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Understanding Payroll in Lithuania: What Global Companies Need to Know About Lithuania Payroll

Aug 15, 2017 

Located in Northeastern Europe, Lithuania is one of the three countries to make up the Baltic states. The republic was the first to declare independence from the former USSR, igniting a rapid move toward a free market. Currently, it boasts the largest economy among the Baltic states. Companies looking to expand will find Lithuania to be a promising country for their business. It was recently ranked 21st on the "Ease of Doing Business" ranking from the World Bank Group. 

Lithuania is made up of roughly 2.9 million people with a GDP of about $41 billion. The vast majority of that GDP stems from the service sector (about 70%) and industrial work (about 23%.) The business climate has attracted many foreign investors because of its skilled workforce, low tax, reliable infrastructure, and rule of law. However, large companies would benefit from having a global payroll provider to stay on top of pertinent changes that are expected to come in the coming years.

Getting Started 

It is fairly easy to get your company registered here, and the majority of the work can be done online. Companies will need an in-country bank account, which generally takes only about a day to complete (providing you have the appropriate capital to get started.) You will need to visit the Centre of Registers for an electronic signature and the Register of Legal Entities to reserve your company name. Companies may be asked to show the partnership or incorporation agreement, the deed of incorporation, or the articles of association as a means of legitimizing the business. 

Payroll Assessment

Employment Laws/Employment Rights 

Lithuanians typically work a 40 hour work week though certain industries may go up to 48 hours for a standard week. Any overtime must be paid at least time and a half. Any work done on a holiday or day of rest should be paid double time. Overtime is generally only requested under rare circumstances, and it cannot exceed more than 4 hours in a 48 hour period. However, it should be noted that Lithuanian employees do not tend to count the minutes the way other employees might. 

There is almost no collective bargaining in Lithuania. It is allowed to be done at an organizational or company-wide level, but this rarely occurs. Terms of employment will be worked out on an individual basis. Employee contracts are required, and must be in writing. They may not stipulate anything outside the basic labor laws of the country. Probationary periods are allowed in Lithuania, but cannot last longer than three months. 

Compensation, Bonuses, Severance 

Employees must make at least €380/month ($448, £345) to meet the minimum wage. Bonuses are not mandatory, though terms for additional compensation can be negotiated by the employee when the contract is drawn up. Workers with in-demand skills will expect a fair wage for their time, and to be considered for raises every year. The exact details of the raises may or may not be spelled out in writing. 

Severance is typically given to employees who were let go either due to redundancy or through no fault of their own. The amount is based on how long the employee worked at the company (e.g. one month's wages for under 12 months of service) If a probationary contract comes to an end without renewal or the employee was let go due to an at-fault situation, they are not required to be given any severance pay.

Tax Requirements/Collection/Withholding

Major taxes in Lithuania include corporate, excise, income, and social security. Corporate tax is 15% as is Income tax (though income tax may decline for low-wage workers.) Income tax is withheld from the employee's paycheck at the source. Non-residents are taxed on their income from Lithuania while residents are taxed on their worldwide income. Social security and mandatory health insurance contributions are split at 30.98% paid by employer and 9% paid by employee.  VAT is 21%, and excise tax is set at different levels depending on the product sold.

Lithuania has been attempting to make a variety of changes to their tax structure (particularly for low wage workers), and an international payroll company can help larger businesses navigate their way through the paperwork and payroll regulations of tomorrow. 

Leave – Sick, Maternity, Vacation, Absence, Holiday

Lithuania is very generous when it comes to vacation time. All workers received a minimum of 28 calendar days off per year (generally given after 6 months employment), plus 13 public holidays. Extended annual PTO of up to 58 days is granted to certain categories of employees who express a large emotional or mental strain.  In addition, certain employees will need at least 35 days off (e.g., single parents, etc.) or potentially even 58 days off (e.g., those with severe mental health issues.) Maternity leave starts at 70 calendar days before childbrith and 56 days after childbirth. 

Employers are not allowed to put new mothers in any danger whatsoever. The exact terms  of this are generally worked out between employee and employer to guarantee the woman's safety. Sick time is generally lumped in with vacation time, though employees are not allowed to be fired if they have a chronic injury unless they are out for more than 120 consecutive days. 

Date Lithuania Public Holiday Schedule
 January 1st  New Year's Day
 February 16th  Restoration of the State Day
 March 11th  Restoration of Independence Day
 Sometime in March - April  Easter Sunday
 Monday after Easter Sunday  Easter Monday
 May 1st  Labor Day
 1st Sunday in May  Mother's Day
 1st Sunday in June  Father's Day
 June 24th  St. John's Day
 July 6th   Anniversary of the Coronation of King  Mindaugas
 August 15th  Assumption Day
 November 1st  All Saint's Day
 December 24th  Christmas Eve
 December 25th  Christmas Day
 December 26th  Second day of Christmas

Final Thoughts 

It is the job of a global payroll solution to pay attention to how Lithuania handles the political questions that affect businesses in unforeseen ways. Large companies simply do not have time to make these types of wide-scale changes across all employees. Trust in an expert to keep everything flowing like clockwork, regardless of the external forces that surround a company. 


This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.


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