Hire employees in Lithuania using an Employer of Record

Lithuania requires 13th and 14th month salary payments. That's two extra months of pay every year. Miss this and you'll owe back payments plus penalties when employees find out during their first Christmas bonus cycle.

Your perfect candidate is ready to start, but setting up a Lithuanian entity means €15,000-40,000 upfront and 4-6 months of legal paperwork. Meanwhile, your competitor with an EOR just hired three people in Vilnius last week.

You've got three ways to hire in Lithuania legally, each with different costs and headaches:

Option 1: Set up your own entity

• Cost: €15,000-40,000 upfront, €8,000-15,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: VAT registration, payroll system, works council requirements, full HR infrastructure
• Makes sense when: Hiring 20+ people long-term, permanent market commitment

Option 2: Hire contractors

• Cost: None upfront, but major limitations
• Timeline: Immediate
• Risks: Misclassification fines up to €50,000, back taxes, mandatory employee reclassification
• Makes sense when: Short projects under 6 months, specialized consulting
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee
• Timeline: 2-3 days to hire
• Complexity: None - we handle everything including those 13th/14th month payments
• Makes sense when: 1-50 employees, testing the Baltic market, multi-country teams

Do the math: hiring 3 people costs $537/month with an EOR versus €25,000+ entity setup plus €12,000/year maintenance. The EOR pays for itself for the first 4+ years, and you can start hiring immediately instead of waiting half a year.

An EOR like Hire with Columbus handles employment contracts, monthly payroll, social contributions, income tax, mandatory benefits, those extra salary payments, and keeps you compliant with Lithuania's worker-friendly employment laws.

Ready to hire in Lithuania without the legal complexity? Get started with Hire with Columbus.

What employment types can you use?

You've got three ways to bring someone onboard in Lithuania. Here's how the costs and risks compare.

How can you hire in Lithuania?

Before diving into contract types, you need to decide your hiring approach. Each option has different costs, timelines, and complexity levels.

Set up your own entity

This means incorporating a Lithuanian subsidiary and handling everything yourself. You'll pay €15,000-25,000 upfront for incorporation, legal setup, and initial compliance costs. Then expect €2,000-4,000 monthly for accounting, payroll systems, HR infrastructure, and ongoing legal requirements.

The timeline? Four to six months before you can legally employ anyone. You'll need tax registration, social security setup, payroll systems, and compliance frameworks.

This makes sense if you're planning to hire 20+ people long-term and want permanent market presence. But most companies underestimate the ongoing complexity of Lithuanian employment law, tax filings, and HR requirements.

Hire contractors/freelancers

You can start immediately, but Lithuania's labor authorities are strict about misclassification. If someone works like an employee (fixed schedule, company equipment, integrated into your team), they legally are an employee.

Misclassification fines start at €2,900 per violation, plus back taxes and social contributions. We've seen companies hit with €50,000+ penalties for treating employees as contractors.

Use this approach only for genuine project work under six months with specialized skills. Think: website redesign, market research, or technical consulting.

Note: Hire with Columbus also handles compliant contractor agreements and payments if you need legitimate freelancer relationships.

Use an employer of record (recommended)

Hire with Columbus becomes the legal employer in Lithuania while you manage day-to-day work and performance. We handle employment contracts, payroll, tax compliance, benefits, and all legal requirements.

Cost: $179/month per employee. Timeline: 2-3 days from decision to signed contract.

The math: Five employees cost $895/month through an EOR versus €25,000+ entity setup plus monthly overhead. You'd need to run payroll for 28+ months before breaking even on entity costs.

This works perfectly for 1-50 employees, testing the Lithuanian market, or building multi-country teams without entity complexity.

Employment contract types in Lithuania

Once you've chosen your hiring approach, you need the right contract type. Lithuania recognizes several employment arrangements with different rules and restrictions.

Permanent contracts (indefinite duration)

This is your standard full-time employment contract with no end date. Use this for core team members you plan to keep long-term.

Lithuanian employees expect permanent contracts for regular roles. It signals job security and career growth potential. You can still terminate with proper notice (1-4 months depending on tenure), but you can't just let the contract expire.

Permanent contracts include full benefits: 28 days paid vacation, sick leave, parental leave, and standard social protections.

Fixed-term contracts

These contracts have specific end dates, typically 6-24 months. You can use them for project work, seasonal roles, or covering maternity leave.

Important restrictions: You can only renew fixed-term contracts once. After that, they automatically become permanent. Total duration can't exceed five years including renewals.

Don't use fixed-term contracts to avoid permanent employment obligations. Lithuanian courts will convert them to permanent if the work is ongoing and integral to your business.

Part-time contracts

Part-time employees work less than 40 hours per week but get proportional benefits and protections. They're entitled to the same hourly wage, vacation days (pro-rated), and social security coverage.

This works well for specialized roles, senior consultants, or employees transitioning to retirement. Part-time employees can work flexible schedules as long as you document the arrangement clearly.

Probationary periods

All employment contracts can include probationary periods: up to one month for contracts under one year, up to four months for longer contracts.

During probation, either party can terminate with just three days' notice. After probation ends, standard notice periods apply (1-4 months based on tenure).

Use probationary periods strategically. They're your chance to evaluate performance and cultural fit with minimal termination complexity.

How Hire with Columbus handles contracts

We draft all employment contracts in Lithuanian and English, ensuring compliance with local labor law. Our legal team stays current with employment regulations, so your contracts include required clauses and protections.

For permanent employees, we handle the full employment lifecycle: onboarding paperwork, benefit enrollment, payroll setup, and eventual offboarding if needed.

We also manage fixed-term contracts and conversions to permanent status when appropriate. Our system tracks contract renewal dates and automatically flags when fixed-term arrangements need to become permanent under Lithuanian law.

The result: You focus on managing your team while we handle the legal complexity of Lithuanian employment contracts.

How does payroll and taxation work?

Your €60,000 employee actually costs €82,800 per year in Lithuania. That 38% markup comes from employer social contributions, which hit harder than most companies expect when they're budgeting their first Lithuanian hire.

Lithuania runs on a straightforward monthly payroll cycle, but the tax structure has some quirks you'll need to plan for. The good news? Once you understand the breakdown, it's fairly predictable.

Income tax brackets

Lithuanian employees pay progressive income tax on their salaries. Here's how the brackets work for 2025:

The tax-free threshold means your lower-paid employees keep more of their salary, but anyone earning above €20,519 annually hits that 32% rate pretty quickly.

Social security contributions

This is where the real employer costs add up. Lithuania splits social security between employer and employee contributions across several categories:

Your employee pays 28.5% of their gross salary in social contributions. You pay an additional 9.29% on top of their gross salary.

Monthly payment schedule

Lithuanian employees expect their salary by the 10th of the following month. Most companies pay between the 5th and 10th to stay safe.

You'll also need to budget for:

• 13th month salary: Required annual bonus equal to one month's salary, typically paid in December
• Holiday allowance: Additional payment when employees take annual leave (usually 50% of daily salary rate)
• Public holiday premiums: Double pay for work on public holidays

Total employment cost breakdown

Let's break down what that €60,000 salary actually costs you annually:

• Base salary: €60,000
• Employer social contributions (9.29%): €5,574
• 13th month salary: €5,000
• Holiday allowance (estimated): €1,200
• Administrative costs: €1,026

Total annual cost: €72,800

That doesn't include recruitment, equipment, or any company benefits you might offer on top.

Payroll cycle and deadlines

Lithuania operates on strict monthly deadlines that'll bite you if you miss them:

• Salary payment: By 10th of following month
• Tax declarations: By 15th of following month
• Social contribution payments: By 15th of following month
• Annual tax returns: By March 31st

Miss these deadlines and you're looking at penalties starting at €145 for late payments, plus 0.03% daily interest on unpaid amounts.

Common payroll mistakes

The biggest trap? Miscalculating social contributions. Lithuania's rates change periodically, and using outdated percentages will leave you scrambling to cover shortfalls during tax audits.

Another gotcha: forgetting to account for the 13th month salary in your annual budget. That extra month hits in December when you're least expecting it.

Many companies also mess up holiday pay calculations. Lithuanian employees get premium rates during their vacation time, not just their regular salary.

Setting up payroll in Lithuania yourself:

• Local accounting firm: €800-1,200/month
• Payroll software: €150-300/month
• Compliance risk: Fines up to €2,900 for errors
• HR expertise needed: €45,000+ salary

With Hire with Columbus: $179/month per employee, fully compliant, zero risk.

We handle all the tax calculations, deadline management, and regulatory updates so you don't have to become a Lithuanian payroll expert overnight.

What benefits and leave are required?

Lithuania employees get 28 calendar days minimum vacation, and here's the catch – unused days must be paid out if they can't take them. You can't just let vacation disappear at year-end.

Most companies actually give 20 working days (which equals 28 calendar days), but you'll see tech companies offering 25-30 working days to stay competitive. Vacation accrues monthly, so new employees earn about 2.3 days per month.

Annual vacation

The legal minimum is 28 calendar days, but this gets confusing because Lithuania counts weekends. Most HR systems track 20 working days instead, which equals the same thing.

Employees can carry over unused vacation to the next year, but only until June 30th. After that, you either pay it out or lose it. The payout rate is their average daily wage over the last 12 months.

You can't force employees to take vacation during their first 6 months, but after that, you can schedule it with proper notice. Most companies require employees to take at least 14 consecutive days once per year.

Sick leave

Employees get unlimited sick leave, but the payment structure changes based on duration. The first 2 days are unpaid (unless your company policy says otherwise), then social insurance kicks in.

Days 3-7 are paid by the employer at 80% of average daily wage. From day 8 onwards, social insurance (Sodra) pays 66.7% of the employee's average wage. Most companies top this up to 100% for the first few weeks.

You'll need a doctor's certificate for any sick leave longer than 3 days. For shorter periods, the employee's written statement is enough. Don't try to verify short sick leave – it's not worth the legal risk.

Parental leave

Maternity leave: 18 weeks total (126 calendar days) at 100% of average wage, paid by social insurance. Women must take at least 14 weeks, but can start up to 8 weeks before the due date.

Paternity leave: 4 weeks at 100% pay, also covered by social insurance. Fathers can take this anytime during the first year after birth.

Parental leave: After maternity/paternity leave ends, either parent can take additional parental leave until the child turns 2. This pays 54.31% of average wage for the first year, then a flat €122 monthly for the second year.

The flexibility here is actually pretty good – parents can split the leave, work part-time, or alternate who's on leave.

Public holidays 2025

Lithuania has 13 public holidays in 2025. If employees work these days, you pay double their normal rate.

When holidays fall on weekends, they don't get moved to Monday – employees just lose the day off. This happens with New Year's Day and Epiphany in 2025 (both fall on weekends).

Mandatory benefits

Three benefits are non-negotiable: social insurance contributions, health insurance, and unemployment insurance.

Social insurance (Sodra):

• Employee pays: 19.5% of gross salary
• Employer pays: 1.77% of gross salary
• Covers pensions, sick leave, maternity/paternity benefits

Health insurance:

• Employee pays: 6.98% of gross salary
• Employer pays: 6.98% of gross salary
• Covers public healthcare system

Unemployment insurance:

• Employee pays: 0.54% of gross salary
• No employer contribution required

Total mandatory contributions add 15.23% to your employment costs (employer portion only). Employees lose about 27% of gross salary to these deductions.

Optional competitive benefits

Most Lithuanian companies offer these extras to attract talent:

Health insurance: Private medical insurance costs €50-150 per employee monthly. Popular with tech workers who want faster specialist appointments.

Meal vouchers: Up to €6 daily, tax-free for employees. Costs you about €125 monthly per employee but saves them income tax.

Life insurance: Usually 12-24 months of salary coverage. Costs 0.1-0.3% of payroll annually.

Transportation: Monthly public transport passes (about €30) or parking allowances. Some companies offer bike leases or car allowances for senior roles.

Flexible benefits platforms: Companies like Benefit Systems let employees choose between gym memberships, cultural events, or shopping vouchers. Budget €100-200 monthly per employee.

Common benefit mistakes

Vacation calculation errors: Companies mess up the working days vs calendar days math constantly. Use 20 working days as your baseline, not 28.

Sick leave overpayment: Don't pay the first 2 days unless your policy specifically promises it. You're not legally required to.

Holiday pay confusion: Double-time applies to work ON holidays, not the day before or after. Some companies pay extra unnecessarily.

Sodra registration delays: Register employees with social insurance before their first day, not during onboarding. Late registration means €290-580 fines per employee.

Missing meal voucher optimization: This benefit saves employees significant tax money but many companies skip it. It's an easy retention win.

Administering these benefits correctly requires local HR expertise (€45k+ annual salary), benefits software (€200+ monthly), and legal review (€5k+ yearly). Miss mandatory contributions and fines start at €290 per employee.

Hire with Columbus handles all benefit administration, Sodra registration, and compliance monitoring for $179/month per employee. We calculate vacation accruals, process sick leave payments, and ensure you never miss contribution deadlines.

What are the compliance requirements?

Written contracts are mandatory in Lithuania. Verbal agreements don't count and expose you to claims. Miss one mandatory contract clause and the entire employment agreement can be voided, leaving you liable for back payments and penalties.

Employment contract requirements

Every employment contract in Lithuania must be in writing and include specific mandatory clauses. The contract must specify job duties, workplace location, working hours, salary amount, and vacation entitlement. You'll also need to include probation period terms (if applicable) and termination notice requirements.

Contracts must be signed before the employee starts work. If you miss this deadline, you're looking at potential fines and the contract being deemed invalid. The good news? You can write contracts in English, but employees have the right to request a Lithuanian translation.

Registration isn't required with government authorities, but you do need to notify the State Social Insurance Fund (Sodra) about new hires within three days of employment start.

Probation periods

Standard probation periods in Lithuania run three months for most positions. You can extend this to six months for managerial roles, but that's the absolute maximum. Don't try to push it longer - it won't hold up legally.

During probation, either party can terminate with just three days' notice. No severance required, no lengthy consultation process. After probation ends, full employment protections kick in and termination becomes much more complex.

Working time regulations

The standard work week is 40 hours across five days. Employees can't work more than eight hours per day or 48 hours per week (including overtime). Rest breaks are mandatory - at least 30 minutes for shifts over six hours.

Overtime pays at 1.5x regular rate for the first two hours, then 2x rate after that. Weekend work gets automatic 2x pay. You're required to keep detailed records of all working hours, breaks, and overtime - labor inspectors will ask for these during audits.

Notice periods

Notice requirements depend on how long someone's been with your company:

These are minimums - your contract can specify longer periods. Notice must be given in writing, and employees continue working (and getting paid) during the notice period unless you agree otherwise.

Termination process

You can't just fire someone without cause in Lithuania. Valid reasons include poor performance, misconduct, redundancy, or company restructuring. For performance issues, you need documented warnings and improvement plans first.

Redundancy requires 45 days advance notice to employees and trade unions (if applicable). For companies with over 20 employees making multiple redundancies, you'll need approval from the Lithuanian Labour Exchange.

Immediate termination is only allowed for serious misconduct like theft, violence, or criminal activity. Even then, you need clear evidence and proper documentation.

Severance pay requirements

Severance depends on the reason for termination and length of service:

No severance is required for resignations, termination during probation, or dismissal for serious misconduct. These amounts are based on average monthly salary over the last three months.

Data protection requirements

Lithuania follows GDPR rules strictly. You need explicit consent to collect employee data beyond what's necessary for employment. Personal files must be kept secure, and employees have the right to access their data anytime.

Background checks require written consent and can only cover job-relevant areas. You can't ask about pregnancy, family plans, or political affiliations during interviews. Violate these rules and you're facing GDPR fines up to €20 million or 4% of global revenue.

Common compliance mistakes

Invalid employment contracts happen when companies miss mandatory clauses or use outdated templates. This voids the entire agreement and can trigger back payment claims for benefits and overtime.

Wrong termination processes are expensive. Skip the consultation period or lack proper documentation, and you'll face wrongful dismissal claims. Employees can demand reinstatement plus compensation for lost wages.

Many companies also mess up overtime calculations or fail to provide mandatory rest periods. Labor inspectors are getting more aggressive about auditing international companies, especially those without local HR expertise.

Penalties for violations

Common compliance failures in Lithuania carry serious financial consequences:

• Invalid employment contract: €3,000-€6,000 fine plus contract deemed void
• Improper dismissal: 6-12 months' salary compensation plus potential reinstatement order
• Missing overtime payments: Back wages owed plus €2,000-€5,000 penalty
• GDPR violations: Up to €20 million or 4% of global revenue
• Working time violations: €1,500-€3,000 per employee affected
• Failure to register employees: €500-€1,500 per unreported worker

Labor court cases in Lithuania typically take 6-18 months and legal fees run €5,000-€15,000 even if you win. Employees who prove wrongful dismissal often get their jobs back plus full back pay for the entire period.

Hire with Columbus ensures every contract and termination follows Lithuania law exactly. We handle all the mandatory clauses, notice periods, and documentation so you don't have to worry about these penalties. At $179/month per employee, it's a lot cheaper than dealing with compliance violations after the fact.

What has changed recently?

Lithuania's been busy updating its employment rules in 2025, and some of these changes will directly impact how you hire and manage employees there.

The biggest shift? Lithuania raised its minimum wage to €924 per month in January 2025, up from €840 in 2024. That's a 10% jump, so if you're budgeting for entry-level roles, you'll need to factor in this increase. The hourly minimum also went up to €5.63.

New remote work regulations

Lithuania finally wrote down proper remote work rules in early 2025 after years of companies making it up as they went post-pandemic. Employees now have the legal right to request remote work, and employers must provide written justification if they refuse.

If an employee works remotely for more than 20% of their time, you need a separate remote work agreement. This covers equipment provision, internet reimbursement, and health and safety requirements for home offices.

The new rules also clarify cross-border remote work within the EU. Lithuanian employees can now work up to 183 days per year from another EU country without triggering tax complications. But you still need to track this carefully.

Updated parental leave benefits

Lithuania expanded its parental leave system in 2025, making it more flexible for working parents. Parents can now take parental leave part-time, working reduced hours while receiving partial benefits.

The leave duration increased to 24 months total (up from 18), and fathers now get dedicated paternity leave of 30 calendar days. The compensation rate also improved. Parents receive 100% of their salary for the first 12 months, then 75% for the remaining period.

Digital nomad visa impact

Lithuania launched its digital nomad visa program in late 2024, and by mid-2025, it's already affecting the local job market. The visa allows non-EU remote workers to live in Lithuania for up to a year while working for foreign companies.

This means more competition for housing and services in Vilnius and Kaunas, which could impact your cost calculations for relocating employees. On the flip side, there's a larger pool of international talent already in the country if you're looking to hire locally.

Tax administration changes

Lithuania's tax authority (VMI) rolled out new digital reporting requirements in 2025. Employers must now submit payroll data monthly instead of quarterly, and the deadline moved to the 15th of the following month.

The good news? The new system is more automated and catches errors faster. The annoying part? You'll need to update your payroll processes if you're running payroll in-house. With an EOR like Hire with Columbus, we handle all these reporting changes automatically, so you don't have to worry about missing deadlines or formatting requirements.

Collective bargaining updates

Lithuania updated its collective bargaining framework in 2025, making it easier for trade unions to negotiate sector-wide agreements. While this mainly affects larger industries, it could impact salary expectations and working conditions across various sectors.

The construction, manufacturing, and transport sectors already have new collective agreements in place with higher wage floors than the national minimum. If you're hiring in these industries, expect salary expectations to be 15-20% higher than previous years.