Located in Europe, Latvia is an economically stable country with a GDP of 40 billion USD (2022). Furthermore, the Latvian labor market is highly favorable for businesses, as the country offers a diverse labor pool of skilled, experienced, and flexible individuals.
Recruitment and selection in Latvia are governed by the Constitution and several laws such as the Labor Law, Labor Protection Law, State Labor Inspection Law, etc. Companies must moderate every aspect of employment relations per the Latvian labor codes. Therefore, to thoroughly understand how to hire employees in Latvia, keep reading below.
Things To Know Before Hiring in Latvia
Latvia provides a business-friendly atmosphere for setting up businesses and hiring individuals. You must be aware of the following factors before you hire staff in Latvia:
Employment contract
After finishing recruitment and selection in Latvia, preparing an employment contract in writing in Latvia is mandatory. The language used can be Latvian or any other language that both parties understand.
Employment contracts in Latvia are primarily of two types; indefinite and definite.
Most enterprises usually prepare contracts indefinitely since Latvian laws heavily regulate fixed-term contracts. In general, fixed-term contracts should have a maximum tenure of five years. Additionally, if any fixed-term contract continues beyond its expiry date, it changes into a permanent contract.
An employment contract in Latvia should mandatorily have the following information:
- Identification of employer and employee
- Workplace
- Date of commencement of work
- Employment duration in the case of temporary contracts
- Pay date
- Salary and other benefits
- Job description
- Total working hours
- Number of leaves and holidays
- Probation and notice period
Working hours
- Latvia has 40 hours work weeks.
- Typically, there are five working days each week which are 8 hours long each.
- The weekly rest duration is a minimum of 42 hours.
- Employers should also provide 12 hours of continuous rest between two work days.
Overtime
- Any work done in addition to the standard working hours is considered overtime.
- The overtime rate of double the regular salary.
- The maximum allowed overtime is 8 hours weekly and 144 hours quarterly.
Sick pay
Employees who have at least worked for a month for an employer receive the benefits of sick pay.
- The employer compensates sick pay for the initial three days of sick leave at a rate of 75%.
- The employer compensates sick pay for day four to day ten at a rate of 80%.
- Subsequently, the sick pay rate is 80% up to 26 weeks of sick leave. However, one must present a valid medical certificate to get this pay.
- Sickness benefits are extended to a maximum of 52 weeks under special circumstances.
Annual leave
- Employees can take four weeks of paid annual leave in Latvia. Employees can divide these leaves at their convenience.
- However, employees must take 14 days of continuous leave in one stretch.
Public holidays
January 1 | New Year’s Day |
April 7 | Good Friday |
April 10 | Easter Monday |
May 1 | Labor Day |
May 4 | Independence Restoration Day |
June 23 | Mid-Summer’s Eve |
June 24 | St. John’s Day |
November 18 | Independence Day |
December 24 | Christmas Eve |
December 25 | Christmas Day |
December 26 | Second Day of Christmas |
December 31 | New Year’s Eve |
Maternity leave
- The maternity leave duration in Latvia is 112 days. A pregnant employee can split the mentioned tenure into 56 days of leave before birth and 56 days after.
- In case of multiple births or complications, one can extend the post-birth leave up to 70 days.
- During maternity leave, employees receive 80% of their regular salary.
Parental leave
- Parental leave can last for a maximum of 19 months till a child is eight years old.
- Both parents should share the parental leave, per Latvia’s labor code.
- The compensation rate for parental leaves lasting 19 months is 43.75%.
- For leaves that are 13 months long, the compensation rate is 60%.
Taxes
Employers must withhold taxes from their employees and submit them to the concerning authorities. They must deduce the taxes per the schema below.
Salary | Tax rate |
Up to EUR 20,004 | 20% |
EUR 20,004 to EUR 78,100 | 23% |
More than EUR 78,100 | 31% |
For employers, the following taxes are applicable:
- 21% VAT
- 20% corporate tax
Social security
Employer | Employee |
EUR 0.36 every month for every employee as Business Risk Fee 23.59% towards the National Social Insurance Contributions | 10.5% towards the National Social Insurance Contributions |
Employment termination
Employment termination can be due to several reasons, some of which are:
- Liquidation of business
- Gross misconduct
- Working under the influence of alcohol or drug
- Redundancy
- Lack of skills
However, people in the following categories are exempted from dismissal:
- Pregnant women
- Women with children under the age of 1year
- Employees on leave
- Temporarily incapacitated employees
Notice period
- Generally, the notice period lasts for one month.
- However, notice periods can vary in exceptional circumstances.
- The notice period is three days if an employee is still on probation.
- When an employee wants to resign, the notice period is one month.
Severance pay
Duration of service | Severance pay |
Less than 5 years | 1 month’s salary |
5 to 10 years | 2 months’ salary |
10 to 20 years | 3 months’ salary |
More than 20 years | 4 months’ salary |
The Cost of Hiring an Employee in Latvia
Some of the costs associated with recruitment and selection in Latvia are:
- Posting job advertisements
- Hiring legal team
- Hiring HR
- Onboarding costs
- Employee training costs
- Salary costs
- Taxes and social security contributions
What Does a Company Need to Hire Employees in Latvia?
To begin recruitment and selection in Latvia, a company must establish its legal presence there. Latvia has different business models, and entrepreneurs can use any of them to set up their enterprises. Overall, these documents should be submitted by employers before they can become operational and start the hiring process in Latvia:
- Articles of Association
- Signed trade register application
- Company charter
- Tax receipts
- Proof of the company’s registered address
- Identification of the company’s shareholders and directors
- Proof of paying the share capital and publication charge
- Corporate bank account details
- Tax registration and relevant receipts
Various Options For Hiring Employees in Latvia
There are two ways through which one can conduct recruitment and selection in Latvia.
- By establishing a company: Entrepreneurs can start recruitment and selection in Latvia after establishing a company. They must submit all the relevant documents to the necessary authorities to establish a company. Post-registration, the employer can start the hiring process in Latvia. While this is an excellent long-term solution, it requires time and resources.
- Through an EOR: An EOR or Employer of Record is a third-party entity hired by companies to take care of employment and employee management in foreign countries on their behalf. It is an ideal option for all kinds of businesses. It saves time and resources by negating the need to register a company before recruitment and selection in Latvia.
The Steps to Hiring in Latvia
To hire staff in Latvia, employees must follow these steps:
- Step 1: The first step is to post job advertisements online or using the newspaper. It is best to mention the job position and description to attract the appropriate candidates while conducting recruitment and selection in Latvia.
- Step 2: After receiving applications, you must shortlist and call the candidate for an interview. You can also ask for pre-employment references to assess any candidate’s capability of doing the listed job.
- Step 3: You can also carry out medical examinations of prospective candidates if the job requires any labor-intensive task.
- Step 4: Finally, you must onboard the selected candidates to your company. It is essential to remember that Latvian law does not allow any discrimination on the basis of age, race, color, disability, gender, and so on during recruitment and selection in Latvia.
- Step 5: The recruitment and selection in Latvia are formally completed. If required, the final step may be arranging training programs for your newly hired employees.
Let Multiplier be Your EOR Platform in Latvia
While Latvia ranks 19 in the Ease of Doing Business index, proving its business-friendly atmosphere, hiring employees in Latvia can take up some time for foreign entrepreneurs. It is because the entire employment process must adhere to the local laws, which may introduce a learning curve for business owners. Furthermore, one must register their company before initiating recruitment and selection in Latvia. It is where an EOR can help by carrying out all the employment-related processes on the company’s behalf.
If you plan to hire staff in Latvia, you can count on Multiplier to help you, as the need to establish a company is negated with us. We offer a robust infrastructure for companies to hire staff in Latvia and manage them through services like payroll management, work permits, etc. Our comprehensive solutions are simple and efficient and help you focus on the more crucial aspects of your business while allowing you to hire from 150+ economies.