Latvia’s Employment Act

With a 40 billion USD GDP (2022), Latvia has one of the leading economies in Europe. The country has an ever-growing open market attracting investors from all over. Furthermore, per economic forecasts, the GDP of Latvia is projected for annual growth in the coming years. The growing market is further enhanced by an expansive labor force with young men and women possessing skills necessary for employment. All these reasons and the Latvia government’s willingness to promote enterprises make Latvia an excellent location for entrepreneurs to conduct business. 

Business owners interested in hiring employees in Latvia must first understand the provisions of the Latvian labor law. Some main conditions of the labor regulations in Latvia are:

• Mandatory employment contracts
• Paid sick leave
• 40 hours work week
• Overtime compensation

To better understand the laws implemented in Latvia, keep reading this employment law in Latvia guide. 

Who is Covered by the Employment Act?

The Latvian labor law applies to everyone who is employed in the country. This means the labor regulations in Latvia cover both foreign and national employees. 

Employment Contract

In Latvia, employment contracts are usually made for an indeterminate period of time since fixed-term agreements are strictly monitored by Latvian labor legislation. Usually, fixed-term contracts can be made for a maximum of five years, after which it turns into permanent contract. 

Employment contracts are generally prepared in Latvian or any other language, which is understandable to both the employer and the employee. 

The mandatory details to be included in all employment contracts are:

• Identification of employee and employer
• Job description
• Working hours and workplace
• Basic salary and benefits
• Probation period 
• Date of commencement
• Notice period 
• Total holidays

Key Provisions of the Act

The primary sources of labor regulations in Latvia are:

• Latvian Constitution
• Strike Law
• Labor Law
• On Unemployment Insurance
• Labor Protection Law
• On Protection of Employees in case of Insolvency of Employer
• Labor Dispute Law
• Support for Unemployed Persons and Persons Seeking Employment Law

The employment laws in Latvia regulate almost all the provisions related to employment. Some major ones are given below:

Payroll

• In Latvia, salaries are to be paid twice a month. The exception is cases wherein both parties have agreed to a single-time payment. 

• As of February 2023, the minimum wage in Latvia is set to EUR 620 per month. 

Working hours

• In Latvia, the working hours are capped at 8 hours per day. 
• Usually, employees work from Monday to Friday, 5 hours per day, for 40 hours per week. 
• Employees are entitled to at least 12 hours of uninterrupted rest between two working days. Furthermore, the amount of rest each week is 42 hours.

For children under 18, the rules related to working hours are as follows:

• Children aged between 13 and 15 are not permitted more than two working hours per day during the school year and for more than four hours per day during school holidays.
• Teenagers in the age group 15 to 18 are not permitted more than seven working hours a day and 35 working hours a week.

Probation period:

• Probation periods can last up to six months after legal revisions in 2023. 

Overtime

• Any work done in addition to the stipulated work hours is considered overtime. This is compensated at a rate of twice the typical salary of the employee. 
• Overtime is limited to 8 additional hours per week. 

• Annually, overtime duration cannot exceed 200 hours for any employee.

• Underage employees cannot work overtime. 

Public Holidays

In total, there are 12 public holidays in Latvia.

Leave schemes

Annual leave

• In Latvia, workers have a right to at least four weeks of paid yearly leave. These leaves can be used in segments. 
• However, employees are mandated to take at least 14 leave days in a row. 

Parental leave

• Parental leave is permissible until the child is eight years old and can last up to 19 months for both parents.
• Legislations have made recent changes for shared paternity leave in Latvia, stating that both parents should share it.
• Therefore, each parent is given a take-it-or-leave-it option for two months out of 19 months of parental leave duration.
• There is also a provision for 13 months of parental leave:

1. 1. Of the 13 months of leave, one parent must use the nine-month portion until their child turns one year old. The nine-month portion also encompasses the period of maternity leave. 
   2. On the other hand, the mother can utilize the two-month non-transferable segment until the child turns eight. 
   3. Similarly, the father can use the two-month non-transferable segment until the child is eight.

Parental leave is compensated as follows:

• Compensation is paid at a 60% rate for 13 months of parental leave. 
• For 19 months of parental leave, the compensation rate is 43.75%.

Maternity and paternity leave

• In Latvia, maternity leave lasts 112 days. The entire leave is divided into 56 days before the baby’s birth and 56 days after the birth. 
• Maternity leave is increased to 140 days in the event of multiple gestations or pregnancy complications.
• According to Latvia’s paid maternity leave scheme, employees receive maternity coverage during their leave of absence at a rate of 80% of their regular pay.
• Fathers are entitled to 10 days of paid paternity leave.
• Paternity leaves are compensated at 80% of the regular salary. The Social Security Scheme pays for this. 

Sick leave

• Employees are entitled to 75% of their salary for the first and second days and 80% for the fourth to the tenth day of their sick leave. 
• For claiming sick leave for up to 26 weeks, employees are required to present a written sick leave certificate from a registered medical practitioner. 
• The state social insurance agency pays the remaining benefits if the sick leave is consecutive for 52 weeks. 

Adoption leave

• One of the parents is eligible for ten days off after the child’s adoption. 
• Companies and parents must consult the Orphan Court before granting any additional unpaid leave.

Study leave

• Companies and organizations must provide an employee 20 working days of leave to take state exams or study for a diploma paper. 
• However, this leave could be paid or unpaid, depending on prior agreements. 

Additional leaves and benefits

• Employees working during night shifts are eligible to take leaves.
• Employees are also entitled to 10 days of paid carers’ leave.

Taxes and social security contributions:

Income tax

In Latvia, employees and employers are subjected to the following tax rates:

For employees:

For employers:

Social security 

According to labor regulations in Latvia, employees and employers must contribute to the social security scheme.

For employees:

For employers

• Furthermore, employers and employees will pay a 25% solidarity tax (ST) equally on income exceeding EUR 78,100. 

Termination of Employment

According to Latvia employment law, an employee’s termination can happen for the following reasons:

• Breaching the employment contract period or disobedience of safety regulations at the workplace

• Consumption of alcohol or other toxic substances during working hours

• Inappropriate behavior at the workplace

• A lack of expertise in the job
• Redundancy

However, the following group of employees is exempted from dismissal:

• Women who are pregnant or who have a child under 1 
• Employees who are momentarily unable to work or are on leave 

Notice period:

Depending on the reason for termination, the notice period’s duration varies.

• In case of gross misconduct or working under the influence of alcohol or other harmful substances, there is no notice period.

• For other causes of dismissals, notice periods can range from two days to a month.

• Employees who are on a trial period are given a notice period of three days. 
• In the case of employees who want to resign, they need to provide notice to the employers at least a month before resigning.

Severance pay:

• Employees terminated for financial reasons or due to a long-term illness are entitled to severance pay from their employers. 

• The length of service determines severance pay: 

Penalties

The State Labor Inspectorate in Latvia is responsible for monitoring compliance with Latvian labor laws. If employers are found not to be following the laws, they can be penalized in the following ways:

• When employers are not following health and safety requirements, the Inspectorate has the right to impose criminal sanctions against them. Such cases are then resolved in the respective criminal courts. 

• If an employer misclassifies an employee as a temporary worker or independent contractor, they will be fined by the Inspectorate. Furthermore, the State Revenue Service may impose additional taxes and penalties on such an employer. 

• If an employee has been dismissed based on discriminatory grounds, they can demand compensation for causing moral harm and other damages. In a dispute, a civil court can decide how to compensate the employer for causing moral harm. Furthermore, the employee can also demand reinstating to their previous position. 

•  A fine is imposed on employers who do not pay minimum wage to any employee. 

• Administrative fines are generally levied on employers who do not follow other applicable labor laws. 

Compliance Strategies for Employers

Primarily, one out of these three strategies can be used by employers in Latvia to comply with Latvian labor law:

Following standard employment rules

• Various sets of rules are detailed in the Latvian employment laws, offering a solid foundation for employers to hire new employees.
• Companies can hire and manage employees by following the regulations laid out by the government.

Hiring an HR team

• To make hiring simple, businesses can also establish a human resources department that understands the labor regulations in Latvia.
• This HR team will then be in charge of appointing and overseeing employees in accordance with regional laws and regulations. 

Partnering with an EOR

• Businesses can hire a skilled Employer of Record (EOR) to manage all their employee duties.
• The EOR will help companies manage all duties like wage disbursement, social security contributions, taxation, and other responsibilities per the local laws. 
• An EOR helps minimize legal risks and costs of compliance.

How Can Multiplier Help?

Due to its robust economic structure and business-friendly atmosphere, Latvia has attracted numerous worldwide investors. While it is easy to operate in Latvia, one must abide by the nation’s all-encompassing laws and regulations. 

Hence, if you want to experience smooth sailing in Latvia, collaborate with Multiplier, a leading provider of EOR/POR solutions. We will help your enterprise fully adhere to the labor code in Latvia while hiring the finest talent. Furthermore, we assist with managing employees, drafting agreements, processing payments, and paying taxes – all on one platform.

Therefore, with Multiplier by your side, you can comfortably say that your business employs the brightest candidates while operating per Latvia employment laws.