Latvia is preparing more specific rules for adjusting labour costs in public works contracts, but the proposal has not been adopted. The Ministry of Economics’ public consultation runs until 3 November 2026. Businesses should distinguish potential compensation from costs they would still bear themselves.
What is already required?
Paragraph 23 of Cabinet Regulation No. 419 already requires indexation clauses in public works contracts lasting over a year. The change would standardise labour-cost adjustments. News of the proposal alone therefore provides no basis for repricing an existing contract.
What limits would apply?
The draft uses the lowest percentage increase among sectoral collective-agreement hourly rates, against the rates officially published by the bid deadline. The ceiling would be sector average hourly pay growth measured by the Central Statistical Bureau. Subcontracts would also require indexation clauses.
The ministry’s explanatory report adds: all minimum rates must rise; one unchanged rate means zero indexation. Eligible costs are estimated labour costs, including mandatory social contributions, excluding profit and overheads. The ministry allows a contractual minimum-growth threshold. An upcoming wage rise published before the bid deadline would not qualify for this adjustment.
Businesses must therefore separate three questions: does the contract fall within scope, which wage level was known when pricing the bid, and which costs qualify? Calling the mechanism “automatic” does not remove the need to substantiate the calculation base.
A wage increase is not the same increase in the whole contract price
Illustration, not a calculation for an actual project: assume eligible work is worth €100,000 excluding VAT, with €30,000 in indexable labour costs. If all conditions were satisfied and the applicable index were 6%, the adjustment would be €1,800, not €6,000.
This illustrates why the cost breakdown matters. Combining wages, materials and profit in one item would complicate verification. A calculated adjustment is also not cash received: the financial plan should distinguish the potential claim, its approval and the expected payment.
What would the 60-day limit mean for subcontractors?
Current rules already specify 10 working days after receiving the client’s payment and a compliant invoice. The consultation proposal clarifies the 60-calendar-day limit following completion of work and receipt of the invoice: it would apply even without the client paying the main contractor.
In practice, the main contractor would need a cash-flow plan covering client delays. Subcontractors would need evidence of completed work and receipt of invoices, so discussions about deadlines do not depend on verbal exchanges.
What should businesses check before bidding again?
- Keep the wage-rate publications used and the bid submission deadline.
- Separate labour costs in the estimate; check that existing indexation does not count the same cost increase twice.
- Check calculation periods, the cost base and the documents required to approve adjustments in the draft contract. Assess the contract together with its procurement documentation.
- Compare payment schedules in the main contract and subcontracts, assessing the working-capital buffer.
A concrete example would be more useful in consultation than general support: identify where the proposed formula creates uncertainty in a company’s estimate and suggest clearer wording. Check the final wording and applicability before amending contracts or invoicing an adjustment.
For administrative planning, businesses can consult the overview of services for businesses; when exploring cooperation opportunities, browse business listings.
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