Lithuania is a high-income Baltic state with an impressive human development index and an open economy of which international trade is a crucial element. The combined value of Lithuania’s exports and imports equals to 155% of GDP. The country ranks 24th in the latest Ease of Doing Business rankings and 15 in the list of 178 countries in the Index of Economic Freedom. It is a lucrative destination for foreign investments due to the availability of skilled workforce, low tax, business-friendly regulations, and quality infrastructure.
Principal language: Lithuanian
Government: Parliamentary Democracy
Capital City: Vilnius
Major Cities: Kaunas, Klaipeda, Riga
Most employment contracts in Lithuania are for an indefinite period. A fixed-term contract, however, is allowed for a certain period for short-term projects, though the duration should not exceed 5 years. Fixed-term employment contracts cannot be more than 20% of all such contracts signed by an employer. If work continues despite the expiry of the period of an employment contract, the agreement is then considered valid for an indefinite period of time.
An employment contract must not include working conditions less beneficial to employees than the same established by the Lithuanian Labor Code. The probationary period is allowed but should not be more than 3 months.
It is advisable to specify in whose interest (the employee's or the employer's) the probationary period is set and to note that employees’ periods of absence from work (sick leave, annual leave, unpaid leave, etc.) are not included in the duration of the probationary period. Probation is not allowed for persons:
- under 18 years of age
- transferred by the agreement between employers to work for another employer, and
- in certain other cases specified by the labor law.
The types of employment contracts that can be entered into are as follows:
- indefinite period contracts
- fixed-term contracts
- temporary employment contracts
- apprenticeship contracts
- undetermined volume contracts
- design contracts
- job-sharing contracts
- employment contract for several employers, and
- seasonal employment contracts.
A typical workday comprises 8 hours, and a workweek is of 40 hours. A regular workweek is for 5 days, from Monday to Friday. Saturday and Sunday are rest days. Night work is any work performed between 10 p.m. and 6 a.m.
An employer may demand an employee to perform overtime work only in exceptional cases as specified in the Labor Code. Otherwise, overtime may be done only with the employee's consent in writing or when an employee requests for it in writing.
Overtime cannot be more than 8 hours in seven successive calendar days unless there is a written consent by an employee to work up to 12 hours of overtime per week. The total number of hours cannot be more than 48 per week over a 3-month period.
A different annual limit for overtime may be specified in the collective bargaining agreement, but it can still not exceed 180 hours in a year. Overtime needs to be paid at a minimum rate of 1.5 times an employee's regular pay. Employees who perform on a public holiday or a rest day are entitled to double pay.
The following mandatory public holidays are observed in Lithuania:
- Jan. 1: New Year's Day
- Feb. 16: Lithuanian Independence Day (established 1918)
- March 11: Lithuanian Independence Day (from the Soviet Union, established 1990)
- Easter Monday
- May 1: Labor Day
- July 6: State Day
- Aug. 15: Assumption Day
- Dec. 25: Christmas Day
- Dec. 26: Second Day of Christmas.
Employers need to allow employees at least 28 days of paid leave every year. Employers need to pay employees for their annual leave 3 days before the employees starting their vacation. Employees may decide to take compensation for up to 3 years of annual leave not used. If an employee’s job responsibilities are more stressful or hazardous than normal, as established by the government, then the employer needs to give 58 days of annual leave to the employee.
Employees who have made contributions to social security, for at least 12 months out of the previous 24 months, can take maternity leave which is paid for by social security. Maternity leave is paid for 126 days. Women can be eligible for an additional 14 days of paid leave if they are suffering from complications due to childbirth or birth of more than one child. Payment of maternity leave is at 100% of normal salary. Women who give premature birth are subject to different rules with regards to days of leave.
Employees need to contribute to social insurance for a minimum 7 months prior to the 1st day of paternity leave to be eligible for this leave. Paternity leave can be taken from the day of childbirth until the child is 1 month old. Payment for paternity leave is 100% of normal salary. It is compensated by the social security system.
A parent or grandparent, or any other guardian qualifies for parental leave till a child is 3 years old, and it can be continuous or incremental. Leave can also be shared among approved caregivers. Payment of a child-raising benefit by the State Social Insurance Fund from the end of maternity leave till the child is 12 or 24 months old is also made. This payment is at 100% of salary for the 1st year and 70% for the 2nd.
Employers need to provide sick leave benefits for the first two days at a rate of 80% or more of normal remuneration. The third day of sick leave is covered by social security. For the third to the seventh sick leave days, social security compensates at an 80% rate of normal remuneration, and from the eighth day onwards, compensation for sick leave is at a 40% rate.
Employees need to make contributions to the social security fund for a minimum 3 months out of the previous 12 months or six months out of the previous 24 months to be eligible to receive sickness benefits from social security.
Employers are required to allow employees three days’ of unpaid leave after the demise of a family member.
Lithuania's national social security system covers:
- pension benefits
- social insurance
- sickness and maternity benefits
- workers' compensation,
- unemployment insurance, and
- health insurance.
Employers must make monthly contributions to the State Social Insurance Fund at the following rates:
- 23.3% of employees’ gross salary towards pension fund
- 3.4% towards maternity and sickness benefits
- 1.1% for unemployment insurance
- 3% in health insurance fund, and
- from 0.18% to 0.9% for workers' compensation.
Employee contributions are for pension and social insurance at the rate of 3% and 6% for health insurance.
The usual retirement age is 60 for women and 62 ½ for men, and it increases by 4 months each year for women and 2 months each year for men until it is 65 for both in 2026. The minimum requirement to be eligible for a full pension is 30 years of service. A reduced pension is also available after completing service of 15 years.
If an occupational disease or accident at work prevents an employee from working, employees receive compensation from the State Social Insurance Fund. Employers are required to pay a premium to the fund that is equal to 0.18% of employees’ gross salary. If social insurance does not cover the injured employee, employers are liable for treatment costs, lost income, and expenses of medical, social and professional rehabilitation.
Depending on the type of work, employers must contribute either 1.8, 0.9%, 0.39% or 0.18% towards the workers' compensation fund.
How GPS can Help
With our Global PEO/Employer of Record services, companies can expand into Lithuania and hire their employees without having to establish a branch office or subsidiary in Lithuania.
- Your candidate is hired via our Lithuania PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
- Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll - all in full compliance with Lithuania laws.
- Global PEO Services experts manage all day-to-day operational issues such as employee expenses, and severance/termination if required.
- With no contractor risks, pass on the compliance burden to Global PEO Services.
Spin Off/M&A Support
- Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.
24/7 Support in 100+ Countries
- Empower your teams with 24/7 support and a single point-of-contact model in which experienced client services directors are in continuous communication with information and advice.
- We are backed by a mix of 300+ multidisciplinary experts from HR, Payroll, Finance, Tax, and Legal domains who are ready to respond to the expected and unexpected needs of your business on the shortest notice.
Easy Visibility into Your Employee Time & Attendance and Benefits Data
With our Global PEO, you get access to Mihi, our proprietary SaaS solution for time and attendance, vacation, leave management and benefits enrollment and managements. Mihi enables clients to have easy access to employee data in real time. It is designed specifically for companies with a global workforce, especially when working in multiple countries with low headcounts.
Ready for Growth When You Are
When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Lean more about our end-to-end international expansion services.