Do I Need a Local Entity to Hire in Latvia?

In Latvia, a "local entity" refers to a recognized business presence that can act as an employer, such as a subsidiary or branch office. This setup allows you to comply with local payroll and employment obligations, ensuring that you meet all statutory requirements.

Without a local entity, you generally cannot manage local payroll, register as an employer, or fulfill mandatory social security contributions. An alternative is to use an Employer of Record (EOR), which can handle these responsibilities on your behalf.

What is Required to Employ Someone in Latvia?

• Local employing entity required to directly employ? Usually yes (unless using an EOR)
• Payroll registration required? Yes (employer registration with the State Revenue Service)
• Withholding/tax remittance required? Yes (mandatory income tax and social contributions)
• Social contributions required? Yes (employer must pay social security contributions)
• Local employment agreement required? Yes (written employment contracts are mandatory)
• Mandatory benefits to budget? Yes (statutory leave, health insurance, and other entitlements)
• Works council/collective agreements considerations? Often (applicable in certain sectors)

Best Options If You're Hiring in Latvia

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but be cautious about the nature of the work relationship.

Hiring contractors in Latvia can be a viable option, but it’s essential to ensure that the contractor is genuinely independent. Misclassification risks arise if the contractor is treated like an employee, which could lead to legal issues. Here are some key points to consider:

• Ensure the contractor has multiple clients and isn’t exclusively working for you.
• Avoid controlling their work hours, location, or methods.
• Keep the contractor’s role distinct from your core business operations.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Latvia, depending on the type of business and registration requirements.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated €200–€600 per month ($220–$660)
• Payroll provider: Estimated €20–€50 per employee per month ($22–$55)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated €1,000–€2,500 per year ($1,100–$2,750)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions, approximately 23.59% of gross salary)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Latvia

Hiring in Latvia can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Latvia quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.