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Employee Termination Procedures & Guidelines in Lithuania

Termination procedure

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.

There are different types of dismissal:

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. Employees should always be informed of the employment termination in writing, detailing the legal and factual reasons for the termination and the date it takes effect. If any dispute ever arises, the employer must have proof of the reason the employee was dismissed.

Termination must be documented and communicated in writing, including the length of the notice period to be served. Employers must inform SODRA of the employment termination by submitting the 2-SD form within one working day of termination. Employees should be paid for any outstanding remuneration and compensation for unused holidays, including severance, by the last day of employment. Delayed payments incur a daily interest equal to the employee’s proportionate average salary, to be awarded to the employee.

Employees who believe their rights have been violated can bring the case to the Labour Dispute Commission within three months (in case of wrongful suspension, termination — within one month). If the employer is found to not have followed the correct termination procedure, the employee may be awarded their remuneration for the entire period between dismissal and the court’s decision. If the court considers it reasonable, the employee may be reinstated at their previous job. In addition, they are also entitled to compensation for any non-economic damages. If the employee is not reinstated, they are entitled to one average monthly salary for every two years of continuous employment with the company, capped at six average monthly salaries.

Disciplinary procedure

The Lithuanian Labour Code sets out the disciplinary procedure that companies must follow before firing an employee. To be dismissed, the employee must have been guilty of repeated misconduct and have been previously issued a warning about it in the preceding year. Employers must act on it no later than one month after they are made aware of the misconduct and no later than six months after the misconduct takes place. In case the employee has made a gross breach of working duties, the employment contract can be terminated immediately (after the employee is given a possibility to explain the breach).

Companies dealing with a disciplinary action should follow these steps:
1. Tell the employee about their misconduct.
2. Request in writing an explanation from them about the misconduct, setting a reasonable deadline for it.
3. Consider the explanation that the employee has provided. If the deadline passes without the employee’s responding to the employer’s request, the employer may proceed with the termination.
4. After considering the employee’s explanation, the employer may choose to act on it by giving them another chance or by proceeding with the termination. This decision must be communicated to the employee in writing, and the employee must sign it.

The employee should be presented with warning letters. The letters should include the legal and factual reasons for dismissal and the date it takes effect.

Resignation

There is no formal procedure for resignation. However, it is common for employees to first speak to their managers about their decision and then submit a dated letter restating their desire to leave the company. Employees must respect the notice period provided in the Labour Code (i.e., 20 calendar days), but they do not need to provide the company with their reason for leaving.

If the employee is resigning for an important reason, they need to notify the employer five working days in advance. According to the Labour Code, the employee is entitled to a severance payment in such a case.

Redundancy

Terminations are considered collective if the employer initiates dismissals, within any 30 days, of

Before the redundancy can take place, companies must consult with the employees’ representatives and inform the Employment Service office in writing about their plans to make employees redundant.

Notice period

The standard notice period when terminating an agreement without an employee’s fault is one month. The notice period is shortened to two weeks for employees who have been employed for less than one year. Employees five years away from retirement age are entitled to a notice period of double the length.

The following categories of employees benefit from a notice period three times longer:

Fixed-term employees are entitled to a different notice period of five working days if they have been employed for one year, and ten working days if they have been employed for at least three years.
Employers and employees can agree to provide the employee with pay in lieu of serving their notice period.

Severance

Employees who are dismissed at no fault of their own by their employers or when the agreement is terminated by the employee due to important reasons are entitled to severance pay according to the length of employment:

When the employment contract is terminated based on the employer’s initiative and without the employee’s fault, the employee is also entitled to receiving a long-time employment benefit from SODRA. The benefit is calculated according to the employee’s terms of employment.

Fixed-term employees who have their employment terminated are entitled to one average monthly salary if they have been working for the company for at least two years.

When the employment agreement is terminated based on the employer’s will, the employee is entitled to a severance payment of their six monthly average salaries.

Employee termination protection

During the following circumstances, employers cannot fire employees of certain categories, except for gross misconduct:

Employees exercising their rights such as being part of a trade union representative body, attending a case against the employer, filing grievance against the employer or for discriminatory reasons cannot be terminated based solely on these grounds.

Unemployment funds

Employees who lose their job may be entitled to the government’s unemployment benefit if they satisfy the following criteria:

The unemployment benefit is paid for up to nine months, until the employee starts a new job. The allowance is made up of a fixed part and a variable sum. The fixed part is 23.27% of the minimum monthly wage (€149.39) plus the variable sum of 38.79% of the average monthly insured income of the individual for the first three months, 31.03% for the next three months, and 23.27% for the following three months. The benefit is capped at 58.18% of the average national wage.

Holiday Entitlement

Employees working 5 days a week are entitled to 20 working days off, and employees working 6 days a week are entitled to 24 working days off. After six months of employment, the employee has a right to use the full number of annual leave days.

Employees in the following categories are entitled to 25 working days off (30 days if they work 6 days a week):

Employees whose work involves greater nervous, emotional, or mental tension and occupational risk, as well as those who have specific working conditions, get up to 41 working days off (those working 5 days a week) or up to 50 working days off (those working 6 days a week). A list of such occupations is approved by the government.

After ten years of continuous employment, employees are entitled to three more working days off. Every five years of employment thereafter provide employees with one additional working day off.

At least one portion of annual leave should be taken as 10 working days (14 for those working 6 days a week). Employees taking annual leave should be paid no later than on the last working day before the beginning of leave unless agreed otherwise.

Time off can be carried forward to the next year, but it cannot be exchanged for remuneration. Also, annual leave cannot be accrued for more than three years.

Public holidays

There are 14 national holidays in Lithuania. On the eve of national holidays, the working hours are reduced by one hour. If an employee works during a national holiday, they are entitled to double pay or an extra time added to annual holidays. Holidays falling on the weekend are not moved to the next working day.

Lithuania Public Holiday Calendar 2022

DATEWEEK DAYHOLIDAY
1/1/2022SaturdayNew Year's Day
16/2/2022WednesdayIndependence Day
11/4/2022FridayIndependence Restoration Day
17/4/2022FridayEaster Sunday
18/4/2022MondayEaster Monday
1/5/2022SundayLabour Day
24/6/2022FridayMidsummer Day
6/7/2022WednesdayKing Mindaugas' Day
15/8/2022MondayAssumption Day
1/11/2022TuesdayAll Saints Day
2/11/2022WednesdayAll Souls Day
24/12/2022SaturdayChristmas Eve
25/12/2022SundayChristmas Day
26/12/2022Monday2nd Christmas Day

Leave

Sick leave

Employees are entitled to paid sick leave in Lithuania. Employers are responsible for the payment for the first two days of illness, at a rate not lower than 62.06% of the employee’s average wage. Often companies pay the employee’s full salary. From the third day onward, the social security authorities (SODRA) take over and pay 62.06% of the employee’s average salary, currently capped at €89,01 daily. The paid sick leave duration depends on why the employee requires sick leave (e.g., whether it is a trauma, disease, tissue or organ donation, taking care of a sick family member, etc.).

If the employee is taking time off to care for a sick family member or child, the sick pay by SODRA is increased to 65.94% of the employee’s salary and starts from the first day. If the employee takes sick leave due to an organ or tissue donation, SODRA pays 77.58% of the employee’s salary.

Employees must have made social security contributions for at least 3 months in the previous 12 months, or 6 months in the previous 24 months to be entitled to the sick pay by SODRA.

Maternity leave

Employees are entitled to 18 weeks (126 days) of paid maternity leave by SODRA, paid at a rate of 77.58% of the employee’s average salary (€240 minimum) after one year of employment. Maternity leave is to be taken 70 days before the birth of the child and for 56 days after. Maternity leave is increased by 14 days in case of multiple or complicated childbirths. The maternity leave allowance is paid all at once for the entire 18 weeks of leave.

Employees are protected from being terminated without cause until their child turns three years of old.

Paternity leave

Fathers are entitled to 30 days of uninterrupted paid paternity leave following the birth of a child, which must be used before the child turns one year old. Paternity leave is paid by SODRA at a rate of 77.58% of the employee’s average salary (currently, €240 minimum and €2,336.56 maximum). Fathers of adoptive children are entitled to paternity leave, which should be taken within three months after the court’s decision to allow the adoption.

To receive the paternity leave allowance, employees must have made social security contributions for at least 12 out of the 24 months preceding paternity leave. In addition, a partner not giving birth in a same-sex couple is not eligible to this leave.

Parental leave

Parents, adoptive parents, grandparents, and guardians are entitled to parental leave until the child turns three years of age, which can be shared between parents. This is the only leave adoptive parents get, as the social security legislation does not envisage separate adoption leave.

Parental leave kicks in at the end of maternity leave, continues until the child turns one, and is paid at a rate of 77.58% of the employee’s salary. Or parental leave can be extended until the child turns two, at a pay rate of 54.31% for the first year and 31.02% for the second year. The third year is unpaid leave. Parental leave is paid by SODRA. The partner of the birth mother in a same-sex couple is not eligible for parental leave. In case of adoption, the maximum duration of parental leave is two years.

Additional time off

Employees are entitled to additional paid time off monthly in the following situations (days off are not accrued monthly):

Bereavement leave

Upon the death of a family member, employees in Lithuania are entitled to five calendar days of unpaid leave.

Education leave

Employees pursuing a formal education are entitled to time off to study, according to each situation, as follows:

Employees pursuing a non-formal education are entitled to study leave of five days per year.

After five years of employment, employees are entitled to up to ten days of education leave per year for formal and non-formal education (in case, it is related to employee’s profession).

Creative leave

Employees are entitled to up to 12 months of creative leave to pursue creative or scientific endeavours. Remuneration (if any) and other provisions are up to the employment parties to decide.

Unpaid leave

Employees are entitled to unpaid time off in the following circumstances:

General Employee Pay Regulations in Lithuania

Minimum wage 

The minimum monthly salary for the year of 2021 is €642.

Frequency

Salaries are paid twice a month. However, upon employee’s request, the salary can be paid once per month.

Payday

Typically, by the 10th of the following month. In any case, the payment has to be done no later than ten working days into the following month.

General

Standard hours

The standard working hours in Lithuania are 8:00 a.m. or 8:30 a.m. to 5:00 p.m. or 5:30 p.m. Monday through Friday, including one unpaid hour for lunch break, for a total of 8 hours daily (i.e., 40 hours weekly). A shorter working time norm is set for employees working under greater mental or emotional tension or employees exposed to harmful working conditions. A list of such occupations is approved by the government.

It is common to have shorter workdays on Fridays, with many employees finishing work as early as 3:30 p.m.

Depending on the industry (e.g., health care, child care, specialised communication services), a standard working week can contain 48 hours or be extended to include Saturdays.

Maximum hours

The number of weekly working hours should not exceed 48. However, sometimes the number of hours may be extended to 12 daily (i.e., 60 weekly), depending on the employee’s role. An employee is allowed to work no more than 8 hours of overtime per seven consecutive days. In case there is written consent from the employee, the employee could work up to 12 hours of overtime per week. Working beyond the standard number of hours should happen in only exceptional circumstances.

Opt-out option

Employees cannot opt-out of maximum working hours. However, they can sign a letter, giving their consent to work up to 12 hours per seven consecutive days.

Overtime compensation

Employees working beyond their standard hours are entitled to overtime pay of 150% of their normal salary. Overtime is increased to 200% if work is performed between 10 p.m. and 6 a.m. or during the employee’s rest day. In case overtime is worked during a national holiday, the employee is entitled to 250% of their normal salary.

Break rights

Employees are entitled to a lunch break (ranging from 30 minutes to 2 hours) no later than 5 hours after starting work. They are further entitled to (1) 11 consecutive hours of uninterrupted rest between workdays and (2) 35 consecutive hours of rest weekly provided in two consecutive days, usually the weekend.

Night workers

Night work is any work performed between the hours of 10 p.m. and 6 a.m. There are different ways to classify an employee as a night worker:

Employees who work night shifts should not have their working time exceed on average eight hours per week over the course of the accounting period (limited to three months). Employees who work night shifts are entitled to 1.5 times their regular salary. If doing overtime, they are entitled to 2 times their regular salary.

Time tracking obligations

The employer must keep records of employees’ working time, except for employees working a fixed number of hours and a fixed number of working days per week. The employer must record the following periods:

Time tracking can be done on paper (as a hard copy) or electronically, and employers may allow employees to be in charge of tracking the information and submitting it at the end of the month. In case the employee is in charge of keeping track of the working time and submitting the reports, there should still be a set of rules regarding the matter.

Penalties

If the employer fails to keep track of the employee’s working time, an administrative fine of €150 – €1,450 may be applied. A fine of €1,450 – €3,000 may be applied in case of a repetitive offence.

Working from Home Policy in Lithuania

In Lithuania, telework is defined by the Labour Code as the way in which work is performed regularly or in parts at a place other than the place of employment, while using information technology.

Employees have the right to request to work remote; however their refusal to work remotely if asked to by their employer cannot be used as a legitimate reason to end an employment contract or change working conditions. When such a request is issued by certain employees (an exact list of such employees is provided below), employers can reject the employee’s request only if they can prove such arrangement would lead to excessive costs. In case of pregnant employees, those breastfeeding, parents with children up to the age of 3, single parents raising a child under the age of 14 (18 if the child has a disability), or a request by the health care institution to allow the employee to work from home, the employer must agree to the employee’s request to work remotely for at least 20% of their total working time.

Work from home

Working from home can be either agreed on between the employer and the employee or requested by the employee. Upon agreement, the remote work and home office arrangements must be established in writing and address the following clauses:
Mandatory clauses

Employers must (1) provide the equipment necessary for work and (2) cover any installation costs. If employees incur any additional costs in connection with work when working from home, the employer must reimburse them. The amount of compensation and the terms of reimbursement are determined as agreed between the parties on the employment contract.

Teleworkers may distribute their working time at their own discretion, without violating the maximum working hours and the minimum rest time requirements.

At least once a year (at the request of the works council), employers must inform the applicable works council or union about the status of telework within the company, including the number of remote workers, their positions, the average salary per occupation, and their genders.

Health & safety at home

As employers don’t have total control of the employee’s home office, employers should set the expectations in cooperation with the employee and instruct them about health and safety, while employees have the duty to follow and care for their health and safety when working remotely. It is the employer’s obligation to ensure that the working conditions are safe and appropriate. Employees working with a display screen should take breaks regularly to rest their eyes. It is important to note that the employer remains responsible for the employee’s occupational health and safety, even if the employee works remotely.

Security of information

Employers and employees should discuss any special measures to protect confidential information for employees working remotely. The Labour Code and the Law of Protection of Commercial Secrets briefly list the employee’s confidentiality obligation. However, company handbooks or individual agreements should address security policies in more detail and provide an accurate list of confidential information and commercial secrets.

Workspace Guidelines in Lithuania

Employers must take all reasonable steps to ensure the employee’s workstation is correctly set up, safe, comfortable, and easy to use in order to reduce potential injuries, while employees must also care for their own health and safety and follow any reasonable policies or directions their employer gives them.

To ensure the employee’s workstation set-up is safe, employers should do the following:

While working remotely, workers must inform employers of any work-related incidents or injuries that occur.
An appropriate workstation will include the following:

Working conditions

Employees working from home have the same rights as those working in the employer’s office. There should be no restrictions on calculating length of service, promotion, training, or any other rights established in the Labour Code. Most importantly, the implementation of telework should not violate the protection of employees’ personal data and their right to privacy.

General

Probation period

Probation periods are optional in Lithuania and cannot exceed three months. Periods of absence due to approved leave, such as sickness on unpaid leave, do not count towards the probation period.

If the probation period leads to unsatisfactory results, the employer may dismiss the employee by giving a written three business days’ notice (the employee has the same right). The employee is not entitled to severance pay.

Grievance and disciplinary procedures

Employees have the right to a grievance procedure before being terminated by their employer. The Lithuanian Labour Code sets out the disciplinary procedure that companies must follow before firing an employee. To be dismissed, the employee must have been guilty of repeated misconduct and have been previously issued a warning about it in the past year. Employers must act on it no later than one month after they are made aware of the misconduct and no later than six months after the misconduct takes place. In case the employee has made a gross breach of working duties, the employment contract can be terminated immediately (after the employee is given a possibility to explain the breach).

Employees who believe that their rights have been violated can bring the case to the Labour Dispute Commission within three months. (If the dispute is related to wrongful suspension, wrongful dismissal, and breach of a collective agreement, the term is one month). If the employer is found to not have followed the correct termination procedure, the employee may be awarded their remuneration for the time between the dismissal and the court decision. If the court considers it reasonable, the employee may be reinstated back to their job. In addition, the employee is entitled to compensation for any non-economic damages. If the employee is not reinstated, they are entitled to one average monthly salary for every two years of continuous employment with the company, capped at six average monthly salaries.

General Employee Rights in Lithuania

Employment agreement

In Lithuania, employment agreements formalise the relationship between employer and employees and list out the employee’s duties, workplace regulations, remuneration, and other employment conditions, to name a few. Contracts must be in Lithuanian (or Lithuanian and a foreign language agreed on by the parties) and in writing.

Contracts must be signed and shared with the employee for signing before the start of employment. The employee should be given a copy for their records, and the employer keeps the other copy. If both parties agree, the contract may be signed electronically. Offer letters are not common in Lithuania, and probationary periods cannot exceed three months. The following terms and conditions must be included in the employment agreement:

Additionally, if the employee is going to be employed for more than one month, the following terms and conditions must be provided in writing:

Although not covered on the employment contract, some duties are implied in every employment relationship. That includes the duty of the employer to comply with health and safety, ensure the working conditions set in labour laws, take care of the needs of the employees, and organise work appropriately. Employees have implied duties to work fairly and honestly, follow work discipline and employer’s orders timely, and protect their employer’s property and commercial secrets.

Health and safety

Employers have the obligation to safeguard and care for their employees’ health and safety. All employees that are at risk must regularly undergo a health checkup. In addition, when a new hire starts, the company must inform them of the rules and requirements that apply to the workplace regarding health and safety.

Companies must (1) document in writing that the employee was instructed about the applicable health and safety requirements and (2) have the employee sign the evidence before the start of employment. Employers must also appoint an employee as the person responsible for health or safety or hire a company that is licensed in that area.

Payslip

Employees have a right to receive payslips either once or twice monthly, detailing their gross and net salary as well as any deductions (including the reasons for them), working hours, and overtime. Online payslips are acceptable.

Remote work

Employees have the right to request to work remotely, while an employee’s refusal to work remotely cannot be used as a legitimate reason to end an employment contract or change working conditions. When such a request is issued by certain employees (an exact list of such employees is provided below), employers can reject the employee’s request only if they can prove that such an arrangement would lead to excessive costs.

In case of pregnant or breastfeeding employees, parents with children up to the age of 3, single parents raising a child under the age of 14 (18 if the child has a disability), or an existing request by a health care institution to allow the employee to work from home, the employer must agree to the employee’s request to work remotely for at least 20% of their total working time.

Contractual claims

Employment contracts are heavily protected in Lithuania, and paying employees on time is taken very seriously. Employees who are paid their salaries late are entitled to a penalty payment of 0.07% for each day of delay. Upon termination, employers must pay any outstanding remuneration to employees on the last day of work. If they are late with the payment, the employer incurs a penalty fee equal to the employee’s average salary for the late period.

Employee Protections in Lithuania

Protection from discrimination

Employers must make sure they don’t discriminate against individuals, based on certain characteristics and circumstances, while interviewing potential candidates and promoting/terminating employees. Employees have the right to equal treatment in the workplace and are protected from discrimination based on the following:

While it is not a common practice, individuals who are discriminated against may bring a claim to court, where they may be awarded compensation that has no cap.

Equal treatment & pay

Based on the characteristics listed in the “Anti-discrimination” section, employees have the right to be treated equally and fairly and to receive equal opportunities for promotion in a company. It is illegal for employers to discriminate against employees. Moreover, employees have the right to equal pay when doing the same work function under the same conditions, regardless of gender.

Companies with 50 or more employees must implement a policy, and monitor its principles regarding employees’ equal rights and opportunities. Such policy must be published so that all employees have access to it.

Diversity and inclusion
Companies must apply equal criteria and conditions when hiring, promoting, offering professional development and benefits, and terminating employees.

Protection in case of a business transfer

During a business transfer, the new company has the obligation to take on all employees from the transferor and cannot make any detrimental changes to the employment conditions. The new company must honour the employment conditions in place with the employees. Employees that are affected by the transfer must be notified in writing about its terms and conditions at least ten working days in advance.

Protection of personal data

An employer has obligations under the General Data Protection Regulation (GDPR) and the Personal Data Protection Act in respect of the personal data of its employees. As it processes the personal data of its employees, the employer is considered to be the data controller. If the law prescribes data processing, the employer must appoint a person responsible for overseeing the processing of personal data (data protection officer).
Under the GDPR rules, employers are subject to restrictions when retrieving and processing employee data:

Protection against dismissal

Protected employees include trade union officials; pregnant women; those on maternity, paternity, or parental leave; ill or injured-at-work employees; those attending military (or alternative) training; long-term employees; employees who have no more than three years left until retirement; employees with children (age 14 or younger or disabled children); and single parents. The employer may terminate their employment only in case grounds laid down in the legislation are met.

Required Employee Benefits in Lithuania

Continuous training

Employees who have been continuously employed with the same company for five years accrue entitlement to training. When off to training, employees are remunerated with at least half of their average monthly salary. Education leave may be either formal or non-formal (in case it is non-formal, it is to relate to employee’s job functions) and should not take longer than ten working days within a year.

Unemployment funds

Employees who lose their job may be entitled to the government’s unemployment benefit if they satisfy the criteria listed in the "End of Employment” section.

The benefit is paid for up to nine months (in certain cases, it can be prolonged). The allowance is made up of a fixed part and a variable sum. The fixed part is 23.27% of the minimum monthly wage (€149.39) plus the variable sum of 38.79% of the average monthly insured income of the individual for the first three months, 31.03% for the next three months, and 23.27% for the following three months. The benefit is capped at 58.18% of the average national wage.

Job Security in Lithuania

Union

Anyone has the right to establish a trade union freely and without prior permission, and to join or not to join a trade union. A trade union may be founded by at least three employees (the exact minimum number of members depends on the total number of the employees within the company).

Employees are entitled to join the trade union of their workplace or any other trade union. Employees are entitled to act as the elected representatives of a trade union.

Consultation with employees
Once a year, employers must inform and consult with employees’ representatives on topics such as the present and future activities of the company, its financial position, and the condition of employment relationships in it. Employers must also consult with the representatives before group redundancies to try and avoid the maximum number of dismissals possible. Employers also have a duty to consult with employees when intending to reorganise or restructure the business, introduce new policies, or propose certain other changes in the company, such as changes to health and safety policies.

Mandatory Employee Benefits in Lithuania

Health insurance by the national system

All residents in Lithuania have access to the national health system, which is funded through mandatory contributions by employees (6.98%). However, some specific health services are compensated partially or not included in the national system and therefore require individuals or their private health insurance to cover them. Other treatments such as prescriptions, hospitalisation, pregnancy, and rehab are services funded by the national system.

The employer should register the employee with the health insurance fund and withhold monthly contributions during payroll.

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. However, the participation in the non-formal adult education program should be related to the employee’s professional development.

Non-Mandatory Employee Benefits in Lithuania

Additional annual leave

It is common for tech companies to provide employees with additional days off, often 4 to 8 additional days (above the statutory 20). In addition, some companies give employees their birthday off.

Private health insurance

Even though Lithuania has a good public health system, including dental health care, many companies offer employees private health insurance for additional coverage. Most companies will pay for the employees’ and their dependents’ private insurance, but some companies offer co-payment or discounted insurance prices to employees.

Private pension plan

A private pension is a common benefit in Lithuania. The pension system in Lithuania comprises three pillars. The first one is mandatory for both employers and employees. The second one is optional and applicable to employees only, including a contribution from the government. The third one is an optional pillar for companies to make additional contributions often ranging 3% – 8% of the employee’s gross salary. Employers who made additional contributions to employees’ pension funds can deduct such an expense from their corporate income tax if certain conditions are met.

Sick leave

In Lithuania, employees are entitled to paid sick leave. The employer is responsible for paying the first two days of the illness at a rate ranging 62.06% – 100% of the employee’s average monthly salary. From the third day onward, the social security authorities (SODRA) pay the employee 62.06% of their salary. It is very common for employers to top up the SODRA contributions to make 100% of the employee’s salary. The duration of paid sick leave depends on the reason the employee requires sick leave (e.g., a trauma, disease, tissue or organ donation, taking care of a sick family member, etc.).

Work flexibility

Increasingly, tech companies are adhering to a flexible work schedule to improve employees’ work-life balance. Different approaches to flexibility exist, such as full-time work from home, hybrid work, flexible hours with core hours, and complete hour flexibility. In Lithuania, having a flexible working schedule is one of the most important factors for job seekers.

Training & learning

Most tech companies provide employees with individual budgets to further their professional knowledge. Some companies offer internal training and mentoring programs; others set a spending amount for employees to use as they wish (commonly, 10%–15% of the employee’s net salary).

Gym Membership

Some companies subsidise or offer discounted gym membership to their employees. Other companies offer fitness stipends to be spent on specific sports an employee may be interested in or even access to remote workout classes.

Life insurance

Life insurance is a very sought-after benefit by employees in Lithuania. It is common for companies to offer accident and life insurance for employees in case they fall severely ill, become disabled, or pass away. The benefit is often a monetary lump sum based on the employee’s yearly pay that is multiplied by three, four, or five, depending on their role.

Cash bonus

It is common for companies in Lithuania to offer employees annual bonuses, depending on the employee’s and the company’s performance.

Stock options

Many tech startups in Lithuania use stock options as a way to attract and retain talent during the early stages of the company. As a result, Lithuania has a very startup-friendly legislation for stocks as long as they are kept for at least three years before being exercised.

Wellness 

Many companies provide in-person or remote access to mental and emotional health support programs, such as Employee Assistance Programs.

Employer Contributions in Lithuania

Social insurance

Employers and employees must contribute into the social security, which funds retirement, unemployment, sickness, and maternity leave. Employers are also responsible for withholding the employees’ contributions during payroll.

Employers contribute 1.77% of a permanent employee’s salary into the social security, and 2.49% of a fixed-term employee’s salary.

The following funds are encompassed in the social insurance contributions:

Guarantee fund

Employers in Lithuania must contribute 0.16% of the gross salary payable to the employee into the country’s guarantee fund, which provides support to workers if the employer goes bankrupt.

Long-term employment fund

Employers must contribute 0.16% of the employee’s gross salary into the long-term employment fund, which entitles employees to receive a payment if the employer terminates the employment agreement without cause.

Workers compensation insurance

Employers must make contributions for social insurance that covers accidents at work and occupational diseases. The rate of contribution depends on the company and industry’s risk profile as follows:

Employee Contributions in Lithuania

Residents of Lithuania are subject to tax on their worldwide income, whereas non-residents are subject to tax on the income generated only within the country. To be considered a resident, an individual must have a permanent place of residence during the tax year in Lithuania; have their personal, social, or economic interests during the tax year in Lithuania; spend more than 183 days per tax year or 280 days during two consecutive tax years (minimum of 90 days in each year) in Lithuania; and receive a Lithuanian sourced income while not residing in Lithuania.

Income tax

In Lithuania, employees must pay two rates of income tax related to employment, depending on their gross income. If the income does not exceed 60 average salaries annually (for 2021 – €81,162), there is a flat rate of 20%. For any amount exceeding this threshold, a progressive rate of 32% is applicable. Couples cannot file taxes jointly, and the employer withholds an employee’s income tax during payroll.

Progressive income taxation applies to other personal income at a rate of 20%, capped at 120 average salaries annually (for 2021 – €162,324).

Lithianian Income Tax 2021

GROSS INCOMETAX (%)
Up to €81,16220
More than €81,16232

Employees on sick leave, maternity, paternity leave are taxed only 15% during their leave.

Social insurance

Employees must contribute to the social security at a rate of 19.50% of their gross salary. The social security contribution is withheld by the employer during payroll and comprises the following:

Additionally, if the employee is part of a second pillar pension fund, there is an additional 2.4% contribution. This contribution is slowly being increased yearly until it reaches 3%. For 2022, it will be 2.7%; for 2023, 3%. The government incentivises the second pillar pension fund by contributing an additional 0.9%, going up to 1.2% in 2022, and then up to 1.5% in 2023.

Individuals participating in second-pillar pension funds may choose to contribute 3% straight away.

All income received from employment, including bonuses, allowances, and severance payments, is taxable for social security. Employment income exceeding 60 average salaries (in 2021 – €81,162) is subject to social contributions at a rate of 6.98%. When the threshold is calculated, income received from all employers is considered.

Benefits in Kind

The following employment benefits are exempt from income tax:

Tax-Free Allowance in Lithuania

In Lithuania, employment expenses are not deductible from the employee’s compensation, and personal allowances do not exist.

Personal deductions

Tax residents in Lithuania can deduct the following from their taxable income:

The total amount of deductible expenses is limited to 25% of the taxable income (subject to 15%, 20%, and 32% income tax rates) in a calendar year. The total deductible life insurance premiums and pension contributions amount should not exceed €1,500. In addition, the repair work of buildings and cars, and nursing services should not exceed €2,000.

Standard deductions

In Lithuania, something called a monthly tax-exempt amount (TEA) exists, which is applied to tax residents’ employment-related income, as follows:

Annual TEA can also be applied to Lithuanian tax non-residents but only at the end of the tax if the annual gross income does not exceed €34,370.67. In addition, an annual PIT return will need to be submitted.
A higher TEA threshold may apply for individuals with a lower level of working capacity.

Family allowance

Families with children receive a monthly family allowance from the local government of €70 per child, from birth to the age of 18. The age threshold may be increased to 21 if the child studies according to a general curriculum.

Overview

CURRENCY
€ Euro
WORKING HOURS
40 hours / week
PUBLIC/BANK HOLIDAYS
14 days per year
CAPITAL
Vilnius
LANGUAGE
Lithuanian
REMOTE WORKERS
72,900
MINIMUM MONTHLY SALARY
€730
TAX YEAR
January 1st - December 31st
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
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