Baltic salary markets in 2026: similar salary increases, different labour-market realities
30.01.2026
Ilmar Põhjala, Figure Baltic Advisory partner and leading analyst
Figure’s forecast survey tells us that looking ahead to 2026, the Baltic countries appear, at first glance, to be moving in sync, but labour market dynamics are diverging according to perceived economic realities of the last few years. Salary growth is slowing down across the Baltics, and inflation is no longer the dominant driver of pay decisions. Employers across Estonia, Latvia and Lithuania are approaching the year with cautious optimism rather than urgency, being more optimistic towards the south of the region.
Stable pace of salary increase
Across the Baltics, base salary increases have settled into a stable pace of roughly 4 to 5%. This marks a shift away from the rapid, inflation-fuelled increases of recent years. Estonian employers plan to raise base salaries by an average of 5%, the same level as last year. In Latvia, base salaries are expected to increase by 4.2%, while in Lithuania the planned average increase in monthly base salaries also stands at 5%. This marks a clear shift away from the rapid, inflation-fuelled increases of recent years.
Employers have more maneuverability in shaping their salary policies. Salary decisions are recalibrated more deliberately, guided by market benchmarks, internal structures and long-term affordability, being less influenced by external factors. At the same time this does not mean that salary pressure has disappeared. On the contrary, competition for skilled professionals remains intense, and organisations continue to feel pressure to adjust pay where talent is scarce or critical to business continuity. More than half or even a majority of organisations admit to still facing salary pressure and see unrealistic salary expectations shaped by the media as one of the most important employee related issues in the upcoming year.
Different realities of workforce planning
Where the Baltic countries truly part ways is in their approach to workforce planning. Estonia stands out for its level of caution. A historically highest share of organisations, 66%, are planning to reduce headcount, with only 14% expecting to hire. This signals a strong focus on cost control, efficiency and consolidation. Rather than growing through hiring, many organisations are choosing to protect their core teams, invest selectively in productivity and allow natural attrition to reshape their workforce. This suggests a labour market that is cooling not only in pay growth, but also in employment opportunities. At the same time, unemployment remains low, signalling that some restructuring of the labour market may be underway, but also giving some confidence to people that new positions might not be hard to find.
Lithuania presents almost the opposite picture. There, the majority, namely 66% of employers, are planning to increase employee numbers, and only 7% expect to decrease them. This reflects a more expansion-oriented outlook. Despite salary increase plans that are broadly similar to those in Estonia, Lithuanian organisations appear more confident in their growth prospects and more willing to invest in people to support future development.
Latvia sits between its two neighbours. Only 15% of employers plan to reduce headcount, while half of them are planning to hire. This places Latvia neither in the sharp caution of Estonia nor in the strong expansionary mode seen in Lithuania, but rather in a balanced and pragmatic position shaped by decreasing uncertainty and slightly careful forecasting.
Rising labour costs across the Baltics
Despite slower salary growth, labour costs are expected to rise in all three countries. In Estonia and Lithuania, 86% of employers anticipate an increase in total labour costs, while in Latvia the share stands at 81%, one of the highest levels seen in recent years. This apparent contradiction reflects a deeper structural shift. Employers are spending more selectively rather than more generously. Targeted salary increases, more systematic pay reviews, adjustments linked to minimum salary changes and preparations for the upcoming EU Pay Transparency Directive are all pushing employment costs upward, even in the absence of across-the-board raises.
The broader economic outlook reinforces this cautiously optimistic pragmatism. Employers across the Baltics tend to expect 2026 to be better or at least no worse than the previous year, yet few are willing to make bold bets. In Estonia, 39% of organisations expect the coming year to be better than the last, while in Latvia 38% share this view. In Lithuania, 41% of employers expect 2026 to be better than the previous year. Investment plans increasingly focus on automation, digitisation and technical solutions rather than large-scale expansion, reflecting a desire to strengthen productivity and resilience rather than pursue growth at any cost.
Perhaps the most important shift for 2026 lies not in the size of salary increases, but in how pay decisions are made and communicated to the employees. Across the Baltics, employers are moving towards more structured, transparent and defensible pay systems. Market benchmarking, internal pay frameworks and regulatory readiness are becoming central to salary discussions. At the same time, organisations increasingly report challenges in managing employee expectations, especially in an environment where public discourse and media narratives may not align with business realities.