Social Tax

The social tax is a mandatory contribution paid from an employee's income and used to provide social guarantees: pensions, sick leave benefits, unemployment benefits and other payments.

In Latvia, the social tax is paid by both the employer and the employee — in fixed proportions established by law.

The social tax is one of the key components of the social insurance system and directly affects an employee's future rights.

What is included in the social tax

The social tax is not a single payment — it is divided into several categories:

  • pension insurance,
  • sickness insurance,
  • insurance against accidents and occupational diseases,
  • unemployment insurance,
  • maternity and parental insurance contributions,
  • contributions to the guaranteed minimum income system.

Every employee pays social tax automatically — the employer withholds the employee's share from their salary and transfers the full amount to the state budget.

How the social tax is calculated

The social tax is calculated based on the gross salary (before taxes).

The rates are fixed and depend on who pays the tax:

  • the employer pays the larger share,
  • the employee pays a smaller portion, which is withheld from the salary.

The final rate depends on the employee category (regular employee, self-employed, etc.), but generally social contributions represent a significant portion of the gross salary.

How the social tax affects income

The social tax does not reduce the salary entirely — it only reduces the net part (the amount a person receives "in hand").

However, these contributions provide important social guarantees:

  • pension rights and size,
  • the right to paid sick leave,
  • the right to unemployment benefits,
  • maternity and childbirth benefits,
  • parental benefits,
  • accident insurance.

The higher the official salary, the broader the social rights of the employee.

Social tax calculation example

For example, the gross salary is 1500 EUR.

The social tax is calculated using the established rates.

Result:

  • a portion is withheld from the employee's salary,
  • the larger share is paid by the employer,
  • the remaining amount after contributions and income tax = net salary.

The higher the social tax, the stronger the social protection — but the lower the amount received "in hand".

Where the social tax is used

The social tax is important in various financial and legal processes:

  • calculating sick leave payments,
  • assigning unemployment benefits,
  • determining pension insurance periods,
  • calculating parental benefits,
  • determining eligibility for social programs.

How to calculate the social tax quickly

To understand how much social tax is withheld from your salary, the easiest way is to use the salary calculator on this website, which automatically:

  • takes social tax rates into account,
  • applies the non-taxable minimum,
  • considers dependents,
  • calculates IIN,
  • shows the final net amount.

This is the quickest and most accurate way to see how the social tax affects your income.