Employing in Lithuania
An employer of record, sometimes known as an international PEO can help you quickly hire and onboard workers in Lithuania – often with just two weeks’ notice. Establishing your own local entity without risk and saving costs, this type of service makes an EOR in Lithuania worth checking out!
One of the three Baltic States (alongside Latvia and Estonia), Lithuania is known for its beautiful baroque architecture, local beers, shores lined with amber and basketball — it’s like a second (if not the first!) religion in the country.
Located in central Europe, Lithuania offers easy travel between other EU states.
Since declaring itself an independent state in 1990, the nation has been making the transition from an industrial economy to a knowledge-based one that focuses on high-value products and services. Today, Lithuania offers a diverse economy and a vibrant financial sector, with many international banks doing business in the country.
In recent years, the country has also excelled in IT and communications technologies — and Lithuania is now one of the leading European nations for biotechnology, communications and IT. Perhaps surprising for such a small country, Lithuania is also one of the most efficient internet providers in Europe. Locals are very proud of the cheap, fast and reliable internet that is accessible all over the country.
Salaries are paid on a monthly basis and must be paid before the 10th of the following month. At TopSource Worldwide, our employees are paid on the last working day of the month.
€642 per month is the minimum wage for a full-time job in Lithuania.
A 13th-month salary payment is not required by law, but it’s normal that some businesses pay this as a bonus.
Employers’ costs are determined by the type of employment contract in Lithuania:
- Permanent employment contract (indefinite time)
- Fixed-term employment contract
The social security system (SODRA) in Lithuania covers healthcare, pension and other statutory insurances such as sick pay and maternity leave. Monthly contributions should be withheld from an employee’s salary:
The annual threshold is capped at EUR 81,162.00. Any income earned over the threshold is subject to a social security contribution ceiling whereby only the health insurance contribution of 6.98% will be deducted.
Lithuanian citizens are entitled to public healthcare, which is covered by compulsory healthcare contributions. Any EU citizen travelling to or living in Lithuania is also entitled to free healthcare.
Additional Medicare Tax
Employers whose wages exceed the maximum threshold of $200,000 are required to pay an additional Medicare tax. Employers are responsible for withholding the 0.9% additional Medicare tax from the employee’s wages; however, there’s no employer match.
The statutory pension contribution is 8.72% and will be withheld from an employee’s salary each month as part of the social security contributions. In addition to the statutory amount, employees can participate in an optional pension accumulation plan. This will additionally be withheld from an employee’s monthly salary based on the rate they select:
- 2.4% pension accumulation plan (equating to a total monthly social security contribution of 21.9% of gross monthly earnings)
- 3.0% pension accumulation plan (equating to a total monthly social security contribution of 22.5% of gross monthly earnings)
To access the old-age pension in Lithuania, employees must have contributed consistently for at least 15 years and be 64 years old (male) and 63 years old (female). Lithuania plans to push the retirement age up to 65 years for men and women by 2026.
Employment contracts may be executed bilingually, provided that Lithuanian is one of the languages.
The Social Security Authority must be informed of any new employees at least one working day prior to the employee’s start date.
The standard probationary period in Lithuania is three months but can be less. If deemed necessary, the period may also be extended by the employer.
An employer may terminate a contract during the probationary period should they deem the employee’s work to be unsatisfactory. The employer must provide the employee with three days’ written notice and is not duty bound to pay severance pay.
The duration and conditions of the probationary period should be outlined in the contract of employment.
Labour laws regarding termination in Lithuania are complex and are determined by the grounds for termination. Contracts may be terminated by mutual agreement and can be initiated by either the employer or employee.
Terminations must be executed in written form to be considered valid and should adhere to the corresponding notice period dependent on the type of contract and the procedures relating to the conditions of termination.
TopSource Worldwide will be able to provide further information on a case-by-case basis.
A full-time job is considered eight hours a day and 40 hours per week.
Overtime is usually paid at 150% of the normal hourly rate. In the instance of overtime having to be worked between the hours of 10 PM to 6 AM, the overtime hours should be paid at 200% of the employee’s usual hourly rate.
The maximum weekly overtime is eight hours and up to 12 hours if the employee agrees. The maximum annual overtime is 180 hours and must not exceed this.
Holiday & Leave
All employees are entitled to 20 working days of holiday per year (and up to 24 working days’ holiday per year if they work six days per week).
Annual leave is granted following six months of employment.
There are 11 paid public holidays per year. Holidays are observed on their calendar day and are not moved if they should fall on a weekend.
Employees are additionally entitled to work one hour less the day before a public holiday and this hour must still be paid.
Annual leave must be granted at least once during a working year. The duration of at least one of the parts of annual leave may not be less than 10 working days (or less than 12 working days for 6 working days per week).
The employer has to pay 62.06% to 100% of the employee’s normal wages for the first two days of any illness. From the third day onwards, the social insurance fund (SODRA) pays the employee’s wages at 62.06% at no cost to the employer.
To be entitled for maternity leave, employees must have a maternity social insurance contribution record of at least 12 months in the 24 months prior to taking maternity leave. A total of 126 days can be taken as maternity leave.
Maternity leave pay is usually paid at a rate of 77.58% of the employee’s average monthly earnings of the previous 12 months but cannot be less than €228 per month. The full amount for the 126 days of maternity leave must be paid as one lump sum at the commencement of the leave period.
Fathers are entitled to up to four weeks of paid paternity leave.
Paternity leave pay is calculated the same as maternity leave pay and is paid at a rate of 77.58% of the employee’s average monthly earnings of the previous 12 months but, again, cannot be less than €228 per month.
Parental (childcare) leave
As chosen by the family, the mother (adoptive mother), father (adoptive father), grandmother, grandfather or other relatives actually raising the child, or an employee designated as a child’s guardian, are granted parental (childcare) leave until the child reaches the age of three years. The leave may be taken all at once or in instalments. Employees entitled to this leave may take it alternately.
Employees are entitled to up to 12 months of creative leave to pursue creative or scientific endeavours.
Keen to engage an EOR in Lithuania?
At TopSource Worldwide, we work with local experts to help you navigate the various admin and cost obstacles you may come across along your expansion journey
To find out how we can help your business with our employment solutions, contact us today.