Hire employees in Latvia
What a foreign company needs to know before employing people in Latvia: whether you need a local entity, what the 23.59% employer contribution means for your budget, how the 25.5% income tax and EUR 550 non-taxable minimum work, what a dismissal costs, and how the 2027 immigration changes affect non-EU hires. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first.
Do I need a local entity in Latvia to hire?
No. There are three routes:
- Employer of Record. Dryft Global employs the person in Latvia through a compliant local employer, reports the hire to the State Revenue Service (VID) before day one, files the monthly employer's report and runs payroll in euro. You direct the work.
- Direct local entity. You form a limited liability company (SIA), register with VID and set up payroll before the first pay day.
- Independent contractor. Lawful only for genuinely independent work. Disguised employment is treated as employment, with back taxes and penalties.
When should I use an EOR instead of registering locally?
Use an EOR for your first engineers or operations staff in Latvia, when you want to start in days and do not want to build VID registrations, monthly employer's reports and Latvian employment contracts yourself. Your own entity earns its keep for a sustained team or a sales office signing Latvian contracts.
What does an employee actually cost beyond salary?
The employer pays 23.59% mandatory social insurance contributions plus a business risk duty of EUR 0.36 a month, up to an annual ceiling of EUR 105,300. For an engineer on EUR 3,500 a month that is about EUR 4,326 a month. The employee pays 10.5% social insurance and 25.5% income tax after a EUR 550 monthly non-taxable minimum, keeping about 71% of gross.
How difficult is termination in Latvia?
There is no termination at will. The employer needs a ground listed in the Labour Law and gives written notice, 1 month on redundancy. Employees who have been union members for at least 6 months need union consent before notice on most grounds, and no-fault terminations cost 1 to 4 months' average earnings in severance by length of service. Mutual agreement is the common clean exit.
Can Dryft Global legally employ my team in Latvia?
Yes. Dryft Global employs your team in Latvia through a compliant local employer set up for the Latvian rules on labour supply and temporary agency work. We issue Labour Law contracts, report each hire to VID before day one, apply the non-taxable minimum from the wage tax booklet, file the employer's report by the 17th, administer leave and sick pay, and manage notice and severance.
Hiring routes compared
Speed, set-up burden and liability differ by route.
| Factor | Direct local entity | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Time to first payroll | 1 to 3 weeks | Days to 2 weeks | Days |
| Local entity required | Yes, SIA or branch | No | No |
| VID registration and monthly reports | Your registrations | Handled by Dryft Global | Payer's duty for unregistered individuals |
| Labour supply rules | Not applicable | Structured compliantly by Dryft | Not applicable |
| Statutory liability | Direct corporate exposure | Assumed by Dryft Global | High if the work is dependent |
| Best fit | Sustained team, local sales | First hires, engineering and shared-services teams | Short independent projects |
What an employee costs in Latvia
The employer pays 23.59% mandatory state social insurance contributions on gross pay up to EUR 105,300 a year, plus a business risk duty of EUR 0.36 per employee a month. The model below is a Riga software engineer on EUR 3,500 gross a month.
| Component | Employer share | Notes |
|---|---|---|
| Social insurance (VSAOI) | 23.59% | Pension, health, unemployment and other insurances; ceiling EUR 105,300 a year |
| Business risk duty | EUR 0.36 a month | Funds the employee claims guarantee fund |
| Statutory subtotal | about 23.6% | EUR 826.01 a month on EUR 3,500 |
| Health insurance | Optional | Tax free up to EUR 700 per employee a year |
| Total employer on-cost | ~24% to 26% | Above gross salary, depending on benefits |
For an employee on EUR 3,500 a month, budget roughly EUR 51,900 a year in statutory employer cost before benefits and the EOR fee. The employee's own deductions are 10.5% social insurance and 25.5% income tax after the EUR 550 non-taxable minimum, leaving net pay of about EUR 2,474 a month. Ask us for a cost model with current rates applied.
Payroll and tax
Salaries are paid in euro at least twice a month, unless the employee agrees to monthly payment. Each hire must be reported to the State Revenue Service before work starts, and changes or termination within 3 working days. The employer files the employer's report on contributions and income tax by the 17th of the following month and pays by the 23rd.
Income tax withholding
Employment income is taxed at 25.5% up to EUR 105,300 a year and 33% above, with a further 3% on annual income over EUR 200,000. Every employee is entitled to a non-taxable minimum of EUR 550 a month in 2026 (EUR 570 from 2027), plus EUR 250 a month per registered dependant, applied by the employer that holds the employee's wage tax booklet.
Minimum wage 2026
The minimum wage is EUR 780 gross a month for full-time work from 1 January 2026, up from EUR 740. The 2027 rate is not yet set.
Leave and mandatory benefits
- Annual leave. At least 4 calendar weeks a year, not counting public holidays, with one part of at least 2 uninterrupted weeks.
- Public holidays. Including Good Friday, Easter Monday, Restoration of Independence Day, Midsummer (23 and 24 June), Proclamation Day and three days at Christmas, plus transferred days off.
- Sick pay. Day 1 is unpaid, the employer pays at least 75% for days 2 and 3 and at least 80% for days 4 to 9, and the State Social Insurance Agency pays 80% from day 10.
- Maternity. 112 calendar days, or 140 in some cases, paid by the State Social Insurance Agency, not by the employer.
- Paternity and parental benefit. 10 working days of paternity leave within 6 months of the birth, and parental benefit until the child turns 1 or 1.5, paid by the state.
- Working time. 8 hours a day and 40 hours a week. Overtime and public holiday work carry a supplement of at least 100%.
- Common extras. Health insurance, tax free up to EUR 700 a year, and performance bonuses.
Termination and notice periods
Probation can last up to 3 months, less for short fixed-term contracts, and either party can end the contract during it in writing. After that, the employer needs a statutory ground, and notice and severance work as follows.
| Item | Rule |
|---|---|
| Notice on redundancy, liquidation or competence grounds | 1 month |
| Severance, under 5 years' service | 1 month's average earnings |
| Severance, 5 to 10 years | 2 months |
| Severance, 10 to 20 years | 3 months |
| Severance, 20 or more years | 4 months |
- Statutory grounds. A reason relating to the employee, such as a significant breach or insufficient competence, or a business reason such as redundancy or liquidation.
- Written notice. State the ground; for competence, health and redundancy grounds, first offer other suitable work if available.
- Union consent. Needed before notice to an employee who has been a union member for at least 6 months, on most grounds.
- Protection. No notice during sick leave or other justified absence, and strong protection for pregnant employees and new mothers.
- Collective redundancy. Thresholds start at 5 dismissals in 30 days for employers of 21 to 49, with consultation and at least 30 days' notice to the State Employment Agency.
- Mutual agreement. The common clean exit.
Can I use independent contractors?
Only for genuinely independent work. A person who works under an employer's instructions for agreed pay is an employee under the Labour Law. Payments under work performance contracts to individuals who are not registered as self-employed are taxed much like salary, and the State Revenue Service and the Labour Inspectorate treat disguised employment as employment, with back taxes and penalties. Providing workers to other businesses requires a licence from the State Employment Agency, with equal treatment rights for agency workers. Latvian law has no separate employer of record category, so the employing structure is a point to settle for each hire. For anyone who works like an employee, an EOR set up through a compliant local employer is the safe route.
The legal framework in brief
Latvia is a civil law system where the Labour Law sets most terms directly. The instruments you will hear most:
- Labour Law. Contracts, probation, working time, leave, pay frequency, notice, union consent, severance and collective redundancy.
- Law on State Social Insurance. The 23.59% employer and 10.5% employee contributions and the EUR 105,300 ceiling.
- Law on Personal Income Tax. The 25.5% and 33% rates, the EUR 550 non-taxable minimum and allowances.
- Data protection. GDPR and the Personal Data Processing Law, enforced by the Data State Inspectorate.
- Immigration and right to work. EU nationals work freely. Others need a visa or residence permit with the right to work, normally after a 2-month vacancy posting with the State Employment Agency, or an EU Blue Card. A new Immigration Law takes effect mainly from 1 January 2027, with shorter permits for local hires and closer checks on providers that place foreign workers.
- Authorities. The State Revenue Service, the State Labour Inspectorate, the State Social Insurance Agency, the State Employment Agency and the Office of Citizenship and Migration Affairs.
Where the talent is
About 1.845 million people, with unemployment of 7.0% in the second quarter of 2026. Information and communication services pay the highest average wages, at EUR 3,257 a month in the second quarter, against a national average of EUR 1,886. Latvia ranks 16th in the world for English proficiency. Time is UTC+2 (UTC+3 in summer), and Latvia is in the EU, Schengen, the eurozone and NATO.
| Region | Talent and industry concentration |
|---|---|
| Riga | Capital, software, fintech, finance and shared services |
| Daugavpils | Second city, manufacturing and services in Latgale |
| Liepāja | Port city, manufacturing and logistics |
| Jelgava | University city near Riga, manufacturing and agritech |
Latvia Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step.
- Step-by-step checklist, from route selection to first payroll
- Contract, probation and VID reporting before day one
- Gross to net and employer cost set-up under the 25.5% tax and EUR 550 minimum
- The employer's report (17th) and payment (23rd) calendar
- Contractor reclassification and labour supply risk checklist
- Notice, union consent, severance and mutual agreement pack
- Every official Latvian authority with direct links
This guide is general information, not legal, tax or immigration advice. Latvia revises the minimum wage, the non-taxable minimum and immigration rules regularly, the 2027 minimum wage is not yet set, and a new Immigration Law takes effect mainly from 1 January 2027. Confirm current figures and the employment structure with a qualified adviser or with Dryft. Last reviewed November 2026.
Ready to hire in Latvia?
Tell us who you want to hire and where they sit. You will get a cost model and a compliant route within a day, from a person who has done this before.