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High education levels and a multilingual workforce are just two of the many reasons why more and more businesses decide to expand into Latvia. The country is strategically located in the North of Europe between Lithuania and Estonia, and labor costs are among the lowest in the EU.
In the 2020 edition of the Worldbank’s Ease of Doing Business Index, Latvia ranked 19th of 190 countries, meaning that multinationals can expect a business-friendly economic environment. Improvements in infrastructure, logistics and IT have further strengthened the country’s position as a popular international trading hub.
Employment contracts in Latvia must generally be concluded for an indefinite term, since the cases where fixed-term contracts are permitted are strictly regulated by Latvian labor law. In those cases where it is possible to hire an employee for a definite period, the contract duration must not exceed 5 years. If the employment relationship continues beyond the agreed expiry date, the contract automatically turns into a permanent contract.
All employment agreements must be made in writing before the employee starts working for the company. The required contract language is Latvian. However, if the employee is unable to understand Latvian, the employer is obligated to share the terms and conditions applying to the employment relationship with the employee in a language that is understood by both parties.
Mandatory information to be specified in the contract includes:
Identification of both parties
Date of commencement (and employment duration for temporary contracts)
Job description, duties and responsibilities
Basic salary as well as other compensation or benefits
Total number of holidays
Notice periods for employment termination
Employee and employer can agree on a probationary period. The duration of the latter should not exceed 3 months. During an employee’s trial period, the notice period is shortened to 3 days. Following legal changes in 2023, probationary periods can now be as long as 6 months under an applicable CBA.
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The standard workweek in Latvia comprises 40 hours and is typically split into 5 workdays of 8 hours. Workdays are usually Monday to Friday.
Employees should have no less than 12 hours of uninterrupted rest between two consecutive workdays. The weekly rest period is set at 42 hours.
Hours worked beyond the employee’s standard working hours are considered overtime and must be paid at double rates. Per week, employees cannot work more than 8 additional hours. Overtime is further limited to 200 hours per year.
It is mandatory to pay employees in Latvia twice a month - unless both parties have specifically agreed to a monthly pay period.
The national minimum wage of Latvia currently (February 2023) stands at EUR 620 per month. In January 2024, the Latvian minimum wage is scheduled to increase to EUR 700 per month.
Paid sick leave is granted to employees who have completed at least one month of service with their current employer. Days 2 to 10 are paid by the employer at rates of 75% (days 2 to 4) and 80% (days 4 to 10).
Thereafter, the employee receives statutory sickness benefits amounting to 80% of their usual earnings for a duration of up to 26 weeks - only upon presentation of a medical certificate. Under certain circumstances, sickness benefits may be paid for up to 52 weeks.
There is no legal obligation to pay employees a 13th salary.
Learn about tax reporting, compensation laws, registration requirements and more in our free Payroll Guide for Latvia.
Employees and employers in Latvia are subject to the following tax and social security contribution rates (last review February 2023):
20% corporate tax rate (25% effective rate)
21% VAT (standard rate)
up to 31%
Up to EUR 20,004: 20%
EUR 20,004 - EUR 78,100: 23%
Over EUR 78,100: 31%
23.59% National Social Insurance Contributions (NSIC)
EUR 0.36 Business Risk Fee per employee, per month
10.5% National Social Insurance Contributions (NSIC)
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Contributions are capped at an annual income of EUR 78,100. However, income exceeding the EUR 78,100 threshold is subject to a 25% solidarity tax (ST) which is borne partly by the employee and partly by the employer. Different rates apply to employees working for a company registered in Latvia or within the EU / EEA who are eligible for retirement.
Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).
Employees in Latvia are entitled to at least 4 weeks of paid annual leave which can be taken in parts. However, it is mandatory for employees to take at least 14 (calendar) days of leave in one block. In addition, the country observes 12 public holidays.
Maternity leave in Latvia lasts for 112 days and is split into two periods of 56 days each which are to be taken before and after birth. In case of multiple births or complications during the pregnancy, the maternity leave entitlement is extended to a total of 140 days, i.e. 70 days of post- and pre-natal leave. While on maternity leave, employees receive maternity benefits equal to 80% of their normal wages.
Fathers get 10 days of paternity leave which is also paid by Social Security at a rate of 80%. Paternity leave can be taken immediately after birth or within the following 2 months.
Parental leave may last for as long as 19 months for both parents and can be taken until the child is 8 years old. Recent changes in Latvia's parental leave rules have made it compulsory for parents to share parental leave. 2 months of the total leave entitlement of 19 months are therefore reserved for each parent on a take-it-or-leave-it basis.
Parental leave benefits can be paid following one of two different schemes:
Benefits paid at a rate of 43.75% during 19 months, i.e. 15 months until the child reaches the age of one and a half years and 4 months until the child reaches the age of eight
Benefits paid at a rate of 60% during 13 months, i.e. 9 months until the child reaches the age of one and 4 months until the child reaches the age of eight
Please note that the period during which the mother receives maternity benefits is included in the overall benefits entitlement of either 13 or 19 months.
Employers can opt to offer their employees additional health and life insurance. Employees are further entitled to 10 days of paid carers’ leave.
It is possible to dismiss an employee based on either individual or economic reasons. Employees must be notified about the dismissal in writing. Reasons for employee dismissal may be:
Violation of employment contract or safety regulations in the workplace
Working under the influence of alcohol or other toxic substances
Lack of skills and / or ability to perform the work the employee has been hired for
Liquidation of the business
The length of the notice period varies depending on the dismissal reason. In cases of gross misconduct or work performed under the influence of alcohol or other toxic substances, the dismissal enters into effect immediately. For other dismissal reasons, the notice period is generally 1 month, but there are also cases where the notice period can be as short as 10 days or as long as 2 months.
During the employee’s probation period, employers only need to give 3 days’ notice. For employees wishing to resign, the notice period is 1 month.
Employers have to provide severance pay to employees who are dismissed for economic reasons or due to long-term illness. Severance pay is calculated based on the employee’s length of service and can reach up to four months’ wages.
Length of service
Pregnant women and women with children of less than 1 year of age are protected from dismissal. The same applies to employees who are temporarily incapacitated or on leave.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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