legally valid reason to terminate an employment contract, must follow procedural requirements, and must provide written notice specifying the grounds for dismissal. Failing to meet these requirements can lead to court-ordered reinstatement and an obligation to pay the employee's average salary for the entire period of forced absence.
- Valid grounds for dismissal by the employer include: Redundancy or reduction in headcount; liquidation of the company; the employee's inability to perform work due to a health condition (where no alternative suitable role exists); insufficient professional competence; and serious misconduct (which requires a prior written warning and an opportunity for the employee to respond).
- Notice requirements, employer-initiated termination: A minimum of 10 days' written notice is required where termination results from the employee's breach of contract or long-term sickness. A minimum of 30 days' (one month's) written notice applies to redundancy, company liquidation, insufficient skills, or the return of a previously substituted employee. For employees with a disability, the notice period extends to two months.
- Notice requirements, employee resignation: Employees must give a maximum of one month's written notice. An employee may resign with immediate effect if they are morally unable to continue performing the required work.
- Notice during probation: Either party may terminate the contract during the probation period with three days' written notice.
- Severance pay: Statutory severance is required when termination is initiated by the employer for non-misconduct reasons. The minimum amounts based on length of service are: one month's average pay for up to 5 years of service; two months' average pay for 5 to 10 years; three months' average pay for 10 to 20 years; and four months' average pay for over 20 years. Severance is calculated using the employee's average earnings from the preceding six months.
- Trade union members: Employees who have worked for more than six months and are members of a trade union cannot be unilaterally dismissed without prior consent from the union.
Useful Resources
- Latvian Labour Law (Darba likums)
- Ministry of Welfare; Minimum Wage
- Latvijas Banka; Public Holidays in Latvia
Disclaimer: This article is provided for informational purposes only and should not be relied on as legal advice or used as a substitute for advice from qualified legal counsel.
