Your first employee is a milestone that changes almost everything: the company stops being "just me"; regular salary payments, social contributions, tax returns, vacations, and sick leave become part of your routine. In 2026, Latvian Labour Law remains quite strict towards employers, and mistakes are costly. But with the right sequence, it's all manageable. This guide covers the entire process — from the moment you decide to hire your first person to their first day at work and beyond.
Before You Start: Register as an Employer with the SRS
Before hiring your first employee, your SIA must register as an employer with the State Revenue Service (VID/SRS).
Under Latvian law, employers — both legal entities and natural persons — must register with the SRS within 10 days of entering into an agreement with an employee for work remuneration. A copy of the signed agreement must be submitted during the registration process.
Registration takes place via EDS:
Log in to EDS using your e‑identity.
Select "Documents" → "Create New Document" → "Taxpayer Registration".
Complete the form and indicate that you are registering as an employer.
The Employment Contract — Mandatory Content Under Section 40 of the Labour Law
The employment contract must be concluded in writing before work commences. The law strictly prescribes what information the contract must contain. The contract is prepared in two copies — one for the employer and one for the employee.
Section 40(2) of the Labour Law specifies the following mandatory content:
Employer's name (or the natural person's given name and surname) and registration number
Employee's given name, surname, and personal identification number (or date of birth, if no ID number)
Start date of the employment relationship — the first day of work
Place of work — a specific address or an indication that the work is mobile
The employee's profession, position, or specialty according to the Profession Classifier and a general description of the agreed‑upon work
Amount of remuneration — monthly or hourly rate, payment procedure, and payment dates
Agreed daily or weekly working hours — including for cumulative working time
Duration of annual paid leave — at least 4 calendar weeks
Notice period for termination of the employment contract and related procedures
Type of employment contract — indefinite or fixed‑term. If fixed‑term, the end date or the circumstances determining the completion of the work must be indicated
Probationary period and its duration (if set)
Reference to the collective agreement, if one has been concluded
Information on training opportunities, if the employer provides training
Information on social security guarantees arising from the employment relationship
An important requirement: the employment contract must be in Latvian. If the employee does not understand Latvian, the employer must provide written information on the terms of the employment contract in a language the employee understands.
Probation Period — Rules and Limits
A probation period is not mandatory, but it is recommended by most employers. It allows both parties to assess whether the working relationship is successful. During the probation period, the notice period for termination is just three days, and neither party needs to provide a reason for termination.
The maximum length of the probation period depends on the type of employment contract:
Contract type | Maximum probation period |
|---|---|
Permanent (indefinite) | 3 months |
Fixed‑term ≤ 6 months | 1 month |
Fixed‑term 6–12 months | 2 months |
Fixed‑term > 1 year | 3 months |
Under a collective agreement | up to 6 months |
Key points about probation:
The probation period starts on the first working day after the contract is signed and cannot be extended.
Days of sickness and other justified absence (donor days, court attendance, etc.) are not included in the probation period.
During probation, the employee has the same rights and obligations as after it ends — the same pay, working hours, and protections.
Pay during probation must not be lower than the minimum wage (€780 in 2026) and must not differ from other employees in the same position.
Employee Registration in EDS — Before the First Working Day
Once the employment contract is signed, the employer must register the employee with the SRS. Information about the employee starting work must be submitted:
No later than one hour before work starts, if submitted electronically via EDS
No later than one day before work starts, if submitted in paper form
The registration in EDS requires: the employee's personal ID number (or a registration number assigned to a non‑resident), the employment contract start date, the position, and the working time fraction.
Important: if the employee is a non‑resident without a Latvian personal ID number, you must first submit an application to the SRS for the assignment of a registration number, providing passport details and address. This process takes additional time — allow at least 3–5 working days.
Employer Obligations After Hiring
Once the employee is hired, you, as the employer, take on a set of ongoing obligations.
Salary and Taxes (monthly)
In 2026, the minimum monthly wage is €780. The following must be withheld from the employee's gross salary:
Employee social contributions (VSAOI): 10.50%
Personal income tax (PIT/IIN): 25.5% (on income up to €105,300 per year), applying the non‑taxable minimum of €550 per month
The employer's additional costs:
Employer social contributions (VSAOI): 23.59%
Business risk duty: 0.36% (totalling 23.95%)
Total employer cost per employee (23.59% VSAOI + salary): for example, at the minimum wage of €780, the company's monthly cost is approximately €964, of which the employee receives roughly €660 net.
Annual Leave
Employees are entitled to at least four calendar weeks of paid annual leave. The right to leave arises after six months of continuous employment with the particular employer.
In addition to annual leave, the Labour Law provides for:
Paid additional leave for employees with children under the age of 14
Paid study leave
Unpaid leave at the employee's request
Sick Leave (Sickness Benefits)
For the first 9 calendar days of sickness, the employer pays sickness benefit from their own funds. For the remaining period of illness, the benefit is paid by the State Social Insurance Agency (VSAA).
Occupational Health and Safety
The employer must arrange a mandatory health check before the employee starts work and regular checks thereafter, depending on workplace risks. The cost of health checks is borne by the employer.
Monthly Employer Report
Each month, by the 17th, an Employer Report must be filed via EDS for the previous month, listing all employees, their gross salaries, calculated taxes, and employment relationship status.
Working Time and Its Organisation
Normal working time in Latvia is 8 hours per day and 40 hours per week. Overtime is permitted only in exceptional circumstances and to a limited extent. Overtime must be paid at least 200% of the normal hourly rate.
Cumulative working time is possible, but it must be clearly specified in the employment contract and in the workplace rules. The reference period for cumulative working time may not exceed three months (in exceptional cases — up to 12 months, if provided for in a collective agreement).
Notice Periods and Severance Pay
An employment relationship may be terminated on the employee's initiative, the employer's initiative, or by mutual agreement.
Employee Resignation
An employee may terminate the employment contract by giving one month's written notice, unless a shorter period is specified in the employment contract.
Employer Termination
The notice period depends on the grounds for termination:
In the case of employee misconduct: 10 calendar days
For economic and organisational reasons (redundancy, position elimination):
Up to 5 years of service: 1 month
5 to 10 years of service: 2 months
More than 10 years of service: 3 months
Severance Pay
If the employment contract is terminated for economic reasons (not due to employee fault), the employee is entitled to severance pay based on length of service:
Length of service | Severance pay |
|---|---|
Up to 5 years | 1 month's average pay |
5–10 years | 2 months' average pay |
10–20 years | 3 months' average pay |
More than 20 years | 4 months' average pay |
Severance pay is calculated using the employee's average earnings over the last six months of employment. This payment is subject to PIT and social contributions.
If Your Employee is a Foreign National
When hiring a foreign national, additional requirements must be observed:
EU/EEA nationals do not require a work permit but must register their right of residence with the Office of Citizenship and Migration Affairs (PMLP).
Third‑country nationals require a work permit or a permanent residence permit with the right to work.
If the foreign national does not have a Latvian personal ID number, a registration number must be obtained from the SRS before the employee can be registered in EDS.
How Your SIA Changes After Hiring Your First Employee
Your first employee means not only new costs but also new administrative obligations:
Monthly payroll and the Employer Report due by the 17th
Withholding and payment of VSAOI and PIT/IIN by the 23rd
Tracking leave and calculating holiday pay
Administering sick leave and calculating sickness benefits
Complying with occupational health and safety requirements — inductions, health checks
The accounting burden increases significantly — whereas previously you could manage with simpler bookkeeping, having an employee brings regular payroll returns, social contribution calculations, and more complex tax reporting.
What to Do If You Hired the Wrong Person — The Advantages of the Probation Period
The probation period is not just a formality — it is a crucial protective tool for the employer. During probation (up to 3 months), the employer can terminate the employment relationship with three days' notice, without stating a reason. There is no need to justify the decision, conduct a disciplinary investigation, or pay severance.
This means: if the new employee does not meet expectations — use the probation period to end the relationship quickly and without additional costs.
Important: if the probation period expires and the employee continues working, they automatically become a permanent employee with full legal protection. Therefore, a week before the probation period ends, assess the employee's performance and make your decision.
Hiring your first employee is a major step in any SIA's journey. Getting the documentation right from the start — a contract with all mandatory clauses, timely registration in EDS, and a clear understanding of your obligations — will protect you from SRS penalties and employment disputes down the line. Our team helps with both drafting employment contracts and handling payroll and monthly returns.
Last updated: April 2026. Information is based on the Labour Law with current amendments, official SRS materials, and State Labour Inspectorate data.
Comments