- Overview: Latvia
- Global HR Compliance
- Global PEO and Payroll
- Work Permit for Hiring Expats via PEO
- Expand without a company set up
- Contractor vs. Employee: Which Is Better?
Global HR Compliance in Latvia
Global employment compliance is a complex and ever-changing field. The risks and liabilities associated with your employees include tax considerations, employee privacy and data protection, liability for employee misconduct, compliance with local employment laws and regulations, employee training and development, employee compensation and benefits, hiring and termination practices and procedures, compliance with labor laws and regulations in the host country and abroad, including those relating to visas and immigration status.
When setting up an international operation, it is important to consult legal counsel or a Global Employer or Record who has experience in dealing with these issues so that you do not run afoul of the law by inadvertently violating any employment regulation in Latvia.
Compliance with labor laws and tax regulations can be complex because they are often inconsistent from country to country, state to state, or city. As a result of these inconsistencies, employers must ensure that their global human resource policies are consistent with local laws wherever their employees or independent contractors work.
When it comes to taxes, there is no universal agreement on how they should be calculated or collected. In many countries around the world, income taxes are deducted from employees’ paychecks before they receive them. This is known as the “withholding” tax. In some countries, employers are responsible for collecting withholding tax directly from their employees and submitting it to the government along with their tax filings. Many countries also have strict rules about when employment-related taxes must be paid and what forms must be filed. In some cases, these requirements change depending on which country the employee is working in.
Multinational employers should know the tax implications of hiring foreign workers in different countries. Some cases may withhold taxes on employee salaries and bonuses that must be paid to foreign governments. Employers must regularly send this withholding amount to the appropriate state tax authority throughout the year. The employer may also pay income tax on these funds locally or in another country. In addition, many countries impose social security taxes on employees, which can result in double taxation if not adequately managed. Employers should consult with their accountants or other tax advisors to learn how best to manage these issues.
Global Employer of Record: Compliance 100% Covered
A Global Employer of Record solution by Acumen International is aimed to help you outsource the global employment of your foreign workforce to companies like ours.
This solution helps you employ your global sales force in Latvia as well as in 190+ countries of the world, provide pay and benefits to your employees, and administer any business expenses with our help.
Our solution differs from other hiring modes in that it helps you engage your foreign workforce in full compliance with the local labor legislation. This means you are protected from non-compliance and employee misclassification risks while we bear all employment risks, not you.
So, it looks like hiring your in-house sales force in your home country. However, you focus only on your global business development while we administer your global HR. In addition, you don’t need to open your entities in foreign countries and can leverage our infrastructure in Latvia instead. With our service, you can become a global company with reduced costs and minimized time and effort on your end.
Your employed foreign sales force will devote 100% of their time to your company product and may stay with you longer than foreign independent sales reps.
The global Employer of Record solution is 100% compliant and guarantees you and your employees’ full compliance with local legislation in Latvia.
We are experts in global workforce employment in Latvia, and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.
Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need it, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with local employment laws.
With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies Latvia’s local tax, social security, and immigration requirements.
See the Hiring and Firing Workforce in Latvia Guide below for a general overview of labor rules and regulations in the country. Or contact us if you need to employ workers in Latvia or would like to get more details.
Employment Agreements in Latvia
There are 2 types of employment contracts in the Republic of Latvia:
Permanent Employment Contracts
Employment contract for an indefinite period – the deadline until the employment contract is valid is not specified.
Fixed-term contracts can be concluded only in some instances, for example, working on individual projects, seasonal work, performing everyday work, replacing colleagues, etc. It is mandatory to indicate when the employment contract or the circumstances of termination of employment will end.
The Latvian Labor Law allows for concluding collective agreements and determines the procedure for concluding them. The law in Latvia allows for agreements at the industry, regional, and company/organization levels. A majority vote must approve company and organization-level collective agreements in a meeting of the employees. Several general agreements have been concluded in Latvia, and two branch collective agreements are in force in the private sector (The railway sector and the Construction sector).
Employment Termination and Severance Pay (Dismissal) in Latvia
If an employer intends to give a written warning or reprimand to the employee or to terminate the employee’s employment, it must first inform the employee in writing of the reason for the potential action and ask the employee to provide a written explanation. Employers must consider the explanation given and the facts and circumstances in general, along with any consequences of the employee’s breach or misconduct, the employee’s previous work, and his or her personality. Generally, employers must give notice of termination to an employee no later than one month from the date of detecting the violation.
Therefore, employers must also consider when the breach or misconduct occurred and whether too much time has passed for disciplinary action. An essential procedural obligation is that the employer, before giving a termination notice, must request that the employee provide information on whether he or she is a trade union member. If the employee is a trade union member, the employer must request consent from the trade union before giving notice. If such a request is rejected, the employer may bring a claim in court requesting termination of the employment contract.
Unfair Dismissals in Latvia
An employer is prohibited from giving a notice of termination of an employment contract (except in cases where the employee has grossly violated the work) to a pregnant woman, as well as to a woman during the period following childbirth up to one year, but if a woman is breastfeeding – during the whole period of breastfeeding, but no longer than until two years of age of the child, In cases specified in the Labor Law an employer is prohibited from giving a notice of termination of an employment contract to an employee if he or she has been declared to be a person with a disability.
An employer does not have the right to give a notice of termination of an employment contract during a period of temporary incapacity of an employee, as well as when an employee is on leave or is not performing the work due to other justifiable reasons. An employer is prohibited from giving a notice of termination of an employment contract until recovery of the ability to work or determination of disability if the reason of incapacity is an accident at work or occupational disease.
Notice Period in Latvia
Suppose the grounds for dismissal are based on the behavior of the employee. In that case, the employer shall give a termination notice no later than one month from the date of detecting a violation, excluding the period of the employee’s temporary incapacity or the period when the employee has been on leave or has not performed work due to other justified reasons, but no later than within 12 months from the date when the violation was committed.
Before giving notice, the employer must request a written explanation from the employee. In cases of lack of professional competence, disability, reinstatement of a former employee, and reduction of several employees (redundancy), the employer is entitled to give a termination notice only if the employer cannot employ the employee with his or her consent in another position in the same or another undertaking of the employer.
An employee has the right to give written notice of termination of an employment contract one month in advance unless the employment contract or the collective agreement provides a shorter period for giving the notice of termination. Upon the employee’s request, a period of temporary incapacity shall not be included in the period of a notice of termination. An employee employed in paid temporary work or other work concerning his or her participation in active employment measures has the right to give notice of termination of an employment contract in writing one day in advance.
Severance Payments in Latvia
The employer is obligated to pay severance if the grounds for termination notice are not related to an employee’s misconduct. The employer is also obliged to pay severance if the employee gives the termination notice based on considerations of morality and fairness that do not allow the continuation of legal employment relationships. The amount of severance pay depends on the length of service with the respective employer:
- One month’s average earnings if the relevant employer has employed the employee for less than 5 years.
- Two months’ average earnings if the relevant employer has employed the employee for 5 to 10 years.
- Three months’ average earnings if the relevant employer has employed the employee for 10 to 20 years.
- Four months’ average earnings if the relevant employer has employed the employee for more than 20 years.
Monthly average earnings are calculated by dividing the total amount of work remuneration for the previous six months by six.
Employee Benefits and Contributions in Latvia
Mandatory Benefits in Latvia
Mandatory benefits required by law to be provided by an employer: public holidays entitlement, annual leave, sick leave, maternity leave, paternity leave.
Voluntary Benefits in Latvia
The Latvian law does not provide any mandated bonuses, and payment of bonuses may vary significantly from company to company. Some customary bonuses may be provided, including a health insurance policy, company telephone, and/or company car, depending on the employee’s seniority or work performed. Those may be considered fringe benefits to the employee and are subject to specific taxation requirements.
Probationary Period in Latvia
When entering into an employment contract, a probationary period may be specified to assess whether an employee is suitable for the performance of the work entrusted to him or her. If an employment contract does not specify a probationary period, it shall be regarded as entered without a probationary period. A probationary period shall not be determined for persons under 18. The term of a probationary period may not exceed three months. The said term shall not include a period of temporary incapacity and other periods when the employee did not perform work for justifiable reasons.
Overtime work shall mean work performed by an employee in addition to regular working time. Overtime work is permitted if the employee and the employer have agreed in writing. Overtime work may not exceed eight hours on average within seven days, calculated in the accounting period that does not exceed four months. It is prohibited to employ people under 18 years of age in overtime work.
Regular daily working time of an employee may not exceed eight hours, and regular weekly working time – 40 hours. Daily working time means the working time within 24 hours. If the daily working time on any weekday is less than the regular daily working time, the regular working time of some other weekday may be extended, but not more than one hour. In such case, the provisions of the length of weekly working time shall be complied with. A working week of five days is specified for an employee. If it is impossible to determine a working week of five days due to the nature of the work, an employer, after consultation with the representatives of employees, shall specify a working week of six days.
Every employee is entitled to a paid annual vacation of at least four calendar weeks (one month for persons under 18), excluding public holidays. In general, the annual leave should be uninterrupted, but it may be divided into parts upon mutual consent of the employee and the employer. However, one part of the annual leave must be at least two uninterrupted calendar weeks. The Labor Law entitles employees having three or more children under the age of 16 years or a disabled child, as well as employees exposed to a special risk, to a supplementary annual leave of three additional days. For an employee having at least one child under the age of 14 an additional one day of vacation must be granted. An employee may demand an annual paid leave once he or she has been employed with the employer for at least six consecutive months.
The employee is entitled to sick pay if he or she is absent from work and thereby loses paid labor income due to the following reasons:
- Loss of capacity due to sickness or injury.
- A need to receive medical assistance of therapeutic or prophylactic nature.
- Isolation is necessary due to quarantine.
- Treatment in a medical treatment institution during the period of recuperation after.
- Sickness or injury if such treatment is required to restore work capacity.
- Nursing of a sick child aged up to 14 years.
- Prosthetics or orthotics in a hospital.
The Labor Law provides that a female employee is entitled to a parental leave of 56 calendar days and maternity leave of 56 calendar days. The term of the above leaves is calculated together, and 112 calendar days of leave are granted irrespective of the number of days of prenatal leave used before childbirth. A woman who has initiated pregnancy-related medical care at a preventive medical institution by the 12th week of pregnancy and has continued it for the entire period of pregnancy is entitled to a supplementary leave of 14 days, adding it to the prenatal leave and calculating 70 calendar days in total. In case of complications during the pregnancy, childbirth, or postnatal period, and if two or more children are born, a woman is entitled to a supplementary leave of 14 days, adding it to the maternity leave and calculating 70 calendar days in total. Leave granted in connection with pregnancy and childbirth shall not be included in annual paid leave.
Every employee has the right to parental leave concerning the birth or adoption of a child. Such leave shall be granted for a period not exceeding one and a half years up to the day the child reaches the age of eight. Parental leave, upon an employee’s request, shall be granted as a single period or in parts. The employee must notify the employer in writing one month before the beginning and the length of the parental leave or parts thereof.
5 Reasons to Work With a Global Employer of Record
Payroll taxes and service fees can be an enormous burden for employers. Many companies use a Global EOR (Employer of Record) to help with these costs. PEOs typically charge a percentage of the total payroll, including employee insurance fees. It can be challenging to determine the actual costs for these services, especially when some employer taxes are only paid on wages up to a certain threshold.
1. Single Global Service Agreement
A global PEO can cover all your international projects within a single contract and add new employees and services as you expand your global workforce in new countries.
2. No Required Minimums
We accept projects of any length, with any number of employees.
3. Flexible Pricing
At Acumen, we adjust your pricing based on the project employee number, whether you need to scale up or down.
4. End-to-end Global Employment Solution
We manage all your global services, including employment, recruitment, immigration, legal and global HR consulting, saving you valuable time. And Acumen International covers the cost and saves you the effort of finding and selecting local employment-related service providers.
5. Avoid Lawsuits
If you don’t want to get sued, you should become a Global Employer of Record. Doing so limits your vulnerability to lawsuits by ensuring compliance procedures are followed, taxes are paid correctly, and payroll is appropriately managed.
6. Reduced Expenses
A global employer of record (EOR) will bundle the cost of payroll, benefits, and workers’ compensation onto one payroll. The EOR will also handle tax filing on your behalf. This means that you only pay one set fee per month for all services, which can save you time and money by preventing multiple invoices from being mailed to you.
7. Free Yourself From HR Hassles with a Global Employer of Record
When you partner up with a Global Employer of Record, you’ll have someone who’s always there to handle the small and large tasks that are going to come up in your HR department. You’ll never have to worry about filling out paperwork or managing new hires again—you can focus all your attention on growing your business. A Global Employer of Record will handle the HR headaches so you can concentrate on your business.
Acumen Global Employer of Record: Core Functions
- Payroll processing and funding
- Handling taxes and tax reporting
- Compliant employee onboarding
- Creating and maintaining compliant employment contracts
- Compliantly handling workers’ compensation
- Conducting thorough background checks for new hires
- Managing benefits
- Dealing with termination
- Handling immigration support and compliance-related matters
- Managing the international workforce in one place