One of the keys to retaining great employees is offering competitive benefits and compensation. Your Latvia benefits management plan must include the country’s statutory minimums, but you can add supplemental benefits to stand out from other companies. You also need to meet Latvia’s compensation laws to stay compliant.
Unfortunately, handling compensation and benefits on top of managing the incorporation process and hiring employees can cause you to lose valuable time and money. By partnering with an Employer of Record (EOR) like G-P, you can start working faster without any worries about compliance or incorporation.
Latvia compensation laws
The minimal wage in Latvia in 2024 is the following:
- EUR 700 gross for EU citizens
- EUR 1,373 gross for non-EU citizens (work permit / residence permit required)
- EUR 1,916 gross for non-EU citizens (EU Blue Card for highly skilled employees)
Guaranteed benefits in Latvia
To ensure compliance, all employees must receive statutory benefits as a part of your Latvia benefits management plan. For example, employees should get time off for the country’s 12 public holidays as well as at least 4 weeks of paid annual leave.
Most employees are generally eligible for 10 days of sick leave paid by the employer. The 2nd and 3rd days are paid at 75% of the employee’s regular wages, and the 4th through 10th days are paid at 80%. From the 11th day through 26 weeks, the state’s Social Insurance Agency pays 80% of the employee’s regular wages.
Another important guaranteed benefit is maternity leave. Expecting employees should get at least 112 days of maternity leave — 56 before the birth and 56 after. Social insurance will cover the employee’s full wages during the leave as long as they are insured. Fathers should get 10 days of paternity leave that they can take within 2 months of the child’s birth.
Latvia benefits management
When you start dispersing your Latvia benefits management plan, you can also disperse other benefits that will encourage greater retention rates. Some of the common employee benefits in Latvia include private health insurance and the use of a company car. If you’re not sure what benefits employees would appreciate most, try seeing what other companies are offering and asking local employees what benefits would mean the most to them.
Restrictions for benefits and compensation
You cannot provide benefits and compensation until you register an entity in the country or work with a global EOR.
Latvia competitive benefits planning
Hiring workers in a new country comes with new payroll processes, working expectations, and other considerations. When it comes to employee benefits planning in Latvia, you’ll need to understand labor laws and market standards to create competitive packages.
About your employee benefits plan
When you create a benefits plan that supports employees’ needs, you can encourage your company’s overall success. On the recruitment end, employee provisions can persuade job seekers to apply for your vacancies. On the job, your benefits packages can improve morale and increase retention rates. Higher retention reduces the need for onboarding expenses, saving your company money long term.
Possible fringe benefits for your team in Latvia include:
- Company cars
- Private health insurance
- Private pensions
- Holiday bonuses
Required benefits in Latvia
Before you choose fringe benefits, you should consider the provisions required by law. You’ll need to provide these benefits to stay compliant:
- Paid sick leave
- Time off for public holidays
- Paid annual leave
- Social insurance contributions
- Maternity leave
Designing Latvia employee benefits plans
Hiring employees in a new country can be challenging because of unfamiliar benefits laws and expectations. With an organized approach, you can create packages that are compliant and competitive.
1. Set a budget.
Tracking your spending is essential for all areas of business. Evaluate your revenue and expenses to determine how much you’re willing to dedicate to your benefits program.
2. Research your competitors’ offerings.
Your company will need an understanding of the market to compete. Look into local companies and their employee provisions. Common benefits will inform job seekers’ expectations.
3. Choose benefits.
With the information you’ve gathered, you can choose provisions for your team members. Allocate funding to the required benefits first, then use your remaining budget for additional perks.
Average cost of benefits
Every company spends a different amount on benefits, affecting the overall market average. Factors like size, location, and industry can influence how much an employer dedicates to benefits. With wide differences between companies, an average isn’t likely to be a helpful metric to guide your spending.
Instead, you should create a budget that fits your revenue. Consider using a percentage of your earnings. This approach makes it easy to scale your budget with your growth. As you bring in more revenue, you can provide more for your workers.
How to calculate employee benefits
The calculation process looks different depending on the benefit. Many calculations are straightforward, like paid annual leave. When employees take a day off, they should receive the same wages they would earn for a day they worked. Calculations for fringe benefits, like holiday bonuses, are at the company’s discretion.
Social insurance contributions rely on a percentage of income earned rather than a set amount. Employees pay 10.5%, and employers pay 23.59%. For workers of retirement age, these contributions drop to 9.25% and 20.77%, respectively.
How are employee benefits taxed in Latvia?
Generally, all types of benefits are subject to income tax in the country. Benefits are taxed at market value.
Employee health benefits
Social insurance, taxes, and other sources cover the public health sector in the country, but the national system does not include every type of care.
Employers are responsible for social insurance contributions to support the public healthcare sector. Companies are not obligated to provide private health insurance, but you may do so as a fringe benefit.
Partner with G-P to build your everywhere workforce.
As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading global employment platform is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.
Learn more about our platform and request a proposal today.