Hire employees in Latvia using an Employer of Record

You've been interviewing for weeks. Finally found the right person in Latvia. Now you need to actually hire them legally. This is where most companies hit a wall.

Latvia's employment laws are employee-friendly with strict contract requirements, mandatory 13th-month payments, and termination procedures that can cost €10,000+ if you mess them up. Miss the required works council notifications for larger teams or get the probation period wrong, and you're looking at penalties plus back payments.

Here's your reality check: you've got three ways to hire in Latvia, and each comes with trade-offs you need to understand upfront.

Option 1: Set up your own entity

• Cost: €15,000-40,000 upfront, €8,000-15,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: Full tax registration, payroll system, legal compliance, HR infrastructure
• Makes sense when: Hiring 15+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control
• Timeline: Immediate
• Risks: Misclassification fines (€25,000+), back taxes, legal disputes
• Makes sense when: Short projects (< 6 months), specialized skills
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee (USD)
• Timeline: 2-3 days to hire
• Complexity: None - we handle everything
• Makes sense when: 1-50 employees, testing markets, multi-country teams

If you're hiring 1-8 people, entity setup costs more than 4+ years of EOR fees ($179/month = $2,148/year per employee). An EOR like Hire with Columbus handles employment contracts, payroll processing, tax compliance, mandatory benefits, and keeps you updated on Latvia's frequent labor law changes. Example: Hiring 3 people = $537/month vs €25,000+ entity setup plus ongoing maintenance costs.

Ready to hire in Latvia without the legal headaches? Get started with Hire with Columbus.

What employment types can you use?

You've got three ways to bring someone onboard in Latvia. Here's how the costs and risks compare.

Setting up your own entity runs €15,000-25,000 upfront plus 4-6 months of paperwork. Hiring contractors seems faster but Latvia's labor inspectors hit misclassified workers with fines up to €14,000 per case. Using an EOR like Hire with Columbus? You're hiring in 2-3 days for $179/month per employee.

Let's break down your options so you can pick the right path.

How can you hire in Latvia?

Here's the decision framework that'll save you months of headaches:

Setting up your own entity

You'll need a minimum €2,500 share capital, plus legal fees, accounting setup, and tax registration. The real cost comes later: monthly accounting (€300-500), annual audits, and staying current with Latvia's employment law changes.

This makes sense if you're planning 20+ employees long-term and want full control over your Latvia operations. Otherwise, you're paying entity costs to solve hiring problems.

Hiring contractors and freelancers

Latvia's tax authority doesn't mess around with contractor misclassification. If your "contractor" works set hours, uses your equipment, or follows your processes like an employee, you'll face back taxes, social contributions, and fines.

Hire with Columbus also handles compliant contractor agreements if you genuinely need project-based work. We manage payments, tax forms, and ensure your contractor relationship stays legitimate.

Using an employer of record

Hire with Columbus becomes the legal employer in Latvia while you manage day-to-day work. We handle employment contracts, payroll processing, tax compliance, and benefits administration.

Real example: A SaaS company wanted to hire 3 developers in Riga. Entity setup would've cost €20,000 plus 5 months. With our EOR, they hired all three in one week for $537/month total. They're now at 8 employees and still saving compared to entity costs.

Employment contract types in Latvia

Once you've decided on EOR (smart choice), here are the contract types we can set up for your team:

Permanent employment contracts

This is your go-to for full-time core roles. No end date, standard notice periods, and full benefits. Most international hires in Latvia use permanent contracts because they offer job security that attracts top talent.

Latvia requires permanent contracts to be indefinite duration - you can't sneak in artificial end dates. Hire with Columbus drafts these contracts in Latvian and English so everyone's clear on terms.

Fixed-term contracts

Use these for specific projects, seasonal work, or maternity leave coverage. Maximum 3 years total (including renewals). After that, the contract automatically converts to permanent.

You can't chain fixed-term contracts to avoid permanent employment rights. Latvia's courts will convert obvious permanent roles disguised as temporary contracts.

Part-time employment

Part-time employees get the same hourly benefits and protections as full-time workers. Popular for senior developers who want flexibility or parents returning to work.

We handle the pro-rated calculations for vacation days, sick leave, and social contributions. Part-time employees still get 4 weeks annual leave - just calculated proportionally.

Probationary periods

You can include up to 3 months probation in any contract type (6 months for management roles). During probation, either party can terminate with just 3 days notice instead of the standard 1 month.

Hire with Columbus includes probationary terms in all new contracts unless you specify otherwise. It's protection you'll want if the hire doesn't work out.

The bottom line: Most companies use permanent contracts for their core team and fixed-term for specific projects. We'll recommend the right contract type based on your role and hiring plans.

How does payroll and taxation work?

Your €60,000 employee actually costs €82,500 per year in Latvia. Employer social contributions add 37.5% to every salary, making it one of the higher tax burden countries in the EU.

Latvia runs on a straightforward monthly payroll cycle, but the tax calculations get complex fast. You've got progressive income tax, mandatory social contributions, and solidarity tax for higher earners. Miss a deadline and penalties start at €150 per violation.

Income tax brackets

Latvia uses a progressive tax system with rates that increased in 2025:

Plus there's a solidarity tax of 1% on income above €100,000 annually. The tax-free threshold of €12,000 helps lower earners, but most professionals hit the 23% bracket quickly.

Social security breakdown

Here's where it gets expensive. Employer contributions are mandatory and non-negotiable:

The employee portion gets deducted from gross salary. The employer portion comes straight from your budget on top of the agreed salary.

Total employment cost example

Let's break down that €60,000 salary:

• Base salary: €60,000
• Employer social contributions: €16,854 (28.09%)
• Mandatory benefits estimate: €2,400 (vacation allowance, sick pay reserve)
• Total annual cost: €79,254

Your employee receives about €47,100 net after taxes and contributions. That's a 32% effective cost increase over the base salary.

Payment schedule and timing

Latvia follows a strict monthly payroll calendar:

• Salary payment: By the 15th of the following month (most companies pay earlier)
• Tax filing deadline: 15th of the following month
• Social contribution payments: 15th of the following month
• Annual tax returns: March 31st for the previous year

There's no 13th or 14th month bonus requirement, but vacation allowance is mandatory. Most companies pay it in June before summer holidays.

Payroll cycle mechanics

Payroll runs monthly with these key dates:

1. Month-end: Calculate gross salaries, overtime, bonuses
2. 1st-5th: Process tax calculations and deductions
3. By 10th: Submit payroll reports to State Revenue Service
4. By 15th: Pay salaries and transfer taxes/contributions
5. By 20th: File detailed social insurance reports

The State Revenue Service (VID) requires electronic filing for all payroll taxes. Paper submissions aren't accepted anymore.

Common payroll mistakes

These errors cost companies serious money:

Late tax payments: 0.05% daily penalty on unpaid amounts, minimum €50 per violation. A €5,000 tax payment that's 10 days late costs an extra €25 plus the base penalty.

Incorrect social contribution calculations: Automatic penalties of €150-€700 plus interest. The system flags discrepancies within days.

Missing vacation allowance: Required by law but often forgotten by foreign companies. Employees can claim back payments plus interest.

Wrong tax residency assumptions: Non-residents pay different rates. Get it wrong and you're recalculating everything retroactively.

Inadequate payslip details: Must include 15 specific items in Latvian. Missing information triggers labor inspectorate reviews.

Setting up payroll yourself vs. EOR

Running payroll in Latvia yourself means:

• Local accounting firm: €800-€1,200/month for 5-10 employees
• Payroll software: €200-€400/month
• HR compliance expertise: €55,000+ annual salary for someone qualified
• Penalty risk: Up to €14,000 for serious violations
• Time investment: 15-20 hours monthly for a small team

With Hire with Columbus: $179/month per employee, fully compliant, zero penalty risk. We handle all calculations, filings, and deadlines while you focus on running your business.

The math works out fast. By employee three or four, you're saving money. By employee ten, you're saving thousands monthly while eliminating compliance headaches entirely.

What benefits and leave are required?

Latvia employees can take 6 days of sick leave before needing a doctor's note. Social insurance covers 80% of pay after the first day, which is unpaid.

Beyond that basic sick leave setup, you're looking at a benefits structure that adds about 35% to your base salary costs. This is what's mandatory and what you'll actually need to budget for.

Annual vacation leave

Every employee gets 20 working days of paid vacation per year minimum. That's four weeks, and it builds up monthly at 1.67 days per month during their first year.

Employees can carry over unused vacation to the next year, but only until March 31st. After that, it's gone unless you pay it out in cash. Most companies just pay it out to avoid the hassle of tracking carryover dates.

When someone leaves, you must pay out all unused vacation days at their current salary rate. No exceptions, and employees will definitely ask about this during their notice period.

Sick leave entitlements

Sick leave actually works day by day like this:

• Day 1: Unpaid (employee absorbs the cost)
• Days 2-10: Employer pays 80% of average salary
• Days 11+: Social insurance pays 80% of average salary

You'll need a doctor's certificate for any absence longer than 6 consecutive days. For shorter periods, the employee's word is enough, though many companies ask for a note anyway after 3 days.

If an employee is sick for more than 52 weeks total in any 3-year period, they may qualify for disability benefits instead of continuing sick leave.

Parental leave breakdown

Maternity leave: 16 weeks total at 80% of average salary. Women must take at least 8 weeks after birth, but can split the remaining 8 weeks before and after delivery.

Paternity leave: 10 days immediately after birth at 80% pay, plus an additional 30 days that can be taken within the first 8 weeks.

Shared parental leave: After the initial maternity period, parents can share up to 18 months of leave at 60% pay for the first year, then a flat rate of €171 per month.

The government pays all parental leave benefits, not you. But you'll handle the paperwork and coordinate with the State Social Insurance Agency.

Public holidays 2025

Latvia has 11 public holidays where employees either get the day off or double pay if they work:

If a public holiday falls on a weekend, it doesn't roll over to Monday. Employees just get that weekend day off as usual.

Mandatory benefit contributions

You'll pay these contributions on top of every employee's gross salary:

Social insurance covers healthcare, pensions, maternity benefits, and sick pay. The unemployment insurance is separate and kicks in if someone loses their job.

These rates are fixed regardless of salary level. There's no cap where contributions stop.

Competitive benefits beyond minimums

Most companies offer more than the legal minimums to attract talent:

Extra vacation: 25-30 days is common for senior roles, especially in tech companies competing for talent.

Health insurance: Private medical insurance costs €50-150 per month per employee but cuts wait times for specialists way down.

Meal vouchers: Up to €15 per working day tax-free. Employees love these because they're completely tax-exempt.

Professional development: €1,000-3,000 annual training budgets are standard in professional services and tech.

13th month salary: Not legally required, but about 40% of companies pay a bonus equivalent to one month's salary in December.

Common benefit administration mistakes

Missing meal voucher optimization: Companies often pay cash meal allowances that get taxed at 35%+ instead of using tax-free voucher systems.

Incorrect vacation accrual: New employees don't get their full 20 days immediately. They earn 1.67 days per month worked in year one.

Social insurance miscalculations: The 24.09% employer rate includes several sub-components that change annually. Using outdated rates costs you in penalties.

Parental leave coordination: You'll still receive invoices for benefits, phone bills, etc. while employees are on state-paid leave. Many companies forget to pause these automatic deductions.

Holiday pay errors: If someone works a public holiday, they get their regular day's pay PLUS double time for the holiday hours. It's not just double pay total.

Penalties for benefit violations start at €150 per employee for minor infractions, but can reach €3,000+ for systematic non-compliance with social insurance requirements.

Managing these benefits correctly requires local HR expertise (€45,000+ annual salary), benefits software (€200+ monthly), and legal review (€5,000+ yearly). Plus the risk of miscalculation penalties.

Hire with Columbus handles all benefit administration, government reporting, and compliance monitoring for $179/month per employee. We calculate contributions automatically, file required reports, and coordinate parental leave transitions so you can focus on running your business instead of Latvian social insurance regulations.

What are the compliance requirements?

Written contracts are mandatory in Latvia within five working days of employment start. Skip this deadline and you're looking at fines up to €2,840 per violation, plus the employee can claim the contract is indefinite term regardless of what you agreed verbally.

Employment contract requirements

Every employment contract in Latvia must be written in Latvian, even if your employee speaks perfect English. The contract needs specific mandatory clauses or the entire agreement can be voided:

• Employee's full name, address, and personal identification number
• Employer's registration details and tax number
• Job title, duties, and workplace location
• Start date and contract duration (if fixed-term)
• Salary amount, payment schedule, and any additional benefits
• Working hours and rest periods
• Notice periods for both parties
• Probation period terms (if applicable)

You'll also need to register the employment relationship with the State Revenue Service within 10 days. Miss this deadline and face penalties starting at €140 per employee.

Probation periods

Standard probation in Latvia runs three months for most positions, but you can extend it up to four months for complex roles. During probation, either party can terminate with just three days' written notice and no severance required.

Once probation ends, full employment protections kick in immediately. That means longer notice periods, potential severance payments, and much stricter termination requirements.

Working time regulations

Latvia caps regular working hours at 40 per week, with daily maximums of eight hours. Overtime is allowed but limited to 144 hours per year per employee, paid at 150% of regular wages.

Employees get mandatory rest breaks: 30 minutes for shifts over six hours, plus 11 consecutive hours of daily rest between shifts. You're required to track all working time and keep records for four years because labor inspectors will check these during audits.

Notice periods

Notice requirements in Latvia depend on length of service and who's initiating the termination:

Notice periods can't be waived by mutual agreement. They're mandatory minimums set by law.

Termination process

You can't just fire someone in Latvia without proper cause and procedure. Valid termination reasons include gross misconduct, redundancy, or inability to perform duties. For misconduct, you need documented evidence and must give the employee a chance to respond.

Redundancy terminations require 30 days advance notice to employee representatives and the State Employment Agency. You'll also need to prove the position is genuinely eliminated and offer suitable alternative roles if available.

Severance pay

Severance is required for most involuntary terminations in Latvia:

Severance is calculated using average monthly earnings over the previous six months, including overtime and bonuses.

Data protection

Latvia follows GDPR rules strictly. You need explicit consent to process employee personal data beyond what's required for employment purposes. Employee files must be secured, access logged, and data deleted within specific timeframes after employment ends.

Violations can trigger fines up to €20 million or 4% of annual global revenue, whichever is higher. The Data Protection Authority conducts regular workplace audits.

Common compliance mistakes

Most companies stumble on these requirements:

• Missing contract clauses: Forgetting mandatory terms voids the entire agreement
• Wrong language contracts: English contracts aren't legally valid
• Improper termination procedures: Skipping consultation periods or documentation
• Overtime violations: Exceeding annual limits or miscalculating premium rates
• Registration delays: Missing the 10-day employment registration deadline

Penalties for violations

Common compliance failures in Latvia carry specific penalties:

• Invalid employment contract: €2,840 fine plus contract deemed void
• Wrong termination process: 2-6 months' severance plus legal fees plus potential reinstatement order
• Missing mandatory registration: €140-€2,840 per violation
• Overtime violations: €710-€2,840 plus back pay at penalty rates
• Data protection breaches: Up to €20 million or 4% global revenue

Hire with Columbus ensures every contract follows Latvia's exact requirements and handles all registration deadlines automatically. Our local legal team manages termination procedures properly, so you avoid these costly mistakes entirely. At $179/month per employee, it's much cheaper than dealing with compliance violations after the fact.

What has changed recently?

Latvia's employment rules went through several major shifts in 2025 that directly impact how you hire and manage employees there.

The biggest change hit in March 2025 when Latvia increased its minimum wage to €700 per month (up from €620 in 2024). That's a 12.9% jump that affects not just your base salaries, but also overtime calculations and statutory benefit minimums. If you're hiring entry-level positions, you'll need to adjust your budget to match.

New parental leave system

Starting January 2025, Latvia rolled out an enhanced parental leave system that's actually pretty generous. Parents can now take up to 18 months of paid leave (previously 16 months), with the first 6 months paid at 80% of their average salary.

What changed for employers:

• You're required to hold positions open for the full 18-month period
• Benefit calculations now include bonuses and overtime from the previous 12 months
• Both parents can take simultaneous leave for up to 2 months (previously just 1 month)

The good news? Social security covers these payments, not you directly. But you'll need to handle the administrative paperwork and potentially hire temporary replacements for longer periods.

Digital nomad tax updates

Latvia tweaked its digital nomad program in June 2025, making it more attractive but also more complex for employers. Digital nomads working for Latvian companies can now stay tax-resident elsewhere for up to 2 years (previously 1 year) if they spend less than 90 days annually in Latvia.

This creates some interesting opportunities if you're hiring remote talent, but the tax implications get tricky fast. You'll need to track physical presence carefully and coordinate with multiple tax authorities.

Collective bargaining expansion

Labor unions gained more negotiating power in 2025, with new rules requiring employers in companies with 50+ employees to engage in collective bargaining if requested by at least 30% of staff (down from 50% previously).

Even if you're not planning to hire 50 people immediately, this affects your long-term growth strategy in Latvia. Union agreements typically include above-minimum wage rates, additional vacation days, and specific termination procedures that override standard employment law.

EU compliance updates

Latvia implemented stricter EU pay transparency rules in April 2025. You're now required to include salary ranges in all job postings and provide detailed pay equity reports annually for companies with 100+ employees globally (not just Latvian employees).

The penalties aren't joke money either. Fines start at €5,000 for missing salary ranges in job posts and can reach €50,000 for companies that don't file required pay equity reports.

When you're working with an EOR like Hire with Columbus, we handle these compliance updates automatically. Our team tracks regulatory changes and adjusts payroll, benefits, and reporting to keep you compliant without you having to monitor every legislative update across multiple countries.