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Human Resources
EMPLOYMENT RELATIONSHIPS
Employment relationships in Latvia are regulated by the Labour Law which transposes many aspects of EU employment law and social policy directives, such as those relating to equal treatment, collective redundancy, working hours and rest breaks. Monitoring of Labour Law compliance is executed by the State Labour Inspectorate and representatives of employers and trade unions.
The Labour Law:
- employment contracts shall be concluded before the start of employment relationships;
- information about new employees shall be submitted to the relevant State institution (the State Revenue Service) one (1) working day before employment starts;
- employment contracts shall be concluded for an indefinite term, excluding certain cases such as projects or temporary jobs, or short-term employee replacement. The duration of fixed-term contracts may not exceed three (3) years.
Key provisions of the Labour Law:
- probation period: to determine whether an employee is qualified to perform the assigned job, a probation period may be defined in the employment contract. The probation period may not exceed three months. During this period, both the employer and employee can terminate the employment contract giving three days’ notice and are not obliged to provide a reason for termination;
- after the probation period, employers can terminate employment relationships by giving at least one month’s notice.
Compensation:
monthly salaries may not be less than the minimum stipulated by the State, which, from 2011, is LVL 200 gross (EUR 285 gross);
LVL 200 Gross salary
less 11 % (social security contribution) | + 24.09 % employer’s part of social security contribution = Cost to employer LVL 248 (EUR 352) |
(Calculation of an employee’s net salary is based on the general algorithm above, the actual formula is more complicated, also taking into account a number of tax discounts, e.g. for dependants.)
- If an employee falls ill, the employer shall disburse sick pay for the 2nd till 10th working days: 75% of average earnings for the 2nd and 3rd days, 80% of average earnings for the 4th till 10th days of the illness. As from the 11th day of illness, sick pay is paid by the State Social Insurance Agency;
- The Law provides for five working days per week, regular working hours per day should not exceed eight hours, regular working hours per week – 40 hours. Hours worked per day in the framework of this Law mean hours worked within a 24-hour period;
- Employers can set cumulative working time when the nature of the work does not allow the setting of regular working hours or regular weekly hours for certain employee categories, for example, service companies working around the clock;
- Cumulative working time should not exceed:
- 56 hours per week – the maximum number of hours an employee can work within a one-week period;
- 160 hours per 4-week period. If an employee works longer hours than provided for by the Labour Law, the extra hours shall be considered overtime.
- Employees working overtime or during public holidays are entitled to additional pay of at least 100% of their daily or hourly salary. Cumulative overtime should not exceed 144 hours within a four-month period. Public holidays in Latvia are: January 1, May 1, May 4, June 23 and 24, November 18, December 24, 25, 26 and 31, also Good Friday and Easter Monday;
- Salary payments shall be made at least twice per month, but employers and employees can agree on different payment schedules;
- Each employee is entitled to paid annual leave of at least four calendar weeks, including both working days and days off, but not public holidays. At least one part of annual leave (vacation) should consist of two continuous weeks.
Bonuses:
During the period of economic growth before 2008, a number of companies practised the payment of variable compensation including short-term bonuses – monthly, quarterly and/or annual bonuses and profit shares, however long-term motivational schemes plans have now become more important, providing compensation for employees’ effective, long-term performance in the form of bonuses, company shares and savings programmes. Health insurance is also one of the most popular bonuses.
Additional information at:
www.lm.gov.lv
www.nva.gov.lv
www.vid.gov.lv
FEATURES OF THE LABOUR MARKET
Latvia’s population in June 2010 was 2.24 million, including approximately 52% or 1.16 million economically active people. Registered unemployment nationally in November 2010 was 14.3% (a decrease compared to 20.4% at the beginning of the year). This decrease is the result of growth in economic activity. The highest unemployment levels are among unskilled workers, however, there are shortages of qualified and experienced specialists in certain areas and positions.
In addition to unskilled workers, the most numerous categories of job seekers are retail sector employees (14% of all job seekers), followed by administrative personnel and assistants (11%) and applicants for service industry positions (11%). The smallest categories of job seekers numerically are specialists in finance and law (approx. 2%).The most in-demand specialists are IT professionals and sales specialists (active sales in B2B sectors).
2010 is considered to be the stabilisation phase for Latvia’s economy and labour market. During 2008/2009, many enterprises implemented workflow optimisation processes; together with staff reductions this has resulted in increased productivity per employee and ensuing efficiencies. This is one of the most significant and positive signs for the labour market in 2010.
YOUTH IN THE LABOUR MARKET
The integration of young people and graduates into Latvia’s labour market is crucial. It is accomplished both within the framework of State-subsidised youth internship programmes and grant and talent development programmes in major Latvian companies: banks, IT, retail and other industries.
Generally, the majority of Latvia’s young people commence their careers while still studying, thus numerous young, leading specialists are already active in the labour market. These people are self-confident, possess good communication skills and are technologically adept. Participation in student exchange programmes, youth organisations (e.g. AIESEC) and international communication is fostering foreign language skills.
Young people from the other Baltic States, as well as CIS countries such as Ukraine and Belarus, frequently choose Latvia as their preferred country for studies and work.
KNOWLEDGE OF FOREIGN LANGUAGES
The country’s historical background and deep tradition in higher education have fostered Latvians’ strong foreign language skills. The most common foreign language among people over 40 is Russian, with 54.7% of survey participants evaluating their knowledge of Russian as very good. The most popular language among people under 40 is English, followed by German. Other popular languages in Latvia are French, Italian, Polish and Scandinavian languages (especially Swedish and Norwegian).
As international trade and partnerships develop domestically, foreign languages continue to be studied by more students and at more advanced levels.
RECRUITMENT
A number of medium-size enterprises (starting with 50 employees) employ HR managers/specialists or have HR departments. The major manufacturing, retail and financial service companies (banking, insurance) typically also have recruitment specialists or departments. In these cases, recruitment is outsourced only for selecting middle and senior management personnel, as well as specialists in some specific areas, where headhunting may be necessary.
Employee selection at small and micro-companies is performed by the head of the company, by an employee, or with the help of a recruitment company. Foreign companies and investors most often use the services of a recruitment company or publish a job advertisement in a leading job portal and perform in-house selection. When creating a job advertisement, the requirements prescribed by the Labour Law must be taken into account: it is illegal to discriminate by age, sex, ethnic origin, etc., and the name and contact details of the employer or recruitment company must be clearly stated.
The operations of recruitment companies in Latvia are licensed by the State Employment Agency (Valsts Nodarbinātības aģentūra (NVA)). A list of licensed companies is published on the NVA’s website www.nva.lv. High quality and value-for-money recruitment services are offered by around ten professional recruitment companies in Latvia, most of them part of international networks. In addition, a number of companies offer staffing and payroll-outsourcing services.
Candidate selection takes 2 - 6 weeks, depending on the nature and seniority of the position.
Additional information at:
www.lm.gov.lv
www.nva.gov.lv
SALARIES IN LATVIA
According to the Central Statistical Bureau of Latvia, the average monthly salary in Latvia in September 2011 was LVL 459 gross (EUR 653 gross). Salaries in the Riga region are about 10-15% above the national average, but in some areas, salaries are up to 30% below average, with the lowest average salaries in Latgale. However, the salary gap between Riga and the other regions has tended to decrease in recent years.
Using January 2011 data, gross salary varies from the official minimum monthly salary of LVL 200 (EUR 285) for unskilled retail sector employees, up to LVL 8 thousand (approx. EUR 11428) for top managers in the largest companies. As an example of low-level net salaries, the starting level salary for administrative or customer service employees (secretary, customer service specialist, etc.) ranges between LVL 300 – 400 net (EUR 430 – 570 net).
While salaries in 2008 and 2009 decreased considerably by 10 to 50%, in 2010 salaries remained stable. In the beginning of 2011, a moderate increase of salaries and wages was seen, and balanced increases in compensation level are forecasted for job categories not sufficiently supplied in the labour market and for high level specialists (e.g., IT, manufacturing). A number of companies have introduced salary schemes comprising fixed and variable parts.
The average level of salary in Latvia is the lowest in the Baltic States, and the level of salary for unskilled jobs is three to four times lower than in other EU countries such as Germany and France. Coupled with labour productivity, the conditions in Latvia create a very favourable environment for investors to benefit from low labour expenses.
Average salaries by sector and job title (2011)
Comments on salaries’ table.
Manufacturing, technical support: Outsourcing is becoming more and more popular in Latvia. Thus, for example, a number of manufacturing companies outsource technical functions – equipment repairs and maintenance are included in service expenditure, and not in the compensation of personnel.
Compensation in the healthcare sector:
Compensation in the state healthcare institutions is fixed by the Cabinet Regulation ’Compensation for healthcare personnel’, which prescribes minimum compensation levels for each job category.
The compensation level for each job category is fixed by the head of the healthcare institution, in accordance with the prescribed minimum monthly salary rates for healthcare personnel.
Compensation levels in privately-owned healthcare institutions are typically higher; in addition, healthcare personnel often combine jobs in State and private healthcare institutions.
Scientific Researchers:
In most cases, compensation for scientific researchers in the State sector is defined within the framework of scientific projects. In addition, a number of scientific researchers are master’s and doctoral students receiving State grants, not fixed salaries.
Additional information at:
www.lm.gov.lv
www.nva.gov.lv
www.cvorecruitment.lv
