Introduction to Payroll in Latvia
When you hire globally, you’re taking on the responsibility of paying your employees on time and accurately over international borders. If you choose to hire in Latvia, you need to do your research to understand the local legal requirements for handling compensation, employment, reporting, and taxes.
That’s where Skuad can help. Skuad offers solutions for managing payroll in Latvia, complete with expert in-country support and knowledge. Our payroll solutions will help you ensure that your Latvian employees are paid on time, correctly, and in compliance with local laws.
You can benefit from Skuad’s local expertise in many ways. Our team can guide you through legal and regulatory hurdles and ensure you comply with local laws on subjects such as:
- Regional and national income and business taxes
- Healthcare, pensions, and unemployment taxes
- Leave and sick time
- Withholdings, employer contributions, and other expected benefits
You can contact Skuad to start managing payroll in Latvia more efficiently or read more about the unique concerns involved in Latvian payroll management below.
Payroll Process in Latvia
Payroll processing isn’t a walk in the park anywhere, but managing payroll in Latvia adds extra challenges. When you’re first setting up your international payroll processing, Latvia requires you to comply with local law in several ways. You’ll need to set up or connect with a local business entity, design processes for keeping payroll accurate and timely, handle taxes, and more.
The general payroll process can be broken down into three phases:
- Payroll calculation
Let’s explore these three periods to better understand the responsibilities you’re taking on when hiring and running payroll in Latvia.
The pre-payroll phase includes everything that needs to happen before calculating your first paycheck in a country. When you’re setting up payroll, Latvia expects you to accomplish the following during your pre-payroll phase:
- Setting up a legal entity: The first and most critical step to hiring Latvian employees is setting up or connecting with a legal entity in the country. Latvian law requires all businesses that hire employees to have a legal entity to pay taxes and provide benefits. You’ll need to register with the Commercial Registry of the Republic of Latvia, open a bank account, and register each employee you hire.
- Developing a leave policy: Latvia mandates that all employees have the right to 20 days of leave every year, in addition to public holidays. Write a leave policy with these legal requirements in mind since leave will impact your payroll.
- Writing an attendance policy: Define how you’ll record whether an employee attends work and what will constitute the work schedule. This is the time to determine how you’ll monitor how many days or hours an employee works to calculate payroll later.
- Providing mandatory salaries and benefits: Latvia requires companies to pay employees a minimum wage and contribute to Social Insurance. When setting up your compensation plan, you need to consider these requirements and any additional benefits you want to make your company more appealing to workers.
- Following legal pay schedule: Companies in Latvia must pay workers bi-monthly unless they have a written agreement stating that payment will be monthly. Set this schedule early to give your employees and payroll team a set structure.
- Gathering and storing employee information: Once you hire workers, you need to collect and secure information such as their name, National Identification Number, address, bank account details, role, and department. This information is critical to delivering their pay and properly reporting and paying taxes.
- Collecting and validating employee work and leave: Once you’ve done everything else, your employees can start recording their time worked and their paid leave. You must collect this information and validate it every pay period to make sure you have the correct number of hours to calculate payroll.
Payroll calculation phase
The payroll calculation process is when you use all of the information you’ve gathered to determine your payroll numbers. You’ll use your employees’ hours worked and paid leave to determine their gross pay. That number will be used to determine the payroll tax Latvia requires. The final result will be your employees’ net pay, corporate taxes, and withheld income taxes.
The final phase occurs once you’ve run the numbers. Post-payroll Latvia tasks include:
- Making salary payments: There are three ways you can pay your employees. You can cut checks yourself, send the numbers to your corporate bank, or work with payroll services Latvian workers trust like Skuad to deposit payments directly into their accounts.
- Handling payroll accounting: After you’ve determined the numbers, your accountants will record the salary and taxes you’ve paid.
- Performing payroll reporting and compliance: You’re responsible for ensuring the taxes you owe and that you’ve withheld are submitted to the correct government agencies. You’re also responsible for properly reporting who each tax payment is for and submitting the payments on time.
But what if this seems like too much to accomplish? You can choose to work with Skuad instead. Skuad is a payroll company that Latvia agencies and workers trust. You can learn more about how Skuad’s simple payment processing methods can make payroll in Latvia a breeze.
Payroll Processing in Latvia
Payroll processing takes time and effort to do well. If you’re not familiar with a country’s laws, it’s too easy to miss critical steps. In Latvia, you need to follow local regulations and carefully record your practices, or you may find yourself facing legal consequences.
Payroll Processing Company in Latvia
The solution is to work with a payroll services Latvian expert like Skuad. Stop worrying about employment laws and start focusing on expanding your company. Contact Skuad today to explore the payroll outsourcing Latvian tools and services we offer.
Payroll Management in Latvia
“Payroll management” refers to all tasks involved in statutory compliance with labor, tax, and payroll laws. During the payroll management process each pay period, you need to calculate gross and net salaries, taxes, and other benefits. You’ll also need to deliver paychecks and maintain appropriate records.
Payroll Compliance in Latvia
Payroll compliance is the same as statutory compliance. This compliance matters because Latvia imposes significant penalties on companies that fail to comply. Penalties for different failures include:
- Back pay to employees who weren’t compensated appropriately
- Fines of 120%-300% of unpaid taxes
- Interest on late tax payments
Using payroll services Latvia approves of can help you avoid these fines and penalties by ensuring that your payroll, taxes, and reports are submitted accurately and on time.
Payroll Components in Latvia
Latvian law requires businesses to provide multiple forms of compensation to their employees, all of which fall under the umbrella of “payroll.” When calculating payroll, you’ll need to consider details like:
- Compensation: Latvia’s minimum wage is €500 per month for full-time work, though many workers expect higher salaries depending on the industry.
- Working hours: Latvia’s standard workweek is eight hours a day and 40 hours a week.
- Overtime laws: Companies must pay overtime to workers who either exceed standard working hours or work on a public holiday. Overtime is paid at 200% of the employee’s regular rate.
- Social security: Latvia’s social security requires businesses to pay a 23.59% National Social Insurance and Solidarity Tax (NSIC) for Employment unless the employee is eligible for the retirement-split rate. In that case, the company pays a tax of 20.77% of the employee’s gross pay. Businesses are also responsible for withholding 10.5% or 9.25% NSIC tax on behalf of employees.
- Sick leave: Any employee employed for at least one month receives 10 days of sick leave from their employer. Sick leave is paid by the employer at 75% of the base salary for the first three days and 80% for the next seven days. After this, the government begins paying for sick leave for up to 52 weeks.
- Parental leave: Latvia requires companies to offer 112 days of maternity leave and 10 days of paternity leave to all employees. The government pays for this leave, not the employer.
- Public holidays: Latvia recognizes the following public holidays: New Year’s Day (January 1), Good Friday (floating), Easter Monday (floating), Labor Day (May 1), Restoration of Independence Day (May 4), Midsummer’s Eve (June 23), Midsummer’s Day (June 24), Proclamation Day of the Republic of Latvia (November 18), Christmas Eve through the second day of Christmas (December 24-26), and New Year’s Eve (December 31). Employees who work on these days receive overtime pay for the entire day.
- Payroll taxes: To manage payroll taxes in Latvia, businesses must withhold employee income taxes based on the appropriate tax bracket.
Missing any of these elements means you’re out of compliance with Latvian law. The easiest way to stay on top of these tasks is to work with payroll outsourcing Latvian experts like Skuad. Our local knowledge will ensure that your employees are always paid accurately, and your company is fully compliant with the law.
With a €500 monthly minimum wage equal to just $536, hiring in Latvia is an excellent financial idea. You have two options when you hire in Latvia: you can manage payroll alone or work with expert payroll solutions Latvia accepts, like Skuad. Unless you’re willing to spend weeks of time and effort to set up your own business organization and learn Latvian law, partnering with Skuad is the best solution.
Skuad will help you save time and money both now and down the road. With Skuad, there are no up-front investments like setting up your own business. You only have to pay for the services you use. More importantly, you’re gaining access to local experts who will ensure your payroll is always accurate and legally compliant. Schedule your demo to learn more about how Skuad can improve your payroll in Latvia today.