Companies typically use an Employer of Record for fast entry, payroll management for existing entities, and entity setup for durable presence. Latvia's minimum non-taxable income threshold and SIA formation options are the main areas that need local expertise.

Employer of Record in Latvia

An EOR removes the need to register with the State Revenue Service and social insurance system. It is suited to early hires and shared-services teams where speed to hire matters more than building a permanent local structure. It is less suited to companies with an established Latvian entity or those planning a large, centrally-managed team where direct control over employment terms is a priority.

How payroll works in Latvia

Latvian payroll withholds income tax at progressive rates and both employer and employee contribute to mandatory state social insurance, covering pension, health, and unemployment. Payroll is monthly. A minimum non-taxable income threshold applies and is periodically adjusted, affecting net pay calculations and requiring payroll systems to be updated when the threshold changes.

Payroll frequency and reporting obligations in Latvia

Monthly payroll is standard, with social insurance contributions remitted monthly to the State Revenue Service. Annual tax reconciliation applies for most employees. Employers must maintain detailed payroll records and meet monthly filing deadlines. The minimum non-taxable income threshold must be applied correctly for each employee, as it varies based on income level.

Key payroll nuances in Latvia

There is no statutory 13th-month payment. Employer social insurance contributions are a meaningful percentage of salary, among the more moderate loads in the Baltics. The minimum non-taxable income threshold applies and is periodically adjusted, meaning payroll systems must be updated promptly when changes take effect. The threshold varies based on the employee's income level, adding a calculation variable that must be tracked per employee.

Pay components and employer costs in Latvia

Typical pay components include base salary. Employer social insurance contributions commonly add around 23–24 percent on top of gross salary, covering pension, health, and unemployment insurance. This is moderate relative to Estonia but higher than Lithuania, reflecting Latvia's position in the middle of the Baltic employer on-cost range.

Benefits and leave entitlements in Latvia

Statutory annual leave is 20 working days. Maternity leave is 112 days. Public holidays number around 12–15 annually. Collective agreements in some sectors may provide additional leave entitlements above the statutory minimum. The 20-day annual leave entitlement is standard by EU norms.

Hiring and employment contracts in Latvia

Written contracts are mandatory. Probation periods are capped at three months. Fixed-term contracts are permitted with specific conditions on duration and renewal. Termination requires notice periods and, in some cases, severance, depending on tenure and reason for termination. Employment contracts must be registered with the State Revenue Service.

Entity setup in Latvia

The Sabiedrība ar ierobežotu atbildību (SIA) is the standard limited liability vehicle for foreign employers. Minimum share capital is as low as €1 for simplified formation (€2,800 for standard formation), giving employers a choice between a fast, low-capital route and a more conventional structure. End-to-end setup typically takes three to five weeks.

EOR vs Payroll Management vs Entity Setup — Latvia

Frequently asked questions