Employer of Record in Latvia

An Employer of Record in Latvia acts as the legal employer on your behalf, managing payroll, tax withholding, and Labour Law compliance without requiring you to set up a local entity.

Latvia's compliance requirements are specific. Employers must register employees with VSAA for VSAOI social insurance contributions, withhold personal income tax through VID, and sponsor work permits via OCMA for third-country nationals. Each step requires a registered Latvian presence unless you use an EOR.

• EU/EEA citizens can be onboarded in 1 to 2 weeks via an EOR, compared to 4 to 6 weeks for a new SIA entity setup.
• The employer VSAOI contribution rate is 23.59% of gross salary.
• The statutory minimum notice period is one month.
• The national minimum wage rises to EUR 780 per month from 1 January 2026.

This page covers employment contracts, payroll contributions, statutory leave, visa sponsorship, worker classification, and EOR costs in Latvia.

Gloroots operates as an EOR provider. This guide is written to help you evaluate all available paths for hiring in Latvia, not only through Gloroots.

What Is an Employer of Record in Latvia?

An EOR's Latvian entity is the named employer at every regulatory touchpoint: VID for personal income tax withholding, VSAA for social insurance registration, and OCMA for work permit sponsorship on behalf of third-country nationals.

Companies use an EOR in Latvia when testing the market, scaling headcount quickly, or hiring before a local SIA is established. To understand how does EOR work in practice, the mechanics follow a consistent pattern across markets.

The client selects a candidate. The EOR then issues a compliant Latvian-language employment contract, registers the employee with both VID and VSAA, runs monthly payroll including statutory deductions, administers required benefits, and handles day-to-day employment queries on the client's behalf.

Clear global hiring pricing

See country-specific EOR pricing before you plan your next international hire.

Check our pricing

Your Hiring Options in Latvia: EOR vs. Entity vs. PEO vs. Contractor

Companies hiring in Latvia have four main paths: an Employer of Record (EOR), a locally registered SIA entity, direct contractor engagement, or a PEO. Latvia has no regulated PEO framework, which limits that option significantly.

An EOR fits companies with no local entity, a small headcount of one to ten hires, or a need to test the Latvian market quickly. Gloroots EOR services support entity-free employment with local execution and centralized governance.

A registered SIA entity suits long-term operations, large headcount plans, or situations requiring full operational control in Latvia.

Latvia's single-named-employer rule means PEO co-employment has no legal standing under Latvian Labour Law or the frameworks governing VID, VSAA, and OCMA registration.

How to Hire in Latvia Through an EOR: Step by Step

Hiring in Latvia through an EOR follows a six-step workflow, from the initial decision to engage through to offboarding, with the EOR managing compliance at every stage.

Step 1: Define the role and confirm employment classification

Confirm whether the worker will be an employee or a contractor. Misclassification under Latvian Labour Law carries financial and legal penalties, so this step sets the foundation for everything that follows.

Step 2: Select an EOR provider and agree on terms

Choose a provider with a verified in-country employment structure in Latvia. Agree on pricing, payroll cycle, and the scope of benefits and statutory coverage before signing.

Step 3: Draft and execute the employment contract

The EOR prepares a compliant Latvian employment contract in Latvian, covering all mandatory terms required under the Labour Law. The contract must be signed before the employee starts work.

Step 4: Register the employee with VID and VSAA

The EOR registers the employee with the State Revenue Service (VID) for income tax and with the State Social Insurance Agency (VSAA) for social contributions. This step must be completed before the first working day.

Step 5: Run payroll and manage ongoing compliance

The EOR processes monthly payroll, withholds income tax and social contributions, and files all required returns with VID and VSAA. Benefits and statutory leave entitlements are administered in line with Latvian law.

Step 6: Manage offboarding if employment ends

The EOR handles notice periods, severance calculations, and final payroll in accordance with Latvian Labour Law. All deregistration filings with VID and VSAA are completed by the EOR.

Step 1: Decide Between EOR and Entity

Assess headcount, timeline, and budget. Fewer than 10 hires or a timeline under six months typically favors EOR over SIA incorporation with VID and VSAA setup.

Step 2: Select and Vet an EOR Provider

Confirm the provider holds its own Latvian legal entity, not a partner network. Verify active VID and VSAA registrations, and confirm the provider can sponsor OCMA work permits for third-country nationals.

Step 3: Draft a Compliant Employment Contract

Fixed-term contracts are capped at 2 years in most cases, with 5 years permitted only in limited circumstances under Labour Law Section 45. The contract must be written in Latvian. If the employee cannot understand Latvian, the employer must provide terms in a mutually understood language.

Step 4: Onboard and Register Statutory Requirements

The EOR registers the employee with VID for personal income tax withholding and with VSAA for social insurance contributions. It collects the employee's payroll tax booklet to apply the monthly differentiated non-taxable minimum of €550 (approximately USD 635–650 depending on exchange rates) in 2026, and initiates the OCMA process where applicable.

Step 5: Run Compliant Monthly Payroll

The EOR calculates gross pay, deducts employee VSAOI (10.50%) and PIT (25.5% up to EUR 105,300), applies Solidarity Tax above that cap, and remits employer VSAOI (23.59%) to VSAA and PIT to VID.

Step 6: Manage Offboarding and Exit

The EOR issues written termination notice (minimum one month), calculates severance by length of service, pays out unused annual leave in cash, and de-registers the employee with VID and VSAA.

Start hiring with Gloroots

Set up compliant employment in your target country without building a local entity first.

Sign up for Gloroots

How to Choose the Right EOR in Latvia

Selecting an EOR in Latvia requires checking six practical criteria before signing any contract. Use these to compare providers objectively.

• Does the provider hold its own registered Latvian entity?
• Can it demonstrate direct compliance with VID, VSAA, and OCMA requirements?
• Does it offer transparent, country-specific pricing?
• How does it handle employment contract drafting in Latvian?
• What is its process for managing terminations and severance under Latvian labor law?
• Does it provide a named account owner for ongoing support?

Reviewing these criteria against any provider's documentation will surface gaps quickly. For a broader comparison of providers across markets, see the best employer of record guide.

Local Legal Knowledge and Own Entity

Confirm the EOR holds its own registered Latvian legal entity. A direct entity means the provider is the named employer at VID, VSAA, and OCMA, with no third-party intermediary adding compliance risk.

Work Permit and Visa Sponsorship Capability

Confirm the EOR can sponsor OCMA residence permits for third-country nationals and manage the NVA labour market test, including the 10-working-day vacancy posting requirement.

Support Model and Response Times

Assess whether the EOR provides dedicated in-country HR support in both Latvian and English, and whether it covers VDI (State Labour Inspectorate) audit response.

Pricing Transparency

Gloroots offers predictable, country-specific pricing per employee per month. Confirm whether statutory employer VSAOI contributions of 23.59% are billed separately or included in the platform fee.

Data Security and Compliance Certifications

Gloroots maintains GDPR compliance, which applies to all data processing in Latvia as an EU member state. ISO 27001 and SOC 2 certification status should be confirmed directly with Gloroots before publication.

Integration and Platform Capability

Confirm that the EOR platform connects with your HRIS and expense tools and provides real-time payroll reporting in EUR.

Workforce and Talent Pool in Latvia

Latvia has a workforce of approximately 900,000 people. The median age is around 43, and the labour force is well-educated, with the majority concentrated in Riga.

Riga is the dominant employment hub. Key sectors include IT and software, logistics, manufacturing, financial services, and business process outsourcing.

Latvian is the official language for employment contracts. English proficiency is high among professionals, particularly in IT and finance. Labour costs are competitive within the EU: average gross monthly wages run between EUR 1,400 and EUR 1,600, making Latvia an accessible market for international hiring.

Employment Law Essentials in Latvia

Employment contracts

Latvia's Labour Law strongly favors permanent, open-ended contracts. Fixed-term contracts are permitted only in defined circumstances and may not exceed two years in standard cases. In limited situations specified under Labour Law Section 45, a maximum of five years applies. Seasonal work contracts are capped at ten months. If employment continues past the agreed expiry date, the contract converts automatically to a permanent agreement. All contracts must be written in Latvian and signed before the employee starts work. For employees who do not understand Latvian, the employer must provide terms in a mutually understood language. Employers using an employer of record Estonia or Latvia structure should note that contract classification errors carry significant legal exposure across both Baltic markets.

Working hours and overtime

The standard working week is 40 hours across five days, with an eight-hour daily limit. The working day immediately before a public holiday is reduced by one hour under Labour Law Section 135. Employees are entitled to a minimum daily rest of 12 consecutive hours (Section 142) and a minimum weekly rest of 42 consecutive hours (Section 143). Any work beyond standard hours requires prior mutual agreement and is compensated at 200% of the regular rate.

Minimum wage

The Cabinet of Ministers sets the national minimum wage under Labour Law Section 61. Effective 1 January 2026, the minimum monthly wage is EUR 780, as confirmed by lm.gov.lv. This figure applies to all employees regardless of sector unless a collective agreement sets a higher floor.

Leave and Statutory Benefits in Latvia

Annual leave

Employees in Latvia are entitled to a minimum of four weeks of paid annual leave per year. At least 14 consecutive calendar days must be taken in one block. Unused leave cannot be paid out in cash during active employment. Cash compensation for unused leave is permitted only on termination, per Labour Law Section 149(5).

Maternity, paternity, and parental leave

Maternity leave runs for up to 140 calendar days in total: 70 days before birth and either 56 or 70 days after, depending on health circumstances or multiple births. The maternity benefit is paid at 80% of the average insurance wage by the State Social Insurance Agency (VSAA), not by the employer.

Paternity leave is 10 calendar days, taken no later than six months after the child's birth under Labour Law Section 155. The paternity benefit is also paid at 80% of the average insurance wage by VSAA. Parental (childcare) leave of up to 18 months is available until the child reaches age 8, under Labour Law Section 156. This period counts toward the employee's length of service.

Public holidays

Latvia observes 12 public holidays each year:

• New Year's Day: 1 January
• Good Friday: movable
• Easter Sunday: movable
• Easter Monday: movable
• Labour Day: 1 May
• Restoration of Independence Day: 4 May
• Midsummer Eve: 23 June
• Midsummer Day / St. John's Day: 24 June
• Proclamation Day: 18 November
• Christmas Eve: 24 December
• Christmas Day: 25 December
• Second Christmas Day: 26 December

Leave entitlements summary

Payroll, Tax and Statutory Contributions in Latvia

Latvian law requires payroll to run at least twice monthly. The employer withholds personal income tax (PIT) and remits VSAOI contributions to VID and VSAA.

A Solidarity Tax applies when gross annual earnings exceed €105,300 per year (approximately USD 121,000–123,000 per year). The nominal rates mirror VSAOI: 23.59% for the employer and 10.50% for the employee, producing an effective rate of 25%. VID administers the tax directly.

Latvia sets a non-taxable personal income minimum of €550/month (~USD 630–645/month) and €6,600/year (~USD 7,600–7,720/year) for 2026. Employees apply this threshold through a payroll tax booklet. A dependent allowance of €250/month (~USD 290–293/month) applies per registered dependent.

Latvia's corporate income tax model defers liability on retained or reinvested profit at 0%. Distributed profit is taxed at 20%, which equals an effective 25% on the gross amount. Companies comparing entity setup against an EOR model should factor this into their cost analysis.

Work Visas and Permits in Latvia

Latvia operates a two-track system. EU, EEA, and Swiss citizens hold free movement rights and require no work permit. Third-country nationals must obtain an OCMA residence permit with the right to employment.

When an EOR sponsors a third-country national, the EOR's Latvian entity submits the OCMA invitation and obtains a labour market test opinion from the NVA. That opinion follows a 10-working-day vacancy posting on cvvp.nva.gov.lv. The EOR entity is named as the sponsoring employer on the issued permit.

Misclassification Risk in Latvia

In Latvia, the State Labour Inspectorate (VDI) applies a substance-over-form test to determine whether a civil-law contractor is in fact an employee.

VDI examiners look for the following indicators when assessing worker status:

• Direction and supervision of the individual's daily work by the client company, rather than the worker controlling their own methods and schedule.
• Integration into the client's organisational structure, including fixed working hours and use of company premises or equipment.
• Economic dependence on a single client, with no meaningful income from other sources.
• Absence of entrepreneurial risk, such as no independent client base, no business expenses, and no exposure to profit or loss.

Companies found to have misclassified workers face several penalties:

• The State Revenue Service (VID) issues back-tax assessments covering unpaid personal income tax (PIT) and social insurance contributions (VSAOI) for the full misclassified period.
• VDI can impose fines under Labour Law Sections 158 to 162 for failure to execute written employment contracts before work commences.
• Contractors must register with VID as self-employed before starting activities; failure to do so triggers additional penalties on top of any misclassification finding.
• A VDI audit creates reputational and operational disruption, including mandatory remediation timelines and public inspection records.

Using an EOR removes misclassification risk entirely because the EOR's Latvian legal entity is the named employer at every regulatory touchpoint.

Plan your hiring route

Talk through your country-specific employment requirements with the Gloroots team.

Book a demo

Hiring, Onboarding, Termination and Offboarding in Latvia

Onboarding

Onboarding in Latvia follows a structured sequence tied to specific registration and documentation requirements.

Termination

Employers may terminate for business reasons, personal reasons, or misconduct. All terminations require written notice and a written explanation of the grounds. Where misconduct is the reason, the employer must first issue a written warning and give the employee a reasonable opportunity to respond before proceeding. The minimum notice period is one month, reduced to three days during the probationary period.

Offboarding

Offboarding covers three areas: financial settlement, documentation, and administrative de-registration.

• Settlement: Calculate severance pay according to the length-of-service table below; pay any unused annual leave as a cash compensation on the final day of employment.
• Documents: Issue the formal written termination notice; provide the employee with their employment record and any required reference documentation.
• Exit: De-register the employee with both VID and VSAA; cancel any OCMA residence permit if applicable; confirm the final payroll run has been processed and filed.

What's New: Recent Regulatory Changes in Latvia

Effective 1 January 2025, Latvia's National Employment Agency (NVA) introduced a mandatory 10-working-day vacancy posting requirement on cvvp.nva.gov.lv before employers can obtain a labour market test opinion for third-country national work permit applications.

• NVA labour market test opinion is now required for all third-country national OCMA residence permit applications from 1 January 2025.
• Minimum wage increases to EUR 780/month effective 1 January 2026, per Cabinet of Ministers decision.
• The non-taxable personal income minimum is set at EUR 550/month (EUR 6,600/year) for 2026 employment income.
• Latvia's CIT deferred model (0% on retained earnings, 20% on distributed profits) remains in force since 1 January 2018.
• PIT rates of 25.5% and 33%, and VSAOI rates of 23.59% (employer) and 10.50% (employee), are unchanged for 2025 and 2026.

Employers hiring third-country nationals must build NVA posting time into their recruitment timeline from Q1 2025 onward. This section is reviewed and updated each quarter by Gloroots' Latvia compliance team.

Costs and Financial Planning for Hiring in Latvia

The total cost of hiring in Latvia extends well beyond gross salary. Employer VSAOI at 23.59% is the largest statutory add-on and applies to all standard employment income.

Additional costs include Solidarity Tax on earnings above EUR 105,300 (effective rate of 25%, mirroring VSAOI nominal rates), severance obligations of up to four months' pay depending on length of service, and supplementary private health insurance, which is a market-norm benefit in Latvia. These costs apply whether you employ through a local SIA entity or via an Employer of Record.

The table below compares the cost structure of a direct SIA entity against Gloroots EOR, so finance teams can plan headcount budgets accurately.

For most companies hiring one to five employees in Latvia, the EOR model removes entity setup capital and ongoing compliance overhead, making total cost more predictable from day one.

Common Challenges and How Gloroots Solves Them in Latvia

Hiring in Latvia presents practical challenges around work permit sponsorship, payroll tax booklet administration, and VDI compliance audits.

Why Gloroots Is a Strong EOR Partner in Latvia

Gloroots is best suited for companies that need to employ staff in Latvia quickly, particularly EU/EEA citizens within one to two weeks, without committing to SIA incorporation or the multi-agency VID/VSAA registration process.

Gloroots operates through its own registered Latvian entity, named as employer at VID, VSAA, and OCMA. That structure supports in-country HR operations in both Latvian and English, and covers third-country national work permit sponsorship from start to finish.

Payroll tax booklet administration, Solidarity Tax calculation, and VDI-compliant contract documentation are all managed by Gloroots. Client teams have no administrative role in those processes.

The service fits tech companies, BPO operators, and logistics firms hiring their first one to ten employees in Latvia.

Companies planning to scale beyond 20 employees over the long term should evaluate whether a direct SIA entity makes financial sense. Gloroots can support that transition planning when the time comes.

Start hiring with Gloroots

Set up compliant employment in your target country without building a local entity first.

Sign up for Gloroots

Conclusion

Latvia's employer VSAOI rate of 23.59% and the NVA labour market test introduced in January 2025 make local compliance more complex than it first appears.

Companies evaluating Latvia should map their headcount timeline and nationality mix before choosing between an EOR and an SIA entity setup. The right path depends on speed, scale, and whether third-country national sponsorship is needed. For teams expanding across the EU, reviewing options like employer of record Germany alongside Latvia can clarify where entity investment makes sense.

Frequently Asked Questions About Employer of Record in Latvia

What does an Employer of Record do in Latvia?

An EOR in Latvia acts as the legal employer on record, signing employment contracts, running payroll, filing VSAOI contributions at 23.59%, and managing statutory benefits on behalf of the client company.

The client retains day-to-day direction of the worker's tasks. The EOR handles all filings with the State Revenue Service (VID) and ensures contracts comply with the Labour Law.

Is it legal to use an EOR in Latvia?

Yes. Latvia has no law prohibiting EOR arrangements. The EOR registers as the employer with VID and the State Social Insurance Agency (VSAA), fulfilling all statutory obligations under Latvian Labour Law.

Client companies must ensure the arrangement does not constitute disguised employment agency activity. A properly structured EOR agreement keeps the engagement compliant with both Latvian and EU employment rules.

How long does it take to hire an employee in Latvia through an EOR?

An EOR can typically onboard an EU or EEA national in Latvia within three to seven business days, once the employment contract is signed and payroll is configured.

Third-country nationals require additional steps. Since January 2025, the National Employment Agency (NVA) labour market test must be completed before a work permit is issued, which can add several weeks to the timeline.

What are the costs of using an EOR in Latvia?

EOR fees in Latvia generally range from a flat monthly service charge per employee to a percentage of gross salary. Employer VSAOI contributions add 23.59% on top of gross pay for most workers.

Retirement-eligible employees attract a reduced employer VSAOI rate of 20.77%. The minimum monthly wage is EUR 780, which sets the floor for payroll calculations. Total employment cost depends on seniority, benefits, and the EOR provider's pricing model.

What is the difference between an EOR and setting up an SIA in Latvia?

An SIA (Sabiedrība ar ierobežotu atbildību) is Latvia's standard private limited company. Setting one up gives the foreign company full legal presence but requires registration, a local director in some cases, and ongoing accounting and tax filings.

An EOR provides entity-free employment. There is no incorporation cost or local entity maintenance. EOR is suited to early-stage hiring or small headcounts; an SIA makes more sense when the company plans sustained operations or needs to contract locally in its own name.

Can an EOR sponsor work visas for employees in Latvia?

Yes. Because the EOR is the registered employer in Latvia, it can act as the sponsoring employer for work permit and residence permit applications filed with the Office of Citizenship and Migration Affairs (OCMA).

For third-country nationals, the NVA labour market test introduced in January 2025 must be satisfied first. The EOR manages the OCMA filing, but the client should account for the additional lead time this process requires.

Do employees hired through an EOR in Latvia receive full statutory benefits?

Yes. Employees on EOR contracts in Latvia receive all statutory entitlements: a minimum of four weeks of paid annual leave, sick pay from the second day of illness, maternity and paternity leave, and VSAOI-funded social insurance coverage.

The employer VSAOI contribution of 23.59% funds state pension, unemployment insurance, and health contributions. Employees contribute 10.50% on their side. Benefits above the statutory floor depend on the agreement between the EOR, the client, and the employee.

What happens if I misclassify a contractor as an employee in Latvia?

The State Labour Inspectorate (VDI) enforces employment classification rules and can audit companies that engage contractors on a regular, subordinate basis. Findings of misclassification result in back-payment of VSAOI contributions and potential fines.

VID, the State Revenue Service, can also assess unpaid income tax and social contributions for the full period of misclassification. Penalties apply to both the engaging company and, in some cases, the individual. Correct classification from the start avoids both agencies' scrutiny.