Hiring Talent And Managing Payroll In Latvia?

Agreements

• There are primarily two kinds of work contracts available in Latvia:

  • Open-ended employment contracts- The most common and are used for indefinite work in Latvia.
  • Fixed-term employment contract- This sort of contract is used, among other unique situations, for seasonal work, contract-length-required tasks, filling in for an absent employee, outside-the-company informal labor, emergency work, and special industries. A fixed-term agreement is limited to five years.
• Irrespective of the type of contract, the following clauses should be included in all employment contracts:

  • Location of employment
  • The specific line of work
  • Duties that go along with the work
  • Wage
  • Probation period
  • Mandatory notice periods
  • Working hours
  • Terms of the collective bargaining agreement or the rules governing work procedures that are relevant to the employment connection
  • Duration and the beginning date of the working relationship (for fixed-term contracts only)

Onboarding Process

• An offer letter and employment contract
• Verification and documentation
• Orientation and training
• Introduction to team and stakeholders
• Provision of tools and resources
• Performance management and feedback
• Ongoing support

Minimum Wage

Payroll Cycle

Annual Bonus

Health Benefits

• Socially insured individuals are eligible to receive sickness benefits.
• Benefits are provided if an employee or self-employed individual misses work or is unable to complete their duties.
• If they paid social insurance contributions for at least 3 months in the previous 6 months or at least 6 months in the previous 24 months, they are eligible for illness benefits.

Working Hours and Overtime

• Work hours:Employees work Monday to Friday for 8 hours a day and 40 hours a week.
• Break:Everyday lunch breaks must last at least 30 minutes.
• Overtime: Payment for overtime is mandatory. The overtime should not exceed 48 hours in a month and 200 hours a year. Employees receive 100% of their hourly wage for a rework.

Social Security

Taxes for Employees

• 10.5% - Employment with a company registered in Latvia/EU/EEA (split rate)
• 9.25% - Employment with a company registered in Latvia/EU/EEA (when the employee is eligible for retirement and also split rate)
• 10.5% - Solidarity Tax (It is applicable on income that is greater than the maximum income attracting NSIC, which is set at EUR 78,100 per year)
• Latvia's personal income tax system is progressive and based on annual income levels.

  • Income up to EUR 20,004 is taxed at a rate of 20%.
  • Income between EUR 20,004 and EUR 78,100 is taxed at a rate of 23%.
  • Income exceeding EUR 78,100 is taxed at a rate of 31%.

Termination

• In Latvia, an employment contract can be ended by either the employer or the employee.
• The contract can also end due to the completion of a fixed-term contract, a mutual agreement between the employer and employee, or at the request of a third party.
• Terminations in compliance include:

  • Employee's voluntary participation
  • Both parties agree
  • Employer acting unilaterally

Severance Pay

• Severance compensation is given to all employees who are terminated in Latvia for the following reasons:

  • Employees' level of occupational competence is insufficient to accomplish the work
  • Employees' health prevents them from carrying out the contracted work, and this is confirmed by a doctor's note
  • A former employee who handled the relevant tasks has been given a job
  • The number of staff is decreasing
  • The employer is going out of business
  • The employee is temporarily unable to complete their job duties
• The length of employment will affect the amount of severance pay:

  • Less than 5 years of employment- One month's worth of average salary
  • 5-7 years of employment - Two months' worth of average salary
  • 10 to 20 years of employment - Three months' worth of average salary
  • More than 20 years of employment- Four months of average salary

Employees or Contractors

• An employee is someone who works under an employment contract and is subject to the employer's control and direction. They are entitled to benefits such as paid leave, social security, and other protections.
• A contractor, on the other hand, is self-employed and operates under a service contract, and has more control over their work. They are not entitled to the same benefits as an employee and are responsible for their taxes and social security contributions.
• Misclassifying contractors and employees can lead to fines and penalties.

Final Words