In Latvia, labor law mandates a comprehensive set of benefits for employees. Employers must comply with these regulations to ensure a legally compliant and attractive work environment.

Paid Time Off

• Annual Leave: Every employee is entitled to a minimum of four weeks (20 working days) of paid annual leave per year. Employers have discretion to offer more than the minimum. Specific procedures govern granting annual leave and carry-over provisions.
• Public Holidays: Latvia observes twelve official public holidays throughout the year. Employees are entitled to paid time off on these days. Working on public holidays requires additional compensation arrangements.
• Sick Leave: Employees with at least one month of employment are entitled to 10 days of paid sick leave per year. The employer pays a portion of the salary during this period, with the rate increasing from 75% for the first three days to 80% for days four to ten. For extended illnesses exceeding ten days, the State Social Insurance Agency takes over the responsibility for benefits.

Social Security Contributions

Latvia operates a mandatory three-tier pension system. Employers are required to contribute a specific percentage of the employee's salary towards the national pension scheme (first tier) and a chosen private pension plan (second tier). Additionally, contributions are made towards unemployment insurance and other social security benefits.

Parental Leave

• Maternity Leave: Female employees are entitled to a total of 112 days of maternity leave, with 56 days allotted before childbirth and 56 days after. They have the flexibility to distribute these days as needed.
• Paternity Leave: Fathers are entitled to 10 days of paid paternity leave within two months of the child's birth.

In Latvia, employers often offer optional benefits packages to enhance employee satisfaction, loyalty, and motivation. One of the most sought-after optional benefits is health insurance. Employers can choose to cover a portion or the entirety of the premium for private health insurance plans, providing financial security and peace of mind regarding medical care.

Life and Disability Insurance

Life and disability insurance are also popular optional benefits. These plans provide financial support to employees or their families in case of death or disability, demonstrating an employer's commitment to employee well-being.

Flexible Work Arrangements

Flexible work arrangements are increasingly embraced in modern Latvian workplaces. These could include remote work options, flexible working hours, or compressed workweeks, fostering a better work-life balance and catering to individual needs.

Professional Development Opportunities

Employers often invest in their employees' professional development. They can offer tuition reimbursement, access to training programs, or conferences to enhance employee skills and expertise, which ultimately benefits the company as well.

Additional Perks and Benefits

Many employers provide additional perks and benefits to create a more attractive work environment. These might include:

• Meal vouchers or subsidized cafeterias: Contributing to employees' meal expenses can be a welcome benefit.
• Fitness programs or gym memberships: Supporting employee health and wellness initiatives is a growing trend.
• Company car or car allowance: Providing transportation benefits can ease commutes and improve employee satisfaction.
• Mobile phone allowance: Contributing to mobile phone costs can be particularly relevant for positions requiring constant connectivity.
• Free or discounted company products or services: This can be a perk for employees working in specific industries.

In Latvia, the mandatory social security system provides basic state-funded healthcare access. However, employer-sponsored health insurance plays a significant role in Latvian healthcare.

No Legal Mandate for Health Insurance

In Latvia, there is no legal mandate for employers to provide health insurance to their employees. However, the state-funded healthcare system has limitations. For instance, obtaining specialist consultations or certain treatments often requires a referral from a general practitioner, leading to potential delays. Additionally, patients might face co-payments for specific medical services or medications under the state system.

Voluntary Health Insurance

To address these limitations and offer employees improved access to healthcare, many Latvian employers provide voluntary health insurance plans as part of their benefits package.

Benefits of Employer-Sponsored Health Insurance

Health insurance plans typically cover co-payments and deductibles associated with state-funded healthcare. Plans often provide faster access to specialists and a wider range of covered services compared to the public system. Offering health insurance is a valuable perk that can significantly boost employee satisfaction and retention.

Tax Benefits for Employers

Employers offering health insurance benefit from tax breaks as well. Premiums paid towards employee health insurance are generally deductible from corporate income tax and not considered taxable income for employees up to a certain limit.

Latvia operates a three-pillar pension system, offering a combination of state-backed and private retirement savings options for employees. Understanding these pillars is essential for planning a secure retirement in Latvia.

State Pension (Pillar 1)

This is a mandatory pay-as-you-go (PAYG) system funded by social security contributions from employees and employers. To qualify for a state pension, individuals must reach the official retirement age (currently 64 years and 6 months, gradually increasing) and have a minimum contribution period (currently 15 years, increasing to 20 years in 2025). The state pension amount is calculated based on the employee's average salary and total contribution period. It typically provides a basic level of income replacement in retirement.

Mandatory Funded Pension (Pillar 2)

Introduced in 2001, this mandatory funded pillar diverts a portion of social security contributions towards individual pension accounts managed by private pension funds chosen by the employee. Individuals can choose from various investment plans with varying risk-return profiles based on their age and risk tolerance. Accumulated funds in the private pension account are paid out upon retirement as a lump sum or annuity. This pillar offers the potential for higher retirement income compared to the state pension alone.

Voluntary Pension Plans (Pillar 3)

This pillar allows individuals to save additional funds for retirement through private pension plans offered by banks or insurance companies. Contributions to voluntary pension plans are tax-deductible up to a certain limit, making it an attractive option for additional retirement savings. Similar to Pillar 2, individuals have various investment choices to suit their needs and risk appetite. This pillar provides flexibility in choosing a retirement income payout option (lump sum or annuity) and the potential to significantly enhance overall retirement income.