Hiring Your First Employee in Latvia — Legal Requirements 2026

Hiring Your First Employee in Latvia — Legal Requirements 2026

Your first employee is a turning point that changes almost everything: the company stops being "just you," and regular payroll, VSAOI, personal income tax filings, vacation, and sick leave all enter the picture. In 2026 the Labor Law remains fairly strict toward employers, and mistakes are costly. Still, if you follow the right sequence, it's entirely manageable. This guide covers the whole process — from the moment you've decided to hire your first person, through their first day of work, and beyond.

Key takeaways

• Register with VID as an employer within 10 days of agreeing on pay with the employee, and register the employee themselves in EDS at least an hour before they start work.

• The employment contract must be in writing, in Latvian, and include all 13 mandatory items required by Article 40(2) of the Labor Law.

• The probation period is usually up to 3 months, or up to 6 months under a collective agreement; during it, the notice period is only 3 days.

• The employer's notice period depends on the reason for dismissal, not the employee's tenure — but the amount of severance pay does depend on tenure.

Before you start: register as an employer with VID

Before hiring your first employee, an SIA must register as an employer with the State Revenue Service (VID).

Under Latvian law, employers — both legal entities and individuals — must register with VID within 10 days of reaching an agreement with the employee on pay. A copy of the signed agreement must be submitted as part of registration.

Registration happens through EDS:

1. Log into EDS with your e-identity.

2. Select "Documents" → "Create new document" → "Taxpayer registration."

3. Fill out the form and indicate that you're registering as an employer.

The employment contract — mandatory content under Article 40 of the Labor Law

The employment contract must be signed in writing before work begins. The law strictly defines what information the contract must contain. The contract is prepared in two copies — one stays with the employer, the other is given to the employee.

Article 40, second paragraph, of the Labor Law requires the following mandatory content:

1. The parties — the employee's full name, personal identity number (or date of birth, if there is none) and place of residence; the employer's name, personal identity number or registration number, and address

2. The start date of the employment relationship — the first day of work

3. The expected duration — if the contract is fixed-term (not applicable to an indefinite contract)

4. The place of work — a specific place, a statement that the employee may be employed in different places, or that the employee may freely choose the place of work

5. The employee's profession, position, or specialty per the Classification of Occupations, and a general description of the agreed work

6. The amount and timing of pay

7. The agreed daily or weekly working time, if the work schedule is fully or mostly predictable; for part-time work with an unpredictable schedule — a statement that the schedule is variable and the guaranteed paid hours

8. The length of paid annual leave

9. The notice period for the contract and its procedure

10. A reference to the collective agreement (if any) and to the internal work rules that apply to the employment relationship

11. The probation period and its length, if one is set

12. The employee's right to training, if the employer provides any

13. The social security institutions that receive social contributions linked to the employment, and any social security protection the employer provides, where the employer is responsible for it

An important requirement: the employment contract must be in Latvian. If the employee doesn't understand Latvian, the employer must also provide written information about the contract terms in a language the employee understands.

Probation period — rules and limits

A probation period isn't mandatory, but most employers use one. It lets both sides confirm the working relationship is a good fit. During probation, the notice period is only three days, and neither side has to state a reason.

The maximum length of the probation period depends on the type of contract:

Source: Labor Law, Article 46, second paragraph — "the period may not exceed three months. Without lowering employees' overall level of protection, a collective agreement concluded with an employees' trade union may set a probation period longer than three months but not exceeding six months."

Key nuances about the probation period:

• The probation period starts on the first day of work after the contract is signed and cannot be extended.

• Sick days and other justified absences (donor leave, court appearances, etc.) don't count toward the probation period.

• During probation, the employee has the same rights and obligations as afterward — the same pay, working hours, and protections.

• Pay during probation can't be lower than the minimum wage (€780 in 2026) and can't differ from other employees in the same position.

Registering the employee in EDS — before their first day

Once the employment contract is signed, the employer must register the employee with VID. Information about an employee starting work must be submitted:

• No later than one hour before they start work, if submitted electronically via EDS

• No later than one day before they start work, if submitted on paper

Registration in EDS requires: the employee's personal identity number (or the registration number issued to a non-resident), the contract start date, position, and workload.

Important: if the employee is a non-resident without a personal identity number, you must first submit an application to VID for a registration number, providing their passport number and address. This process takes extra time — plan for at least 3–5 business days.

Employer obligations after hiring

Once you've hired an employee, a series of ongoing obligations kick in as an employer.

Pay and taxes (monthly)

The minimum monthly wage in 2026 is €780. From the employee's gross pay, you must withhold:

• Employee VSAOI: 10.50%

• Personal income tax: 25.5% (for income up to €105,300 a year), applying the €550/month non-taxable minimum

Additional employer costs:

• Employer VSAOI: 23.59% of gross pay

• Business risk state fee: €0.36 a month, a fixed amount per employee — this is not a percentage of salary and doesn't change with the salary amount, so it can't be added to the VSAOI percentage rate

Total employer cost per employee: for example, at the minimum wage of €780 — the company's monthly cost is roughly €964 (€780 + employer VSAOI ~€184 + the €0.36 fee), of which the employee takes home roughly €660 net. You can work out the exact numbers for any salary amount with our salary calculator.

Vacation

Employees are entitled to at least four calendar weeks of paid annual leave. The right to leave arises after six months of work with the given employer.

Beyond annual leave, the Labor Law also provides for:

• Paid additional leave for employees with children under 14

• Paid study leave

• Unpaid leave at the employee's request

Sick leave

For Form A sick leave, the employer pays sick pay from its own funds for days 2 through 9 of sick leave — the first day isn't paid at all. Payment amount: day 2 and 3 — at least 75% of salary; days 4 through 9 — at least 80% of salary. From day 10 onward, the State Social Insurance Agency (VSAA) pays the benefit.

Source: State Labor Inspectorate — Sick Pay

Occupational safety

The employer must arrange a mandatory health check before work begins, and periodic checks based on the workplace's risk factors. The employer covers the cost of these health checks.

Employer report (monthly)

Every month by the 17th, the employer report for the previous month must be filed in EDS, listing all employees, their gross pay, calculated taxes, and employment status. The actual tax payment (VSAOI, personal income tax) is due through the unified tax account by the 23rd — a different deadline from filing the report.

Working time and its organization

Standard working time in Latvia is 8 hours a day and 40 hours a week. Overtime is only allowed in exceptional cases and within limits. Overtime must be paid at a supplement of at least 100%, which together with the base rate for that time totals 200%, i.e., double pay.

Aggregated working time is possible, but it must be clearly set out in the employment contract and internal work rules. The reference period for aggregated working time is one month unless a longer one is set; an employment contract may set up to three months, and a collective agreement up to 12 months (Labor Law, Article 140(3)).

Notice periods and severance pay

Employment can end at the employee's initiative, the employer's initiative, or by mutual agreement.

Notice by the employee

An employee can give notice one month in advance in writing, unless the contract sets a shorter period.

Notice by the employer

⚠️ Important nuance: the employer's notice period depends on the reason for dismissal, not the employee's tenure (this is often confused with the amount of severance pay — see below, which does depend on tenure):

• Immediately — in especially serious cases (e.g., unlawful conduct while performing duties, working under the influence of alcohol or drugs, a health condition that prevents continuing work)

• 10 calendar days — for a material breach of the employment contract, a gross violation of occupational safety rules, or conduct contrary to good morals

• One month — for economic or organizational reasons (staff reduction, position elimination, company liquidation) or insufficient professional ability — this period is the same regardless of how long the employee has worked at the company

• Two months — in certain termination cases (Labour Law Article 101, part 1, points 8, 9 and 11), if the employee is recognised as a person with a disability (Article 103, part 1, point 4)

Severance pay

If the contract is terminated for reasons that are not the employee's fault (the cases in Labor Law, Article 101(1), points 6–11, such as staff reductions), the employee is entitled to severance pay based on tenure:

Severance pay is calculated using the employee's average pay over the last six months. This payment is subject to personal income tax and VSAOI. It's severance pay — not the notice period — that changes based on tenure.

If the employee is a foreign national

Hiring a foreign national comes with additional requirements:

• EU/EEA citizens don't need a work permit, but their right of residence must be registered with PMLP

• Third-country nationals need a residence permit with the right to employment (Immigration Law, in force from 15 September 2026): a temporary residence permit linked to employment can be requested for up to 1 year, and this ground is not available if the employer is a micro-enterprise tax payer (Article 27, part 1, point 12); a permanent residence permit, for example, gives the right to employment without restrictions

• If the foreign national has no personal identity number, a VID registration number must be obtained before registering the employee in EDS

What changes in your SIA after hiring your first employee

A first employee means not just new costs, but new administrative duties:

• Monthly payroll calculation and the employer report by the 17th

• Withholding and paying VSAOI and personal income tax by the 23rd

• Tracking vacation and calculating vacation pay

• Administering sick leave and calculating sick pay

• Complying with occupational safety requirements — briefings, health checks

The accounting workload increases significantly — where you may have managed with simpler bookkeeping before, an employee brings regular payroll filings, VSAOI calculations, and more complex tax reporting.

What to do if you've hired the wrong person — the advantage of the probation period

The probation period isn't just a formality — it's a significant protective tool for the employer. During probation (up to 3 months, or up to 6 months if set by a collective agreement), the employer can end the employment relationship with three days' notice, without stating a reason. There's no need to justify the decision, conduct a disciplinary investigation, or pay severance.

In other words: if a new hire isn't working out, use the probation period to end the relationship quickly and without extra cost.

Important: if the probation period ends and the employee keeps working, they automatically become a permanent employee with full protection. So evaluate the employee's performance and make a decision a week before the probation period ends.

Frequently asked questions

Does the notice period depend on how long the employee has worked here?

No — the notice period depends on the reason for dismissal (10 days, one month, or immediate, depending on the situation). Tenure only affects the amount of severance pay, not how much advance notice is required.

Is the business risk state fee a significant cost item?

No — it's a fixed, symbolic amount, €0.36 a month per employee, regardless of salary. It has practically no impact on the real labor cost picture.

Can pay be lower during the probation period?

No. Pay during probation must be at least the minimum wage, and it can't differ from other employees in the same position.

What if the new employee doesn't have a personal identity number (a foreign national)?

First, submit an application to VID for a registration number (plan for 3–5 business days), and only then can you register the employee in EDS before they start work.

Can the employment contract be signed only in English if the employee doesn't speak Latvian?

No — the contract itself must be prepared in Latvian, but the employer must additionally provide the employee with written information about the contract terms in a language they understand.

What happens if I forget to file the employer report by the 17th?

A delay can trigger a fine and late payment interest on the overdue tax. The filing deadline (the 17th) and the tax payment deadline (the 23rd) are two separate dates — worth marking both separately.

Related reading: employer payroll taxes and gross-to-net salary calculations, plus our article on the 2027 business risk state fee.

See also: sick leave and sick pay and taxation of employee benefits.

Legal sources and references

• Labor Law — Article 40 (contract content), Article 46 (probation period), Article 68 (overtime pay), Articles 101–103 (grounds and notice periods for dismissal), Article 112 (severance pay)

• Law "On State Social Insurance" — employer registration deadline, VSAOI rates

• VID — Registration of employees and employers

• Cabinet Regulation "Regulations on the Business Risk State Fee for 2026"

• State Labor Inspectorate — Sick Pay

Your first employee is a major step in any SIA's life. Getting the documentation right from the start — an employment contract with every mandatory item, timely EDS registration, and a clear understanding of your obligations — will protect you from VID fines and labor disputes down the road. Get in touch with Balansis — we help with drafting employment contracts as well as payroll and monthly filings.

Last updated: September 2026. Information based on the Labor Law with current amendments, the Law "On State Social Insurance", official VID materials, and State Labor Inspectorate data.