Self-Employed Income During Parental Leave in Latvia

Andrika Stretinska, Senior Expert of the Benefits Methodological Management Division at the State Social Insurance Agency

Reader asks: A self-employed person is on parental leave and it is planned that each month they will receive money into their account as a percentage of previously sold books. Occasionally, this person would also like to create personalized orders for clients. Can a self-employed person, who is also an employee, and is on parental leave and receiving parental allowance, also earn income from economic activity? What amount is allowed to be received in the account?

From the question, it is understood that the person is an employee on parental leave and at the same time self-employed, currently not performing any economic activity and receiving parental allowance in the granted amount.

The purpose of social insurance benefits is to compensate the insured person for lost work income in the event of a social risk.

If a person earns income while receiving parental allowance, the payment of the allowance is not denied, but the amount of the payment is limited.

For a recipient of parental allowance who is employed during the childcare period and is not on parental leave, or who earns income as a self-employed person during this time, the allowance is paid in the amount of 50% of the granted amount according to Article 10.6, Paragraph 3 of the Law "On Maternity and Sickness Insurance". Currently, amendments have been submitted to the Saeima to increase the allowance payment to 75%.

Receiving the full amount of the parental allowance is restricted by any form of employment or income generation. The amount of income and workload does not play a decisive role in the application of the parental allowance payment conditions.

If a person has registered economic activity and monthly income from self-employment reaches or exceeds the set minimum income level (in 2024 – EUR 700), then the self-employed person must pay state social insurance contributions (VSAOI) at 31.07% from a freely chosen contribution base, which cannot be less than the minimum set income level. In addition, pension insurance contributions must be paid in the amount of 10% from the chosen base and the difference between actual income.

According to Article 6, Paragraph 3 of the Law "On State Social Insurance", a self-employed person whose income reaches or exceeds the minimum wage in the country and who pays VSAOI at 31.07%, is subject to pension insurance, disability insurance, maternity and sickness insurance, health insurance, and parental insurance. In this case, the person is entitled to receive 50% of the granted parental allowance.

Currently, under existing legislation, the only exception when one can receive the full amount of parental allowance is when a person has registered their economic activity as self-employed and the income from such activity (also for authors if they chose this payment regime) is less than the minimum wage in the country, and the person pays VSAOI at 10% for pension insurance only. This means that according to Article 6, Paragraph 3 of the VSA Law, the person is only subject to pension insurance during this period, and the contributions made do not affect the right to receive the full amount of parental allowance.

Therefore, if it is planned to earn income from economic activity during the period of receiving the (basic part of the) parental allowance, the right to receive the full amount exists only if the income does not reach the minimum wage, which in 2024 is EUR 700 per month. In such a case, only 10% VSAOI must be paid for pension insurance.

If the monthly income does reach or exceed the minimum wage, then full VSAOI (31.07%) must be paid, and the parental allowance for that period is paid in the amount of 50% of the granted allowance.

It should be remembered that the condition of receiving 50% of the parental allowance applies only to the basic part of the allowance. The non-transferable part of the parental allowance, according to Article 10.4, Paragraph 4.2, Clause 4 of the Law "On Maternity and Sickness Insurance", can only be received if the person is on parental leave and does not earn income during this time.

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