Global PEO Services (GPS) helps companies hire employees in Lithuania without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by the Global PEO, while the new hires and headquarter teams focus on your business goals.
When hiring employees in Lithuania, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.
Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with Lithuania labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Lithuania. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.
Lithuania - Country Overview
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 160% of its GDP. The country ranks 14th in the latest Ease of Doing Business rankings, and 21st in the Index of Economic Freedom. It is a lucrative destination for foreign investments due to the availability of skilled workers, low taxes, business-friendly regulations, and quality infrastructure.
Kaunas, Klaipeda, Riga
Employment Contracts in Lithuania
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.
Working Hours in Lithuania
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 7 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. Employees to be paid at twice the normal rate of remuneration if they work on Sundays and holidays.
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 work on a public holiday or a rest day are entitled to double pay.
Employee Leave in Lithuania
The following mandatory public holidays are observed in Lithuania:
- Jan. 1: New Year’s Day
- Feb. 16: Day of Reestablishment of the State of Lithuania)
- March 11: Day of Reestablishment of the State of Lithuania
- Easter Sunday and Easter Monday
- May 1: Labor Day
- First Sunday in May: Mother’s Day
- First Sunday in June: Father’s Day
- June 24: Rasos and St. John’s Day
- July 6: Day of the State
- Aug. 15: Assumption Day
- Nov. 1: All Saints’ Day
- Dec. 24: Christmas Eve
- Dec. 25: Christmas Day
- Dec. 26: Second Day of Christmas.
Employees are entitled to 20 days of paid annual leave if working a five day work week, and 24 days of paid annual leave if working a six day work week. Certain categories of employees (e.g., minors, the disabled) are entitled to extended annual leave. Additional annual leave must be granted to employees if specified by employment contracts, collective bargaining agreements, and internal work regulations.
Expectant mothers are entitled to 70 calendar days of maternity leave prior to childbirth, and 56 calendar days of maternity leave following childbirth. In the case of a complicated confinement or birth of two or more children, the mother is entitled to 70 calendar days of maternity leave following childbirth. During maternity leave, the employee is eligible for maternity benefits from the State Social Insurance Fund. As a general rule, the maternity benefit is equal to the employee’s full salary, subject to certain statutory limitations.
Men are entitled to 30 uninterrupted days of paternity leave. This leave may be taken at any point between the date of birth and the date at which the child is three months old. During paternity leave, the employee is eligible for paternity benefits from the State Social Insurance Fund, generally equal to the employee’s full salary, subject to certain statutory limitations.
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 2 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 of 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 3 days’ unpaid leave after the demise of a family member.
Employee Benefits in Lithuania
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 at the rate of 3% for pension and social insurance 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 the employee’s 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.