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Lithuania

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Lithuania

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  • Lithuania
  • Taxes
  • Benefits
  • Employment cost calculator
  • Employee Rights
  • Employment Conditions
  • Remote Work
  • Hours of Work
  • Payment
  • Leave
  • End of Employment
  • Independent Contracting

    • Hiring in Lithuania at a glance

    CURRENCY
    € Euro
    WORKING HOURS
    40 hours
    PUBLIC/BANK HOLIDAYS
    14 days
    CAPITAL
    Vilnius
    LANGUAGE
    Lithuanian
    REMOTE WORKERS
    72,900
    MINIMUM Monthly SALARY
    €924
    TAX YEAR
    1st Jan - 31st Dec
    DATE FORMAT
    DD/MM/YYYY
    MISCLASSIFICATION PENALTIES
    Fines between €868 and €5,792 per misclassification plus back pay of wages and contributions covering the period of misclassification
    FUN FACT
    Over 50% of the population speak more than two languages

    Employment tax: 

    2.07% - 4.05%

    Social security - 1.77% - 2.49%

    Workers' compensation insurance - 0.14% - 1.4%

    Long-term employment fund 0.16%

    Employee tax: 

    26.98% - 54.5%

    Social insurance: 19.5%, which includes contributions for pension, health insurance, sickness and motherhood 

    Income tax:
    GROSS INCOMEPROGRESSIVE TAX RATE
    Up to €90,24620%
    More than €90,24632%

    Lithuania Employment Cost Calculator

    Use our handy calculator to understand what are all the employment costs you have to consider in Lithuania.

    Provide us with some extra details and we will send you a full breakdown of the salary costs.

    Employer of Record in Lithuania

    Read more
    An Employer of Record is the legal employer of a worker in Lithuania. As such, the Employer of Record takes care of all Lithuania compliance aspects of employment, including payroll, taxes, statutory benefits, employment contracts and more.

    the employer of Record is responsible for:

    Ensuring their employment is compliant with local laws
    Processing local payroll
    Filing employment related taxes and returns
    Issuing payslips to the employee
    Distributing salary payments

    How Employer of Record works

    COMPANY

    Maintains a direct relationship with the employee, allocates them work tasks, and manages their performance.

    BOUNDLESS

    Takes care of payroll, taxes, benefits, ensuring the employee and the company are compliant with all legal regulations.

    EMPLOYEE

    The third party to the agreement, the employee, fulfils all of their obligations as a worker for the company.

    Statutory Benefits in Lithuania

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    Health insurance

    All residents in Lithuania have access to the national health system, which is funded through mandatory contributions by employees (6.98%).

    Education

    After five years of continuous employment, employees are entitled to at least half of their salary to be left for education leave (for formal or non-formal education) of up to ten working days per year.

    Common Non-mandatory Benefits in Lithuania

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    Additional annual leave
    Private health insurance
    Top up to SODRA paid sick leave
    Private pension plan
    Work flexibility
    Training & learning
    Cash bonus
    Stock options

    Employee Rights and Protections

    Read more
    Written employment contract
    Payslip
    Remote work
    Health & safety
    Continuous training
    Contractual claims
    Unemployment funds
    Equal treatment & pay
    Protection against dismissal

    Paid time off: 20-25 days + bank holidays

    Paternity leave: 30 days

    Paid sick leave: Length depends on reasons for taking it. Employers pay first two days, and the rest social security authorities

    Parental leave: Up to 3 years, paid at different rates each year

    Maternity leave: 18 weeks

    Probationary Period

    Read more
    Probationary periods are optional in Lithuania and cannot exceed three months.

    Payment Frequency

    The payment frequency in Lithuania is monthly.

    End of Employment

    Read more
    In Lithuania, companies must follow a standard procedure to properly dismiss an employee, which includes a grievance procedure, valid reason, notice and severance pay (if the employee is not at fault) according to tenure.

    The most common and preferred termination procedure is by mutual agreement, which should be concluded in writing and detail the terms and conditions agreed by the parties. If the termination is not done in writing, the employer bears the burden of proof in the event of a dispute.

    Termination must be documented and communicated in writing, including the length of the notice period to be served.

    The Lithuanian Labour Code sets out the disciplinary procedure that companies must follow in regard to a dismissed employee.

    Frequently Asked Questions

    What are my options if I want to hire a worker in Lithuania?

    While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in Lithuania, outlining the potential cons.

     

    HQ country employment & payroll

    While the person is in Lithuania, they are employed and payrolled directly by the company’s HQ entity.
    Cons: This may appear attractive, but it generally isn't legal in the long term. HQ payroll won't be possible if the person is not a tax resident in the HQ country.

     

    Independent contractor agreements

    People are locally registered as sole traders or limited liability company owners in Lithuania and invoice for their work. There is no direct employment relationship.
    Cons: In Lithuania, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

     

    Direct local employer setup

    The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.
    Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

     

    Partnering with an Employer of Record Lithuania /full-service Professional Employer Organisation

    Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record helps to hire and pay employees.
    Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

    How long does it take to set up a company in Lithuania?

    Setting up a local company in Lithuania is relatively straightforward. However, the difficult part comes after the initial setup when payroll needs to be calculated and run every month, taxes filed, benefits extended, change of rules and regulations followed. Here is an overview of everything you will find yourself needing to do.

    Can I employ people as independent contractors in Lithuania?

    While many employers practice employing remote workers as independent contractors, it's a bad practice. If an individual is giving their full and undivided attention to your company in Lithuania, treating them as an independent contractor is a likely breach of Lithuanian employment laws and of those in your country.
     
    Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefit, maternity benefit, or other legal measures. Since the individuals you are working with do not receive the benefit of local employment laws and protections that are often afforded to people working full-time hours.
     

    What does HR compliance mean in Lithuania, and why does it matter?

    When you hire employees in Lithuania, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices. Complying with local employment law in Lithuania is fundamental for the correct running of your business - not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, working hours regulations.

    How much does it cost to employ someone in Lithuania?

    As with every other country, there are certain costs associated with employing a worker in Lithuania that come on top of the gross salary you are offering. A Lithuanian employer must make social security contributions, as well as contribute to the long-term employment fund and workers' compensation insurance. To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

    What does Employer of Record mean in Lithuania?

    It means that Boundless is the legal employer of the individual, as far as the Lithuanian government, tax, and employment authorities are concerned. We are responsible for:
    • informing you about any pre-employment requirements
    • ensuring their employment is compliant with Lithuanian employment law
    • informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
    • providing a locally compliant employment contract
    • processing local payroll
    • filing employment-related tax returns
    • issuing payslips to the employee
    • distributing salary payments
    • payments to the local tax authorities
    Customers that work with an Employer of Record in Lithuania are responsible for:
    • sourcing and recruiting their own workers
    • managing the employee’s day-to-day work load
    • contributing to the personal / professional development of the employee through their work
    • following any guidance we give on employment and HR best practices or legal obligations in Lithuania, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
    • ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

    Who is responsible for filing and paying employees' taxes and social insurance contributions in Lithuania if employing through an Employer of Record?

    Boundless as the Employer of Record Lithuania files all pertinent taxes, and other contributions to the social system for the Lithuania employee to be compliant.

    How does Boundless as an Employer of Record Lithuania ensure HR compliance in Lithuania?

    We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Lithuania. They ensure the Lithuanian employment contracts, and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Lithuania, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

    What are the legal responsibilities of a company when they use an Employer of Record service like Boundless in Lithuania?

    The company remains responsible and informs employees of the day-to-day management of the people and teams that are employed through Boundless, including any disciplinary or performance issues.
     
    Boundless ensures compliance with Lithuanian-specific procedures, practices and labour laws while employing people and teams on behalf of the company.

    Do employees get all their rights and benefits when employed through an Employer of Record in Lithuania?

    Any new employee that is locally employed through an Employer of Record gets full employment rights and benefits as specified in Lithuanian employment law. They get a locally compliant employment contract, statutory maternity leave, annual leave, illness benefits, any relevant tax credit, and many more. 

    What taxes do I need to pay in Lithuania?

    both employers and employees have to pay taxes. Employers make contributions to social insurance, the long-term employment fund and the workers' compensation insurance. Employees contribute to social insurance, which comprises of pension social insurance, health insurance, sickness and motherhood social insurance and pay personal income tax. To get a clear overview of both employee and employer taxes, use our salary breakdown calculator, submitting any additional data needed and get a downloadable pdf like this one.

    Choose Boundless as your employment partner in Lithuania
    Talk to us
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