How to Use An Employer of Record in
Latvia

Latvia requires employers to register with the State Revenue Service (Valsts ieņēmumu dienests, VID) within three working days of hiring, calculates employer social security contributions at 23.59% of gross salary, and mandates specific contract clauses under the Labour Law (Darba likums). An Employer of Record in Latvia becomes your employee's legal employer, handling all statutory registrations, payroll tax withholding, and compliance while you maintain full control over day-to-day work and performance. The EOR shields you from penalties for late VID registration, incorrect social contribution calculations, and non-compliant employment contracts: all common pitfalls for foreign companies without a local HR presence.

What Is an Employer of Record in Latvia?

An Employer of Record in Latvia is a third-party organisation that becomes the legal employer of your staff under Latvian law, handling all statutory obligations, payroll, and compliance while you retain full operational control. The EOR signs the employment contract, registers employees with government authorities, withholds income tax, and remits social contributions: all under its Latvian legal identity. You direct the employee's work, set objectives, and manage performance exactly as you would with your own entity.

Under the Darba likums (Labour Law), employment contracts must include trial periods not exceeding three months, specify the employee's place of work, working hours, and paid leave entitlement, and comply with any applicable collective agreements. If your employee falls under a sector-specific collective agreement, the EOR ensures contract terms meet or exceed those minimums. Fixed-term contracts are permitted but require objective justification and cannot exceed five years including renewals. Social security contributions must be reported monthly to the State Social Insurance Agency (Valsts sociālās apdrošināšanas aģentūra, VSAA), and late filings trigger automatic penalties.

You retain day-to-day management, assign tasks, conduct performance reviews, and determine promotions or role changes. The EOR owns the employment contract, processes monthly payroll in euros, files tax and social security declarations with VID and VSAA, administers statutory leave, and executes termination procedures including severance payments when required. If the employee needs to be terminated, you inform the EOR and they handle notice periods, severance calculations, and final payroll in line with Latvian law.

How Does an Employer of Record Work in Latvia?

Using an Employer of Record in Latvia follows a structured process that ensures your new hire is compliant from day one. The EOR registers the employee with Latvian authorities, prepares contracts under the Darba likums, and operates monthly payroll while you focus on managing the employee's work. Here's how each step works in practice.

Step 1: Define Role and Employment Terms

You provide the job title, salary, work location, and start date. If the role falls under a sector-specific collective agreement: common in construction, transport, and healthcare: the EOR confirms that salary and benefits meet or exceed the agreement's minimums. Latvia does not have a universal statutory minimum wage for all sectors, but the national minimum wage for 2026 is €700 per month for full-time employees, and collective agreements often set higher thresholds. The EOR reviews your proposed terms against both statutory floors and any applicable collective agreement before drafting the contract.

Step 2: EOR Compliance Check

The EOR verifies that your employment terms comply with Latvia's working time regulations under the Darba likums, which set a maximum 40-hour working week and 48-hour weekly average including overtime when calculated over a four-month reference period. The proposed salary must meet or exceed the €700 monthly minimum for full-time roles, and the role must be classified correctly: employee versus contractor status is determined by the degree of control, exclusivity, and integration into your business operations. Misclassification carries penalties including back-payment of social contributions and fines from VID, so the EOR ensures the contract structure reflects the true nature of the working relationship.

Step 3: Employment Contract

The EOR prepares a written employment contract in Latvian or, with the employee's consent, in another mutually agreed language. Under the Darba likums, the contract must include the employee's full name and personal identification number, job title and duties, place of work, start date, trial period (if any, not exceeding three months), working hours and schedule, salary and payment terms, and paid annual leave entitlement (minimum 20 working days per year). Fixed-term contracts require objective justification such as a specific project, temporary replacement, or seasonal work, and cannot exceed five years including renewals. The contract must be signed before the employee starts work, and one copy must be provided to the employee.

Step 4: Government Registrations

The EOR must register the employee with VID within three working days before the employment start date using the electronic declaration system (Elektroniskās deklarēšanas sistēma, EDS). The registration declaration includes the employee's personal details, contract start date, position, and salary. Simultaneously, the EOR registers the employee with VSAA for social insurance coverage, which includes pension, sickness, maternity, and unemployment insurance. Failure to register within the three-day deadline results in automatic penalties from VID starting at €140 per employee and increases for repeat violations or deliberate concealment of employment.

Step 5: Payroll in Local Currency

Payroll in Latvia is processed monthly and paid in euros. The EOR calculates gross salary, withholds personal income tax (iedzīvotāju ienākuma nodoklis, IIN) at the applicable rate: 20% for income up to €62,800 annually in 2026, 23% above that threshold, and 25% or 31% for specific income types: and deducts the employee's social security contributions at 10.5% of gross salary. The EOR then remits employer social contributions at 23.59% of gross salary to VSAA and submits the withholding declaration to VID by the 15th of the following month. The employee receives a payslip detailing gross pay, all deductions, and net pay.

Step 6: Ongoing Compliance

The EOR files monthly payroll declarations with VID and VSAA, reporting income tax withheld, social contributions due, and employee details by the 15th of each month. Employer social contributions must be paid by the 15th, and withheld income tax by the same deadline. The EOR submits an annual income declaration for each employee by 15 January of the following year, reconciling all income paid and tax withheld. The EOR tracks and administers statutory leave entitlements, including 20 working days of paid annual leave, public holidays (11 days in 2026), and paid sick leave after the employer-paid period ends. The EOR also monitors changes to the Darba likums, VID regulations, collective agreements, and social contribution rates, updating payroll configurations and contract templates as required.

Step 7: Termination

Termination in Latvia requires just cause or adherence to specific notice procedures under the Darba likums. If you decide to terminate an employee, you inform the EOR of the reason and effective date. For termination by the employer, valid grounds include redundancy, the employee's inability to perform their duties due to lack of qualifications or health reasons, or serious breach of duties. Notice periods depend on the employee's length of service: one month for employment up to five years, two months for five to ten years, and three months for over ten years. Collective agreements may stipulate longer notice periods. Severance pay is mandatory for redundancy and certain other employer-initiated terminations, calculated as one month's average salary for employment exceeding five years, two months' average salary for employment exceeding ten years, and three months' average salary for employment exceeding twenty years. The EOR issues the termination notice, calculates any severance due, processes the final payroll including accrued leave, and deregisters the employee with VID and VSAA.

Employment Laws and Compliance an Employer of Record Handles in Latvia

When you hire through an Employer of Record in Latvia, they take on full compliance responsibility so you don't need to build an in-country HR function. The EOR monitors and implements every legislative change, files mandatory declarations, and ensures your employment contracts and payroll meet Latvian statutory requirements.

• Employment Contracts: Under the Darba likums, every employment contract must be in writing, signed before the start date, and include mandatory clauses covering job duties, working hours, salary, leave entitlement, and notice periods. Fixed-term contracts require objective justification and cannot exceed five years including renewals. Non-compliant contracts can be declared invalid by the State Labour Inspectorate (Valsts darba inspekcija, VDI), exposing you to back-payment claims and fines.
• Payroll Tax and Income Tax Withholding: Employers must withhold IIN at 20% for income up to €62,800 annually and 23% above that threshold in 2026, remit withheld tax to VID by the 15th of the following month, and submit monthly payroll declarations via EDS. Late payment or under-reporting triggers penalties of 10% of the unpaid amount plus daily interest of 0.05%. The EOR calculates, withholds, and remits IIN on your behalf and maintains full audit records.
• Social Security and Pension Contributions: Employers pay 23.59% of gross salary to VSAA covering pension insurance (20%), sickness and maternity insurance (0.44%), work injury insurance (0.15% to 1.08% depending on risk class), and solidarity tax (3%). Employees contribute 10.5% of gross salary. Contributions must be paid by the 15th of the following month, and late payment incurs penalties of 15% of the unpaid amount plus daily interest. The EOR calculates, reports, and remits all contributions and ensures correct risk classification for work injury insurance.
• Statutory Leave Entitlements: Employees are entitled to a minimum of 20 working days of paid annual leave per year, with pro-rata accrual during the first year. Public holidays in 2026 total 11 days, and if a public holiday falls on a non-working day, no additional leave is granted. Sick leave is paid by the employer for the first day, then by the state from the second to the tenth day, then by the state at a higher rate from the eleventh day onward. Maternity leave is 112 calendar days with state benefits. The EOR tracks accruals, approves leave requests, and ensures payment aligns with VSAA and Darba likums requirements.
• Termination and Severance: Termination by the employer requires just cause: redundancy, inability to perform duties, or serious breach: and written notice with specified notice periods: one month for employment up to five years, two months for five to ten years, three months over ten years. Severance is due for redundancy and other specified grounds: one average monthly salary for over five years' service, two for over ten years, three for over twenty years. The EOR drafts termination notices, calculates severance, processes final pay including accrued leave, and ensures compliance with collective agreement provisions if applicable.
• Working Time and Overtime: The standard working week is 40 hours, and working time including overtime must not exceed an average of 48 hours per week over a four-month reference period under the Darba likums. Overtime must be compensated at 100% premium for the first two hours per day or shift, 150% for additional hours, and 200% for overtime on weekends and public holidays. The EOR tracks working hours, ensures overtime calculations comply with statutory rates and collective agreement minimums, and configures payroll to apply correct premiums.
• Health and Safety: Employers must register with VDI, conduct workplace risk assessments, provide mandatory occupational health services, and report workplace accidents and occupational diseases within three days. Non-compliance can result in fines up to €14,000 and temporary closure orders. The EOR ensures health and safety registrations are current, contracts occupational health providers, files accident reports, and coordinates with VDI inspections on your behalf.
• Data Protection and Employee Privacy: Latvia implements the EU General Data Protection Regulation (GDPR), requiring lawful basis for processing employee personal data, data processing agreements with third parties, and notification to the Data State Inspectorate (Datu valsts inspekcija) of any personal data breach within 72 hours. Violations can result in fines up to €20 million or 4% of global turnover. The EOR maintains GDPR-compliant payroll and HR systems, executes data processing agreements, and ensures employee data is stored and transferred in accordance with GDPR requirements.
• Collective Agreements: Sector-specific collective agreements in construction, transport, healthcare, education, and other industries set minimum wages, enhanced leave entitlements, and additional benefits above statutory floors. If an employee's role falls under a registered collective agreement, those terms automatically apply. The EOR monitors which collective agreements cover your employees, ensures contract terms and payroll meet or exceed collective agreement minimums, and updates employment terms when agreements are renegotiated.
• Trial Periods: Trial periods are permitted under the Darba likums but cannot exceed three months for standard employment contracts. During the trial period, either party may terminate with three working days' notice and no severance obligation. Trial periods must be explicitly stated in the written contract; omission means no trial period applies and full notice and severance provisions govern termination. The EOR drafts trial period clauses correctly and ensures termination during trial follows the shortened notice procedure.

How Much Does It Cost to Use an Employer of Record in Latvia?

The total cost of hiring through an Employer of Record in Latvia has two components: statutory on-costs fixed by Latvian law and the EOR service fee. Statutory costs include employer social security contributions at 23.59% of gross salary and occupational health service fees, which are mandatory and identical regardless of which EOR you use. Playroll's Employer of Record service fee starts from $399 per employee per month, billed separately from payroll costs. The fee covers contract preparation, government registrations, monthly payroll processing, statutory filings with VID and VSAA, compliance monitoring, and ongoing HR support.

Let's look at an example that includes a base salary and the EOR service fee.

The EOR service fee covers all employment administration: drafting compliant contracts under the Darba likums, registering employees with VID and VSAA within statutory deadlines, processing monthly payroll in euros with correct IIN and social contribution calculations, filing monthly and annual declarations, tracking and administering statutory leave, and managing terminations including severance calculations and deregistration. You avoid the cost and complexity of establishing a legal entity, hiring local HR and payroll staff, contracting occupational health providers, and maintaining ongoing compliance monitoring.

Employer of Record vs Setting Up an Entity in Latvia

Choosing between an Employer of Record and setting up your own legal entity in Latvia depends on your hiring volume and long-term commitment. Foreign companies typically establish a sabiedrība ar ierobežotu atbildību (SIA), a limited liability company, which requires registration with the Latvian Register of Enterprises (Latvijas Republikas Uzņēmumu reģistrs), a local registered office, and a minimum share capital of €2,800. Realistic incorporation timelines run 15 to 25 business days, and setup costs including notary fees, registration fees, and legal advice range from €2,000 to €4,000. Once incorporated, you must establish payroll systems, register as an employer with VID and VSAA, contract occupational health services, and maintain ongoing statutory filings and compliance: all requiring dedicated in-country HR and accounting resources.

For companies hiring fewer than 10 employees in Latvia, an Employer of Record is almost always the faster and more cost-effective route.

Playroll also supports your long-term growth through its Global Entity Setup product, which handles entity incorporation and local payroll in 120+ countries: so you can transition from EOR to your own compliant entity in Latvia when the time is right, without switching providers or rebuilding your HR processes.

How Long Does It Take to Hire Someone in Latvia Through an Employer of Record?

You can typically hire an employee in Latvia through an Employer of Record in 7 to 12 business days from confirming employment terms to the employee's first day of work.

• Stage 1: Contract preparation and signing (2 to 3 business days): The EOR drafts a compliant employment contract under the Darba likums, including all mandatory clauses, applicable collective agreement terms, and trial period provisions if agreed. The employee reviews and signs the contract, and you countersign to confirm employment terms. Timing depends on how quickly the employee returns the signed contract and whether any negotiation or clarification is required on salary, leave, or working arrangements.
• Stage 2: Government registrations (1 to 2 business days): The EOR must register the employee with VID via EDS at least three working days before the employment start date, and simultaneously register the employee with VSAA for social insurance coverage. This registration window is a legal deadline under Latvian law; failure to register within three working days triggers automatic penalties starting at €140 per employee and escalates for repeat or deliberate violations. The EOR submits electronic declarations immediately after contract signing to meet this deadline.
• Stage 3: Payroll configuration and first cycle (2 to 4 business days): The EOR configures the employee's payroll profile, including gross salary, IIN withholding rate, employer and employee social contributions at 23.59% and 10.5% respectively, occupational health deductions, and any collective agreement premiums or allowances. Payroll in Latvia is processed monthly, and the first payslip is generated in the month the employee starts. If the employee begins mid-month, the first payslip is pro-rated. The EOR confirms bank details and payment currency (euros) before the first pay run.
• Stage 4: Latvia-specific requirements (concurrent with Stage 2): If the employee's role falls under a sector-specific collective agreement, the EOR verifies that contract terms meet or exceed the agreement's minimum wage, leave entitlements, and other benefits, which may add one business day to contract preparation. If the role requires a work injury risk classification above the standard 0.15% rate, the EOR determines the correct classification and adjusts employer social contributions accordingly. These verifications typically run in parallel with VID and VSAA registration and do not extend the overall timeline.

Timelines can extend if the employee lacks a Latvian personal identification number (personas kods) and needs to obtain one from the Office of Citizenship and Migration Affairs (Pilsonības un migrācijas lietu pārvalde, PMLP), which can add 5 to 10 business days. Delays also occur if contract negotiations require multiple revisions, if the employee is slow to provide identity documents or bank details, or if the start date falls during a Latvian public holiday period when VID and VSAA processing may be delayed.

For comparison, incorporating a SIA in Latvia and setting up compliant payroll typically takes 4 to 6 weeks from engaging legal counsel to hiring your first employee, making the EOR route at least three times faster.

How Playroll's Employer of Record Process Works in Latvia

Hiring through Playroll in Latvia is structured around four clear steps that take you from defining the role to ongoing compliant employment.

1. You define the role and employment terms

You tell us the job title, salary, work location, start date, and any specific benefits or allowances. If the role falls under a Latvian collective agreement, we flag the applicable minimum terms and confirm your proposed salary and leave entitlements meet or exceed those requirements.

2. We prepare a compliant employment contract

Playroll drafts a written contract in Latvian (or another mutually agreed language with employee consent) that includes all mandatory clauses under the Darba likums: job duties, working hours, salary and payment terms, trial period not exceeding three months if agreed, and paid annual leave entitlement of at least 20 working days. The contract is signed by Playroll as the legal employer, countersigned by you to confirm operational terms, and provided to the employee before their start date.

3. Employee onboarded and payroll goes live

Playroll registers the employee with VID and VSAA within the statutory three-day deadline, configures payroll with correct IIN withholding and social contributions, and processes the first pay cycle in euros. The employee is typically onboarded and ready to start in 7 to 12 business days from contract signing, and receives their first payslip on the agreed monthly pay date.

4. We manage ongoing compliance and support your growth

Playroll files monthly declarations with VID and VSAA by the 15th of each month, tracks statutory leave accruals, monitors changes to the Darba likums and applicable collective agreements, and coordinates terminations including notice periods and severance calculations when required. If your hiring in Latvia grows to where a local SIA makes sense, Playroll can handle that too through our global entity setup service, managing incorporation, registered office, and compliant local payroll so you can transition smoothly without changing providers or rebuilding your HR infrastructure.