What Severance Pay Rules Must Employers Follow in Latvia?

Which Employees Qualify for Severance Pay?

• Employees dismissed by the employer for economic, organizational, or similar business reasons (redundancy).
• Employees terminated due to long-term incapacity or lack of adequate occupational skills, where grounds are not related to misconduct.
• Employees whose employment is ended by the employer with proper notice and a lawful reason under the Labour Law, excluding serious fault cases.
• Employees with at least one month of continuous service, as severance scales increase with longer seniority.
• Employees on fixed-term contracts that are ended early by the employer for business reasons, if statutory conditions are met.
• Employees who are not dismissed for gross misconduct or other fault-based grounds where the law allows termination without severance.

What Are the Legal Timelines for Paying Severance?

In Latvia, severance must generally be paid at the time the employment relationship ends, together with the employee’s final salary and compensation for unused annual leave. In practice, you should process severance no later than the regular payday for the last working period, to show clear compliance with the Labour Law. Many employers pay on the last working day or within a few days of termination to avoid disputes. Always document the calculation, payment date, and legal grounds for termination in writing. If there is a notice period, plan payroll cut-off dates so that severance is ready on or immediately after the final day of work.

What Penalties Apply if Severance Is Not Paid Correctly?

If you underpay or delay severance in Latvia, you risk labour inspectorate scrutiny, employee claims, and additional financial exposure. Non-compliance can lead to back payments, default interest, and potential compensation for damages, as well as reputational harm with both employees and regulators.

• The State Labour Inspectorate may investigate complaints and order corrective actions.
• Courts can award unpaid severance plus statutory interest and legal costs.
• Persistent or serious breaches can trigger higher compensation and closer monitoring.
• Disputes may delay workforce changes and increase internal management time.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) in Latvia does not remove the need to follow Latvian Labour Law, including severance rules. Under a compliant EOR model, the EOR is the formal employer on paper, but your company typically directs day-to-day work and may share liability in practice. If severance is miscalculated or unpaid, both the EOR and your business can be drawn into inspections or court claims. Your contract with the EOR should clearly allocate who calculates severance, who funds it, and how disputes are handled. You should still monitor local law changes and audit the EOR’s processes to ensure Latvian requirements are met in full.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company navigate Latvia’s severance rules by combining local legal insight with streamlined payroll execution. Our team tracks updates to the Labour Law, applies the correct seniority-based severance tiers, and ensures final-pay calculations include all mandatory elements. You stay in control of business decisions, while we handle the technical compliance and documentation.

With Playroll as your global employment partner, you can scale in Latvia without worrying about missed deadlines or misapplied severance formulas. We coordinate with your HR and finance teams, align severance payments with your payroll cycles, and provide clear records to support audits or employee queries. That means fewer disputes, lower legal risk, and a smoother offboarding experience for your Latvian employees.