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Labor Code in Lithuania

Global companies and entrepreneurs looking to expand their business operations in Central and Eastern Europe see Lithuania as a bright investment destination, especially in the ICT and fintech sectors. 

Along with local skilled talent and the free flow of the European Union labor force,  Lithuania is among the fastest-growing destinations in Europe for companies pursuing global expansion. 

Thus, the Lithuanian labor law has undergone a massive transformation in the last three decades in managing local business operations. From the centralized state-regulated regime to a more market-regulated liberal government, employers-employees can now determine work conditions on mutual agreement. 

The following page shares a detailed orientation on the new labor code in Lithuania and suggests compliance strategies for global companies looking to hire and manage local talents. 

Applicability of the Act

Lithuanian labor law and other employment regulations apply to all employment relationships in the territory of the Republic of Lithuania. 

To promote the competitiveness of small and micro-enterprises, the labor act rules in Lithuania apply to the employment relationships in a differentiated manner depending on the –

  • The exclusive nature of work 
  • The place of work 
  • Size of the employer, whether employing ten or more employees 

The labor act rules in Lithuania also apply differently to employees with managerial positions, like Managing Directors. For instance, the Lithuanian labor code provides non-standard rules regarding payment for overtime, etc. 

Further, the labor code in Lithuania emphasizes the following innovations in an employee-employer relationship: 

  • The principle of anti-discrimination, such that there are equal employment opportunities   
  • Respect for the employee’s family commitments to maintain a perfect work-life balance
  • Fairness and cooperation principle so that both employee and employer could defend their interest at the minimum time and expense 
  • The principle of correct information and protection of confidential information, such that all terms and conditions of employment are defined in the written contract 
  • The principles of protection of the employee’s data and the privacy of the employee’s personal life 

Employment Contract

In addition to popular types of employment contracts like indefinite-term contracts and fixed-term contracts, the labor code in Lithuania also introduces four new types of employment contracts as 

Project-based employment contract 

  • The employment agreement is on a project basis and is fixed at two years (for new employees) or five years (on replacing the existing contract). 

Job-sharing employment contract 

  • The employment agreement is based on two employees agreeing to share one job position for a single employer. 
  • The contract must contain the identity of the other employee, details on working hours, duration of the contract, etc.

Multiple-employer employment contract

  • The employment agreement is based on the premise of a single employee working for two or more employers. 
  • The contract must contain details on remuneration for working time. 

Apprenticeship employment contract 

  • This employment agreement is usually concluded between parties seeking to acquire new skills or qualifications required for a new profession.  
  • The maximum duration of the contract length is six months.

Usually, the employment contract shall include the following: 

  • Name of the employer and employee
  • Description of work
  • Location of work
  • Whether the employment is for a fixed or indefinite period
  • If the contract is for a definite period, then the duration of the contract 
  • Date of commencement
  • Working hours
  • Base salary, parameters for work performance, compensation, increased pay, and other payments
  • Reference to a collective agreement or the labor rulebook in practice
  • Daily and weekly working time

Probation period

Additionally, an employer can also include a probation period of a maximum of three months. The probationary period for fixed-term contracts of less than six months and executed after 1 August 2022 must be proportional to the contract duration (less than three months). 

Both employer and employee can terminate the contract in this period with at least three business days’ notice.  

Termination of employment contract

  • Employees can end the employment contract with a prior 20 calendar days’ notice to the employer, but it can be shortened or waived off through mutual agreement. 
  • Employees will no longer enjoy the right to withdraw their resignation notice within three working days if the employment contract has already been ended.

Key Provisions of the Act

Lithuanian employment rules are broadly based on the provisions of the Constitution of the Republic of Lithuania, international agreements like the ILO conventions, laws and regulations complementing the labor code in Lithuania, and regulatory requirements of collective agreements.

Following are the key provisions of the new Lithuanian labor code which entered into force on 1 July 2017.

Working hours 

  • Lithuanian working hours law sets a default working time of 40 hours per week and a maximum daily limit of eight hours a day. 
  • Average working hours per Lithuanian labor law, including overtime, is set at 48 hours per week. 
  • Maximum working hours per Lithuanian labor law, including overtime and additional work, cannot exceed 60 hours per week with a daily working hour limit of 12 hours. 
  • Lithuanian work week standard is five days. However, the labor code allows for flexible work schedules outlined in the employment contract. 

Remote work

  • Until recently, remote work was restricted to one-fifth of working time. 
  • The new amendment to the current labor code in Lithuania expands the scope of full-time remote work for certain sections like 
    1. Employees raising a child under eight years of age
    2. Employees with a disability or the responsibility to care for a family member 

Public holidays 

  • The labor code of Lithuania lists 11 public holidays (in total 13 calendar days) where employees are not obliged to report to work. 
  • Here is a breakdown of public holidays in Lithuania:
    1. January 01: New Year’s Day
    2. February 16: Restoration of the State Day
    3. March 11: Restoration of Independence Day
    4. April 18: Easter Monday
    5. May 01: Labor Day
    6. June 24: St John’s Day
    7. July 06: Anniversary of the Coronation of King Mindaugas
    8. November 01: All Saints’ Day
    9. November 02: All Souls’ Day
    10. August 15: Assumption Day
    11. December 25: Christmas Day

Leave schemes

The labor code in Lithuania mentions various instances of leaves that an employer must provide for their employees. This section covers all paid and unpaid leave schemes per the Lithuanian labor law:

Annual leave: 

  • Employees are granted annual leave after six months of continuous employment. 
  • An employee is eligible for an annual leave of at least 20 work days (24 work days in case of a six-day work week)
  • Employers could grant employees working under a greater nervous, emotional, and mental strain environment up to 58 calendar days of paid leave. 
  • This list of employees is approved by the Government and includes professionals such as teachers, university professors, some categories of medical servants, aviators, and other related professions.
  • Lithuanian employment rules prohibit employers from replacing paid annual leave with cash compensation. 
  • If an employee does not get annual leave due to termination or doesn’t take leaves, they shall be compensated in cash. This happens only when the employment contract is terminated, irrespective of its term. 

Maternity leave:

  • A female employee is eligible for a leave of 126 calendar days in Lithuania as paid maternity leave. 
  • Employees receive compensation from the State Social Insurance Fund per Lithuanian labor law, which equals 77.58% of the earnings
  • Typically, the maternity leave in Lithuania for foreigners or nationals is split into 70 calendar days before childbirth and 56 calendar days for post-natal care, extendable to 70 calendar days in case of complications. 

Child care leave:

  • Employers must give nursing breaks for at least 30 minutes every three hours. 
  • Employees with a disabled child under 16 years are entitled to an additional day of rest per month or a shortening of weekly hours by two hours. 
  • Employees with two or more children under 12 years are entitled to two additional days of rest per month or a shortening of weekly hours by four hours. 
  • In the latest amendment to the new Lithuanian labor code, employees with one child under 12 years can take one additional day of rest per month or shorten the working time by eight hours every three months. 

Sick leave: 

  • The labor act rules of Lithuania protect the job position of employees who become temporarily unavailable to work due to injury or sickness.
  • Employees should retain their job position if they were absent for not more than 120 successive days or not more than 140 days within the last 12 months.  

Education leave:

  • Lithuanian labor code grants employees three days of education leave to prepare for and pass each entrance examination to colleges and higher educational institutions. 
  • Interested employees are also eligible for sabbatical leave to complete a thesis or write a textbook.  
  • The employment contract or a collection agreement determines the compensation for education and sabbatical leave.

Payroll Obligations 

The employment law in Lithuania guides all employers to withhold income taxes and social securities contributions as part of payroll obligations. Employers must fulfill all social security returns electronically at the official portal monthly, i.e., on the 15th day of the following month. 

Employers calculate their payroll obligations in Lithuania as follows: 

  • A progressive income tax rate of 20%-32% applies to employees with a gross income of up to €90,246 and above. 
  • The employer withholds 19.5% and contributes 1.77% of each employee’s gross income, receiving up to €90,246 in a year. 
  • The proportion of social security contributions as per the labor regulations in Lithuania: 
    1. 8.72% – Pension social insurance
    2. 6.98% – Health insurance
    3. 2.09% – Sickness
    4. 1.71% – Motherhood social insurance
  • Employees receiving more than €90,246 annually contribute only 6.98% to health insurance premiums. 
  • Employers may explore the list of origin countries of their foreign employees that do not require to pay social security contributions in Lithuania. 

Minimum salary

  • The new labor code in Lithuania restricts the application of minimum salary only for unqualified work, which does not require any professional skill.
  • The minimum salary from January 1, 2022, is EUR 730 per month

Employee Termination

The labor law in Lithuania allows employers to terminate the employment contract through a prior notice period and severance pay as applicable. 

  • Employers terminating the employment contract due to a non-functional job role, disagreement after the business transfer or change in employment terms, the inability of the employee to reach the agreed results of work, or winding up business activities are obliged to provide a formal notice to employees before one month. 
  • The total duration of the notice period increases up to three times for employees: 
    1. Raising a child under 14 years of age or a disabled child under 18 years
    2. Entitled to the retirement pension in two years
  • Notice periods are doubled for employees entitled to a retirement pension in five years. 
  • Notice period reduces to two weeks if employment is less than one year. 
  • Employers terminating the employment contract based on any other reason will have to provide  
    1. Written notice within three business days 
    2. Severance pay of at least six average monthly salaries
  • Employers may not dismiss employees on maternity, paternity, or child care leave in such a manner. 

Workplace discrimination

The labor code in Lithuania now obliges employers with more than 50 employees to publish information related to psychological violence and implement ways to prevent it in the workplace. 

The code has defined what constitutes mobbing, violence, and harassment, including gender-based violence and harassment. 

Severance pay

Lithuanian labor code mandates severance payment of up to two average monthly salaries upon dismissal of an employee. However, employees who served less than one year are entitled to 0.5 of their monthly average wage.

Additionally, the labor regulations in Lithuania allow employees to adjust the severance pay based on the continuous length of employment if the dismissed employee is already receiving compensation from a particular state fund. 

Data protection & privacy regulations

Employers with over 50 employees are obliged per labor act rules in Lithuania to protect employees’ personal data and implement measures to promote it in the workplace. 

It is also the reason that Lithuanian labor law restricts employers from contracting third-party providers for background screening to formally check convicted criminal history and references. 

Penalties 

Lithuanian labor law also enforces specific penalties on employers to safeguard employee interests in various situations like  

  • Workplace safety – Employers must compensate for work-related injury or occupational disease. 
  • Unlawful dismissal – Employers are obliged to pay the average monthly salary for the period of forced absence from work.
  • Annual leave compensation – Compensation in cash for the unused annual leave upon termination of the employment contract 

Latest Amendments to the 2017 Lithuanian Labor Code

The national parliament recently passed more than 40 amendments to the present Lithuanian labor code which is implemented in a two-phased manner. Some of the critical amendments affecting the labor law in Lithuania are as follows: 

Effective from 1 January 2023

Notice period:

  • Employers terminating the employment contract without employees’ fault may extend the notice period three times the standard practice if the employee shows any of the listed severe diseases approved by the Minister of Health of the Republic of Lithuania.

Paternity leave

  • Presently, paternity leave in Lithuania is for a continuous 30 calendar days after childbirth, with the flexibility to choose until the child is one year old.  
  • After the amendment, fathers may split paternity leave in Lithuania into two parts. 

Parental leave

  • There is no shared parental leave in Lithuania where a portion of maternity leave is shared with the other spouse. 
  • Instead, the employment law in Lithuania offers non-transferable parental leave for each parent to take care of the child until 18-24 months. 
  • Both parents can avail of shared parental leave in Lithuania for up to two months, either continuous or in parts, but not simultaneously. 

Compliance Strategies for Employers

Any employer looking to hire and recruit local talents in Lithuania must base its compliance strategy on local labor regulations. 

Employers must execute the employment laws in Lithuania in the employment contract so that both employer and employee can exercise their rights and defend their interests at the minimum time and expense of the other party. 

Here are recommended compliance strategies for any employers to avoid legal liabilities while hiring local talents in Lithuania:    

Delegating an in-house HR manager:

  • Hiring local talents involves drafting legally compliant contracts, managing payroll obligations, offering social & legal benefits as per Lithuanian labor law, and more.
  • Employers can develop an in-house HR team with special knowledge of the labor codes in Lithuania. 
  • HR teams usually hire and manage local employees and ensure a smooth onboarding process.  

Outsourcing a third-party firm:

  • Global companies looking for multiple expansions can outsource the onboarding and payroll team management to a legally compliant service provider like Multiplier
  • Some third-party firms provide compliance strategies for hiring in Lithuania with solutions like automated employment contracts, multi-lingual contracts, and compliant expansion per the Lithuanian labor code. 

How Can Multiplier Help?

Multiplier offers SaaS-based PEO/EOR solutions that make international & local hiring easier for employers. Our expert team provides services like drafting legal documents and managing payroll, taxes, and other benefits per the labor act rules and regulations in Lithuania.  

For instance, the labor code mentions all HR-related documents like employment contracts and policies to be drawn up in the Lithuanian language or other languages acceptable to the parties. 

Multiplier’s multi-lingual contract services are highly recommended in this context. We can also quicken the pace of hiring and recruitment through automated employment contracts, complying 100% with the Lithuanian employment rules. 

Further, the Lithuanian labor code is a dynamic document that periodically changes. Keeping track of all such amendments becomes a cumbersome process in the long run. Here is where Multiplier can support global companies in their pursuit of compliant expansion in over 150+ countries, including Lithuania. 

Frequently Asked Questions

thuanian labor laws prohibit the employment of persons under 16 years, and the standard legal age to work in Lithuania is 18 years and above. Employers can still hire individuals under 16-18 for light work that meets their physical abilities.

Resolution No 138 of the Government of the Republic of Lithuania dated 29 January 2003 is the related legal basis.

Employer registration in Lithuania can take up to 12 weeks, depending on the required time to acquire the various documents. Only after registering a local entity can businesses hire and manage employees in Lithuania. The best alternative to this is to partner with EOR/PEO solutions like Multiplier.

Lithuanian employment rules grant the employees and their representatives the right to organize and manage strikes. However, the law also mandates the employee unions to give at least seven days of written notice to the employer before the intended strike.

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