Minimum Wage

As of 2024, the minimum wage in Latvia is set at €700 per month. This amount is established by the government and is applicable to all employees, ensuring a basic standard of living. Employers must comply with this regulation to avoid legal penalties.

Minimum Wage	Monthly Amount
Minimum Wage	€700

Income Tax

Latvia employs a progressive income tax system with three different tax rates based on annual income levels:

• 20% for income up to €20,004
• 23% for income between €20,005 and €78,100
• 31% for income exceeding €78,100

Employers are responsible for withholding these taxes from employee salaries and remitting them to the State Revenue Service.

Income Tax Bracket	Tax Rate
Up to €20,004	20%
€20,005 – €78,100	23%
Over €78,100	31%

Payroll Cost

In addition to salaries, employers in Latvia are required to contribute to social security for their employees. The total employer contribution rate is approximately 23.59% of the gross salary. This includes contributions to various social insurance programs.

Payroll Cost	Employer Contribution
National Social Insurance	23.59% of gross salary

The breakdown of employer contributions typically includes:

• Pension Contributions: Included in the total employer contribution.
• Health Insurance Contributions: Also included in the total.

Overtime Pay

Latvian labor law stipulates that any work performed beyond the standard working hours must be compensated at a higher rate. The standard workweek consists of 40 hours, typically spread over five days. Overtime pay is calculated as follows:

• For hours worked beyond the regular hours: 200% of the employee’s regular hourly rate.

Employers must ensure that overtime is properly tracked and compensated according to these regulations.

Overtime Pay	Rate
Overtime Hours	200% of regular hourly rate

Regular & Maximum Working Hours

In Latvia, the standard workweek is set at 40 hours, typically distributed over five days. The maximum daily working hours are 8 hours. If a company operates on a six-day workweek, the daily working hours are generally capped at 7 hours to maintain the total workweek within the 40-hour limit.

Key Regulations:

• Regular Working Time: Employees are expected to work 8 hours per day.
• Maximum Working Time: The total weekly working hours must not exceed 40 hours.
• Daily Rest Period: Employees must receive a minimum of 12 consecutive hours of uninterrupted rest between two working days.
• Weekly Rest Period: Employees are guaranteed a minimum of 42 consecutive hours of rest within any seven-day period.

Working Hours	Regular Hours	Maximum Hours
Daily	8 hours	8 hours
Weekly	40 hours	40 hours
Six-Day Workweek	7 hours	42 hours weekly

Leave

Latvian labor law provides various types of leave to ensure employee well-being. Here are the main types of leave available:

Annual Leave

Employees in Latvia are entitled to a minimum of four weeks (20 working days) of paid annual leave after completing one year of service. This leave can be taken in segments, but at least one segment must consist of a continuous period of at least 14 days.

Leave Type	Entitlement
Annual Leave	Minimum of 4 weeks (20 days)
Annual Leave Entitlement in Latvia

Sick Leave

Employees are entitled to sick leave benefits after working for at least one month. The sick pay structure is as follows:

• For the first three days: 75% of salary
• From day four to day ten: 80% of salary
• Beyond day ten: Requires a medical certificate for social support, paid at 80% of salary for up to 26 weeks.

Sick Leave Entitlement	Duration & Compensation
First three days	75% salary
Days four to ten	80% salary
Beyond ten days	Requires medical certificate
Sick Leave Compensation in Latvia

Maternity Leave

Female employees are entitled to a total of 112 calendar days of maternity leave, which can be divided into:

• 56 days before childbirth
• 56 days after childbirth

In cases of multiple births or complications, the post-birth leave can be extended up to 70 days.

Maternity Leave Type	Duration
Total Maternity Leave	112 calendar days
Maternity Leave Entitlement in Latvia

Holidays

Latvia recognizes several public holidays during which employees are entitled to paid time off. The following are the statutory public holidays:

• New Year’s Day – January 1
• Good Friday – Date varies
• Easter Sunday – Date varies
• Labor Day – May 1
• Restoration of the Republic Day – November 18
• Christmas Day – December 25
• Boxing Day – December 26

Public Holiday	Date
New Year’s Day	January 1
Good Friday	Date varies
Easter Sunday	Date varies
Labor Day	May 1
Restoration of the Republic Day	November 18
Christmas Day	December 25
Boxing Day	December 26
Public Holidays in Latvia

Termination Requirements

In Latvia, termination of employment must adhere to specific legal requirements. Employers cannot terminate an employee’s contract at will; valid reasons must be provided. Acceptable grounds for termination include:

• Voluntary Resignation: The employee chooses to leave the job.
• Mutual Agreement: Both parties agree to terminate the contract.
• Employer-Initiated Termination: This can occur for various reasons, including:
  • Inadequate occupational competence
  • Health-related incapacity certified by a doctor
  • Redundancy due to workforce reduction
  • Company liquidation
  • Repeated misconduct or violation of workplace policies

Employers must provide a written explanation for the termination and follow due process as outlined in Latvian labor law.

Termination Type	Description
Voluntary Resignation	Employee chooses to leave
Mutual Agreement	Both parties agree to terminate
Employer-Initiated	Must have valid grounds as per labor law

Notice Period

The notice period required for terminating an employment contract varies based on the circumstances:

• General Notice Period: For most terminations, a minimum notice period of one month is required.
• During Probation Period: If the employee is still within their probation period, only a three-day written notice is required.
• Immediate Termination: In cases of gross misconduct, no notice period is necessary.

Notice Period	Duration
General	At least 1 month
During Probation	At least 3 days
Gross Misconduct	No notice required
Notice Period Requirements in Latvia

Severance Pay

Severance pay is applicable under specific circumstances, particularly during employer-initiated terminations. The amount of severance pay depends on the length of employment:

• Less than 5 years: One month’s average salary
• 5 to 10 years: Two months’ average salary
• 10 to 20 years: Three months’ average salary
• Over 20 years: Four months’ average salary

Severance pay is intended to provide financial support to employees who are terminated without cause.

Length of Employment	Severance Pay
Less than 5 years	1 month
5 to 10 years	2 months
10 to 20 years	3 months
Over 20 years	4 months
Severance Pay Structure in Latvia

Probation Periods

Probation periods in Latvia typically last up to three months, allowing employers to assess the suitability of new employees. However, under certain collective agreements, this period can be extended up to six months without compromising employee rights.During the probation period, either party can terminate the employment with a shorter notice period (three days), providing flexibility for both employers and employees.

Probation Period Details	Maximum Duration	Notice Requirement
Standard	Up to 3 months	At least 3 days
Extended	Up to 6 months (by agreement)	Same as standard
Probation Period Regulations in Latvia

Misclassification

Misclassification occurs when a worker is incorrectly classified as an independent contractor instead of an employee. This distinction is crucial because it affects the rights and benefits available to the worker under Latvian labor law. Proper classification helps avoid legal consequences for both employers and workers.

Key Factors for Determining Classification

Latvian courts and labor authorities consider several factors when determining whether a worker is an employee or an independent contractor:

• Control: The extent to which the employer controls the worker’s tasks and work schedule.
• Integration: How integrated the worker is into the employer’s business operations.
• Financial Risk: Whether the worker bears financial risks associated with their work.
• Provision of Tools: Who provides the tools and equipment necessary for the job.

Misclassifying a worker can lead to significant penalties, including back taxes, fines, and claims for unpaid benefits.

Classification Criteria	Employee	Independent Contractor
Control	High level of control by employer	Low level of control
Integration	Integrated into the business	Operates independently
Financial Risk	Minimal financial risk	Bears financial risk
Provision of Tools	Employer provides tools	Worker provides their own tools
Differences Between Employees and Independent Contractors in Latvia

Contractual Agreements

When engaging independent contractors, it is crucial to have a well-defined written contract. While not legally required, a written agreement clarifies expectations and protects both parties’ interests. Key elements that should be included in a contractor agreement are:

• Scope of Work: Clearly define tasks and responsibilities.
• Payment Terms: Outline compensation structure (hourly rate, project fee, etc.).
• Duration of Contract: Specify the length of engagement or completion date.
• Confidentiality Clauses: Protect sensitive information shared during the engagement.
• Termination Conditions: Detail how either party can terminate the agreement.

Contract Element	Description
Scope of Work	Define tasks and responsibilities
Payment Terms	Outline compensation structure
Duration of Contract	Specify length or completion date
Confidentiality Clauses	Protect sensitive information
Termination Conditions	Detail termination procedures
Key Elements of Contractor Agreements in Latvia

Compliance with Labor Laws

Employers must ensure compliance with Latvian labor laws when hiring contractors. This includes understanding tax obligations and social security contributions. Independent contractors are responsible for their own tax filings and social security contributions.

• Income Tax: Independent contractors pay income tax on their net profit at a progressive rate ranging from 20% to 31.4%.
• Social Security Contributions: Contractors must contribute approximately 34.09% on their gross income.