Hiring in Latvia: A Complete Guide for US-Based Companies

Latvia is fast becoming a prime destination for international hiring, especially for US-based companies seeking to tap into Europe’s skilled talent pool. Its strategic location in the Baltics, membership in the European Union, and advanced digital infrastructure make Latvia an attractive hub for global expansion. The country boasts a competitive workforce, particularly in IT, finance, and digital sectors, and offers a supportive business environment that encourages innovation and growth.

Foreign companies hiring in Latvia benefit from:

• Access to a highly educated, multilingual workforce.
• Favorable business regulations and EU market access.
• Cost-effective hiring compared to Western Europe.
• A robust digital ecosystem and modern infrastructure.
• Time zone alignment for smooth collaboration with both European and US teams.

These advantages make Latvia a compelling choice for companies looking to expand their global footprint while maintaining compliance and operational efficiency.

How to Hire Employees in Latvia

Assess Your Hiring Needs

Before entering the Latvian market, clarify your hiring objectives:

• Full-time vs. project-based support: Decide if you need permanent employees for ongoing roles or contractors for specific projects.
• Local compliance requirements: Understand Latvian labor laws, tax obligations, and social security contributions to avoid legal pitfalls.

• Onboarding speed vs. long-term control: Consider how quickly you need to onboard talent versus your need for direct oversight and brand integration.

A clear assessment helps you choose the right hiring model and ensures a smooth entry into the Latvian market.

Hiring Options in Latvia

You have two primary options for hiring in Latvia:

• Set Up a Legal Entity: Establish a local company, giving you full control over hiring, payroll, and compliance. Ideal for long-term, large-scale operations.

• Partner with an Employer of Record (EOR): Engage a local EOR to legally employ talent on your behalf. The EOR manages payroll, compliance, and HR, allowing you to hire quickly without setting up a local entity.

Each approach has its unique advantages and challenges, so select the one that aligns with your business goals and resources.

EOR vs. Legal Entity: Side-by-Side Comparison

Feature	Employer of Record (EOR)	Legal Entity Setup
Setup Speed	Fast (days to weeks)	Slow (months)
Compliance Management	Handled by EOR	Handled internally
Cost Structure	Service fee + employment costs	Higher upfront and ongoing costs
Direct Control	Limited (EOR manages HR processes)	Full control over employees
Market Presence	No local brand presence	Strong local presence
Suitable For	Quick entry, pilot teams, flexibility	Long-term, large-scale operations

Ready to streamline your global hiring? Explore how an EOR can simplify your Latvia expansion.

Understanding Worker Classification

Employees vs. Contractors in Latvia

Correct worker classification is critical for compliance and risk management. Here’s how employees and contractors differ in Latvia:

Aspect	Employee	Contractor
Control	Employer sets hours, tasks, and process	Contractor controls work methods
Commitment	Ongoing, open-ended or fixed-term	Project-based or temporary
Benefits	Entitled to statutory benefits	No statutory benefits
Tax Handling	Employer withholds/payroll taxes	Contractor manages own taxes
Compliance	Employer responsible for compliance	Contractor responsible

Legal Implications and Risks of Misclassification

Latvian law enforces strict criteria for distinguishing employees from contractors. Misclassifying a worker can result in:

• Retroactive payment of employment taxes and benefits.
• Fines and penalties from labor authorities.
• Legal disputes and reputational damage.

Employers must evaluate the level of control, supervision, and integration in their business. If in doubt, consult local experts or use an EOR to ensure proper classification and avoid costly mistakes.

Want to avoid misclassification risks? Learn more about global worker classification best practices.

Hiring Costs and Payroll

Hiring Costs Overview

The minimum wage in Latvia is €740 per month for a full-time, 40-hour workweek (as of 2025). However, actual hiring costs are higher once you factor in:

• Employer social insurance contributions (23.59% of gross salary).
• Work accident insurance (0.36–1.48% depending on industry).
• Additional benefits (health insurance, allowances).
• Recruitment, onboarding, and training expenses.

Budget for total compensation, not just base salary, to remain competitive and compliant.

Payroll Setup Steps

To set up payroll in Latvia:

1. Register your company or engage an EOR.
2. Register employees with the State Revenue Service and social insurance.
3. Collect and verify employee tax information.
4. Calculate gross-to-net salaries, deducting taxes and contributions.
5. Disburse salaries in Euros and remit taxes to authorities.
6. File monthly payroll reports.

Accurate payroll setup ensures compliance and employee satisfaction.

Income Tax Rates

Latvia applies progressive income tax rates:

• 20% on annual income up to €20,004.
• 23% on income from €20,004.01 to €78,100.
• 31% on income above €78,100.

Employers must withhold these taxes from salaries and remit them to the State Revenue Service monthly.

Payment Methods

Common payment methods in Latvia include:

• Direct bank deposit: Most widely used; salaries paid in Euros to local accounts.
• International wire transfer: Used for employees with non-Latvian accounts; subject to fees and exchange rates.
• Payroll outsourcing/EOR payroll: EORs handle payments, compliance, and documentation.
• Cash payments: Rare and strictly regulated.

All payments must comply with Latvian labor law and be properly documented.

Using Global Payroll Services

Global payroll providers and EORs offer:

• Automated payroll processing and compliance.
• Multi-currency payments and tax filings.
• Local expertise for accurate deductions and reporting.
• Integration with HR and accounting systems.

This approach reduces administrative burden and ensures error-free payroll management.

How to Properly Hire and Pay Contractors

To hire and pay contractors in Latvia:

• Draft a clear, project-based contract outlining deliverables and payment terms.
• Verify contractor’s legal status and tax registration.
• Pay via bank transfer or approved payment platforms.
• Ensure proper invoicing and retain records for compliance.

For more on best practices, see how to pay international contractors.

Looking for cost-effective payroll solutions? Discover how Tarmack simplifies global payroll and compliance.

Compliance Risks

Incorrect Payroll Contributions

Mistakes in calculating social insurance, health, and unemployment contributions can result in:

• Penalties and back payments.
• Employee dissatisfaction.
• Audit risks.

Always use up-to-date rates and consult local experts or a trusted EOR.

Permanent Establishment Risk

Hiring employees or maintaining a physical presence in Latvia can trigger permanent establishment (PE) status, leading to:

• Corporate tax obligations.
• Increased compliance requirements.
• Potential double taxation.

Mitigate PE risk by understanding local thresholds and structuring operations carefully. Read more about PE risk.

Statutory Benefits

Latvian law mandates:

• Social security and pension contributions.
• Health and unemployment insurance.
• Paid annual and sick leave.

Failure to provide these benefits exposes employers to fines and legal claims.

Misclassification Risks

Misclassifying employees as contractors to avoid taxes or benefits is illegal. Consequences include:

• Retroactive payroll taxes and benefit payments.
• Fines and reputational harm.
• Legal disputes.

For guidance, see contractor vs. employee classification.

Provincial/Regional Law Variances

Latvia has a unified national labor law. Regional differences are minimal, but always verify local municipal requirements for taxes or permits.

Overview of Intellectual Property Rights for Employers

Employers should secure:

• IP assignment clauses in employment and contractor agreements.
• Confidentiality and non-disclosure agreements (NDAs).
• Clear policies on inventions, software, and creative works.

This protects company assets and ensures compliance with Latvian and EU IP laws.

Onboarding Process

Before Their First Day

• Prepare a compliant employment contract in Latvian (and English if needed).
• Register the employee with the State Revenue Service and social insurance.
• Set up payroll and benefits enrollment.
• Arrange IT access and equipment.

On Day 1

• Conduct orientation covering company policies and Latvian labor law basics.
• Introduce the new hire to their team and assign a mentor.
• Provide access to necessary systems and tools.

During Their First 90 Days

• Monitor progress with regular check-ins.
• Offer training on job responsibilities and company culture.
• Review performance and provide feedback.
• Ensure understanding of benefits, leave policies, and workplace safety.

Offer Letter Essentials

A Latvian offer letter should include:

• Job title and description.
• Start date and work location.
• Salary and payment frequency.
• Benefits and leave entitlements.
• Probation period, if applicable.

NDAs and Confidentiality

• Include NDAs in employment contracts to protect sensitive information.
• Outline confidentiality obligations and consequences for breaches.

Running Background Checks

• Conduct background checks in accordance with Latvian data protection laws.
• Obtain written consent from candidates.
• Verify education, employment history, and references.

For more onboarding insights, see best practices for onboarding international employees.

Remote Employee Management

Managing remote employees in Latvia requires a thoughtful approach:

• Computer and App Access: Provide secure laptops, VPNs, and access to company systems. Use centralized platforms for collaboration.

• IP Protection: Include IP assignment and confidentiality clauses in contracts. Use monitoring tools to protect sensitive data.

• Best Practices:
  • Set clear performance expectations and communication protocols.
  • Schedule regular video check-ins and virtual team meetings.
  • Offer training on cybersecurity and data protection.

For more, explore how to manage employees remotely and globally and building organizational culture in remote teams.

Labor Law Compliance

Key Working Condition Requirements

• Working Hours: Standard 40-hour week; overtime requires consent and is paid at 150–200% of base rate.
• Leave: Minimum 28 days paid annual leave, plus public holidays, sick, maternity, and paternity leave.
• Rest Periods: Mandatory daily and weekly rest breaks.

Working Conditions by Employment Type

• Full-time Employees: Entitled to all statutory benefits and protections.
• Fixed-term/Seasonal: Same rights as permanent staff but for the contract duration.
• Contractors: No statutory benefits; rights defined by contract.

No At-Will Employment

Latvia does not permit at-will termination. All dismissals must follow legal procedures and be based on valid reasons.

Trade Unions and Collective Bargaining

• Employees may join unions and participate in collective bargaining.
• Employers must respect union rights and consult on workplace changes.

For more on compliance, see employment compliance and its importance.

Termination Guidelines

Acceptable Termination Reasons

Latvian law allows termination for:

• Economic reasons (redundancy, restructuring).
• Employee misconduct or underperformance.
• Mutual agreement.
• End of fixed-term contract.

All terminations must be justified, documented, and follow due process.

Notice Periods and Legal Protections

• Notice Periods: Typically 1 month, but may vary by contract or collective agreement.
• Protections: Employees on parental leave, sick leave, or union representatives have extra protection.
• Severance: Required in cases of redundancy or employer-initiated termination.

Failure to comply with termination rules can result in legal disputes and compensation claims.

Benefits of Hiring in Latvia

Foreign companies enjoy several key advantages when hiring in Latvia:

• Highly Skilled Talent Pool: Strong emphasis on STEM education and multilingual professionals.
• Cost Efficiency: Lower salary and benefit costs compared to Western Europe.
• Favorable Time Zone: Overlaps with both European and US working hours.
• Modern Infrastructure: Advanced digital networks and business services.
• EU Market Access: Seamless access to the European single market.
• Business-Friendly Environment: Supportive regulations and incentives for foreign investors.

Scale Seamlessly in the Baltics: Hire and Manage Teams in Latvia

Latvia offers a compelling mix of skilled talent, cost savings, and strategic advantages for US-based companies expanding globally. 

By understanding local compliance, choosing the right hiring model, and leveraging expert partners, you can build a successful, compliant team in Latvia. Whether you opt for an EOR or set up your own entity, careful planning and ongoing support are key to thriving in this dynamic Baltic market.

Ready to take the next step? Contact Tarmack to start hiring in Latvia today.