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Hiring in Lithuania

Hiring employees compliantly in Lithuania means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Lithuania so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Lithuania; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Need assistance hiring in Lithuania? Contact us about our International EOR Service

Labor Laws in Lithuania

Employee Probation Period

  • The probationary period provided by law is three months but the parties may also agree upon a shorter period.

Annual Leave in Lithuania

  • Employees are generally entitled to the following annual leave: -
    • 20 working days (for a 5 day work week)
    • 24 working days (for a 6 day work week)
    • 28 calendar days (for part-time employees)
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Holidays in Lithuania

New Year’s Day 1st January
Day of renewal of the Lithuanian state 16th February
Day of renewal of Lithuanian independence 11th March
Labor Day 1st May
Johannis' Day 24th June
Coronation of King Mindaugas 6th July
Assumption Day 15th August
All Saints' Day 1st November
Christmas Day 25th December
Boxing Day 26th December

 

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Maternity Leave Lithuania

  • Female employees are generally entitled to 70 days of maternity leave before the birth and 56 days after the birth. 
  • Employees are eligible for all days regardless of how many were actually taken before the birth.
  • The State Social Insurance Fund pays an allowance for maternity leave.

Paternity Leave Lithuania

  • Fathers are entitled to 30 days of paternity leave

Sick Leave in Lithuania

  • Employees are eligible to receive between 62.06% and 100% of pay from their employer for the first two days of illness.
  • From the third through the seventh day, they are eligible for 62.06% of the recipient's earnings over the previous three months.

Working Hours in Lithuania

  • In general, the work week is 40 hours, with five, eight-hour days.

Overtime in Lithuania

  • Overtime is permitted under the exceptional cases which are listed in the Lithuanian labor Code. 
  • Overtime works shall not exceed for each employee 8 hours in one week and 180 hours per year. 
  • Upon the written consent of the employee, overtime can be extended up to 12 hours per week.
  • The average maximum working hours inclusive of overtime cannot exceed 48 hours per week over a 3-month period.
  • Overtime is paid at least 150% of the average wage per hour.
  • Under the amended Labour Code 2017, Overtime rate for night workers is set as at least double (200%) the normal rate.

Termination of Employment in Lithuania

  • Apart from general grounds of the private law contract expiration, the employment contract may be terminated:
    • Upon the initiative of the employer;
    • Upon the request of the employee;
    • Upon mutual agreement of both parties;
    • Upon expiration of the term of the contract.
  • As of 1 July 2017, employers will be able to terminate employment agreement without employees’ fault due to the following reasons:
    • employee’s work function is no longer required;
    • employee fails to reach the agreed results of work;
    • employee does not agree to change the terms of his/her employment agreement, place of work or working regime;
    • employee does not agree to continue employment after business transfer or a part thereof;
    • employer ceases its activities.
  • In case of employment termination on the initiative of an employer without the fault of an employee, standard notice is 1 month.
  • When employment continues for less than 1 year, 2 weeks’ notice is required. 

Notice Period in Lithuania

  • The employment contract shall be terminated by giving the employee notice 1 month in advance, or, for employment relationships of less than one year – 2 weeks in advance.
  • These notice periods shall be: -
    • doubled for employees who have less than five years left until the statutory age of old-age pension, and
    • tripled for employees who are raising a child/adopted child under the age of 14 and employees who are raising a disabled child under the age of 18, as well as for disabled employees and employees who have less than two years left until the statutory age of old-age pension.

Severance in Lithuania

  • Upon ordinary dismissal, the dismissed employee is entitled to a severance pay of his/her 2 average monthly salaries.
  • If the employment relationship lasted less than a year, the dismissed employee has to be paid 1/2 of his/her average monthly salary.
  • Additionally, the dismissed employee may receive a severance pay from the State Social Insurance Fund Board (SODRA), with the amount depending on his/her seniority.
  • In case of termination of the employment contract upon employer’s will, the dismissed employee has to be paid a severance pay of at least 6 of his/her average monthly salaries.

Lithuania Salary and Wages

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13 / 14th Month Salary in Lithuania

  • No
  • There is no statutory requirement to pay the 13th or the 14th month salary.
  • Employees may agree on bonuses with their employers.
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Income Tax in Lithuania

  • Worldwide income received by a Lithuanian tax resident is subject to PIT.
  • However, only the following income sourced in Lithuania by a non-resident is subject to PIT:
    • Employment-related income or income arising from substantially similar relations.
    • Income from distributed profits and payments to the members of the Board or Supervisory Board.
    • Interest income, except for interest received on government non-equity securities.
    • Royalties.
    • Income from sports activities, including income directly or indirectly related to those activities irrespective of whether the payment is made directly to the sportsman concerned or a third party acting on behalf of and for that sportsman.
    • Income from performing activities, including income directly or indirectly related to those activities irrespective of whether the payment is made directly to the performing artist concerned or a third party acting on behalf of and for that performing artist.
    • Income from the lease of immovable property located in Lithuania.
    • Income from the sale or transfer of movable property if that object is subject to legal registration in accordance with the local regulations and such object is (or must be) registered in Lithuania, as well as income from the sale of immovable property located in Lithuania.
    • Income derived from individual activities carried out through a fixed base, as well as income earned abroad that is attributed to that fixed base in Lithuania, where the said income is related to the activities of a non-resident through the fixed base in Lithuania.
    • Compensation for copyright infringement.
  • PIT at a 20% rate is applied to income amounts not exceeding 101,094 euros (EUR) per calendar year in 2023  and at a 32% rate for the exceeding part for:
    • employment-related income
    • payments to the members of the Board or Supervisory Board
    • income derived under copyright agreements (when it is received from the company that is also the employer of individual), and
    • income under civil agreement received by a manager of small partnership who is not a member of such small partnership.

Personal Income Tax Rate

Income

Rate
Up to EUR 101,094 20%
Income exceeding 101,094 32%
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Social Security in Lithuania

  • On behalf of employees, the employer must withhold 12.52% of the employee’s gross salary for social security contributions
    • 8.72% for pension social insurance, plus 1.99% and 1.81% for sickness and motherhood social insurance, respectively
    • an additional 2.7%-3% for participants in the second pillar pension funds program,
    • and 6.98% for health insurance contributions.
  • The employer’s portion usually is equal to 1.77% or 2.49% (depending on the type of employment agreement and risk group); contributions are made to unemployment insurance, social insurance for accidents at work and occupational diseases, and the long-term employment benefit fund.

Type of insurance

Paid by employer

Paid by employee
Social security and mandatory health insurance contributions 1.77% or 2.49% (depending on the type of employment agreement and risk group) 12.52%

Immigration Lithuania

  • Usually, a Lithuanian-registered enterprise may employ the following foreigners:
    • A foreigner who has a valid work permit issued by the Central Labor Exchange of Lithuania
    • A foreigner who has retained the right to Lithuanian citizenship
    • A foreigner who is of Lithuanian origin
    • A foreigner who marries in Lithuania Work permits are not required for citizens of the EU as well as for foreigners holding a permit for permanent residence issued by Lithuania.
  • A permanent residence permit may be issued after five years of legal stay in Lithuania.
  • A company that intends to employ a foreigner must submit a request to the local labor exchange for a work permit.
  • A company must register a free working place (an available employment position in the company) five days before submitting a request for a work permit. When the local labor exchange issues a positive decision, the required documents are submitted to the Central Labor Exchange, which issues a final decision and issues a work permit to the foreigner.
  • A foreigner is issued a work permit valid for up to two years.
  • Based on the work permit, an individual may be eligible for a temporary residence in Lithuania.
  • In general, a work permit is required for a non-EU citizen before the beginning of work in Lithuania, unless he or she is exempt from the requirement of obtaining a residence permit.
  • The following are a few of the possible exemptions:
    • A non-EU citizen who intends to take a job requiring high profession qualification (additional requirements apply)
    • An employee who is transferred from a foreign company as a manager or specialist in a group structural unit established in Lithuania (additional requirements apply)
    • A non-EU citizen who is seconded for a duration of no more than one year as a specialist from a non-EU employer to Lithuania under a service agreement concluded between the employer and a Lithuanian company (additional requirements apply)
    • An individual who has a permanent residence permit obtained in another EU country
    • An employee who arrives in Lithuania for no more than three months during a year to take care of a matter related to the negotiation, conclusion or execution of an agreement, personnel training or installation of equipment
    • An individual who is in a profession that is listed among the professions that are in need in Lithuania Other exemptions are also available.
  • EU Blue Card
    • High Skilled non EU citizens can apply for an EU Blue Card
    • The gross annual salary resulting from the monthly or annual salary specified in the work contract or binding job offer must be equal to or higher than the relevant salary threshold defined by the Member State (at least 1.5 times the average gross annual salary).
Need assistance hiring in Lithuania? Contact us about our International EOR Service

Type of Visa/Permit

Documentation

Validity

Eligibility
Work Permit
  • National Visa D
  • Copy of Passport
  • Copy of a diploma or an equivalent document confirming person’s qualification
  • Contract of employment
  • Proof of social insurance
  • Copy of a foreign country’s Certificate of Registration of Legal Entity or copy of Abstract of Title;
  • Detailed description of the project specifying the reasons why a foreign company’s services have been chosen to implement this project and what is the purpose of receiving a foreign employee
 2 years
  • A non EU citizen who wishes to work in Lithuania
EU Blue Card
  • A valid work contract or binding job offer
  • A valid travel document
  • An application for a visa or a visa
  • A valid residence permit or a national long-term visa
  • A proof of sickness insurance
  • Bachelors or Master’s degree
 3 years
  • High skilled workers
  • Gross salary should be 1.5 times the average gross annual salary
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Value Added Tax (VAT) in Lithuania

  • Supply of goods and services for consideration within the territory of Lithuania, performed by a taxable person engaged in economic activity, is subject to VAT in Lithuania.
  • The standard VAT rate is 21%.
  • Reduced rates of 9% and 5% are applicable on certain goods and services.

VAT Rates

Standard Rate

Group 1083

21%
Reduced Rate Group 1083 9%
Reduced Rate Group 1083 5%
Zero Rate Group 1083 0%
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Mandatory Benefits in Lithuania

  • These are benefits as postulated by law
  • These include probationary period, public holidays, annual leave, sick leave, maternity leave, parental leave, notice period and severance pay.
  • Statutory benefits also include social security benefits such as health insurance, pension etc.
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Mandatory Benefits overview

  • Probationary period

  • Public Holidays

  • Annual Leave

  • Sick Leave

  • Maternity Leave

  • Parental Leave

  • Notice Period

  • Severance Pay

  • Social Security Benefits

Payments And Invoicing

  • A Lithuanian tax resident that receives income during a tax year must file an annual income tax return by 1 May of the following year. 
  • A Lithuanian tax resident must pay the difference in income tax between the amount specified in his or her annual income tax return and the amount paid (withheld) during the tax year by 1 May of the following year. 
  • A Lithuanian tax resident may elect not to file the annual income tax return if any of the following apply: 
  • The individual will not exercise his or her right to deduct the annual nontaxable income amount. 
  • The individual will not exercise his or her right to deduct certain expenses incurred from income. 
  • During the tax period, the individual received only A class income related to employment and no additional tax is payable. 
  • Tax residents who hold specified positions in certain Lithuanian institutions must file annual tax returns and special asset tax returns. 
  • A person who is engaged in individual activity under a business certificate or who has registered his or her individual activity must submit his or her annual income tax return even if he or she did not earn any income from the individual business activity. 
  • Nonresidents who receive B class income (all income not included in A class) must file nonresident income tax returns and pay tax due not later than 25 days after the receipt of income.

Payroll Accrual in Lithuania

Country Accruals Additional Information

Social security 1.77%
Vacations  9.32%
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Description

Social security and mandatory health insurance contributions are payable in respect of gross employment income by the employer and employee. Income cap for social security contributions on employment income is applicable . In 2020 it is EUR104,277.60. Specific rules are established for self-employed individuals with a cap for contributions applied.

Payroll Accruals Additional Information

 

 

Employment Accruals
Annual Leave Employees are generally entitled to four weeks of annual paid leave, which may be taken in parts but not less than 14 days at a time. This equals 7.69% (14/52 weeks) of annual income
Maternity Leave Female employees are generally entitled to 70 days of maternity leave before the birth and 56 days after the birth.  This equals 34.5% (126/365 days) of annual income
Sick Leave Employees are eligible to receive between 80% and 100% of pay from their employer for the first two days of illness.
From the third through the seventh day, they are eligible for 40% of pay, and after the seventh day, the State Social Insurance Fund pays 80% of the employee’s salary.		 Paid by Social security
Overtime Overtime works shall not exceed for each employee 8 hours in one week and 180 hours per year. Overtime rate is subjective
Severance If the employee is terminated without fault, s/he is generally entitled to severance pay based on length of service, ranging from one month of pay for less than 12 months’ service to six months’ pay for 240 months or more of service. This equals 8.33% (1/12 months) of annual income
Social Security Employers must contribute around 1.77% of annual income to Social security and mandatory health insurance contributions. This equals 1.77% of annual income

Accrued Benefits in Lithuania

Christmas Bonus % 0%
Christmas Bonus Over Vacations % 0%
Severance per Year%

Employees are entitled to severance pay equal to2 month's pay after completion of one year of employment (16.66% of annual salary)

 16.66% of annual salary
Vacations %

Employees are normally entitled to 20 days of annual holiday leave each year (5.49% of annual salary)

 5.49%
Of annual
salary
Notice %

Employees are entitled to 2 months of notice period for one year of service or more (16.66%)

 16.66%
Christmas Bonus Over Notifications % 0%
Vacations Plus % 0%

Total percentage of Salary (yearly)

The total employment accruals as a percentage of salary per anum are equal to 38.81%

38.81%

Why use Global Expansion to hire in Lithuania

Establishing a branch office or subsidiary in Lithuania can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Lithuania labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Lithuania law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Lithuania. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Lithuania Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.

 

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