Hire in Lithuania through our Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire employees in countries where they don't have a legal entity, effectively expanding their global reach without the need to establish a local subsidiary or navigate complex international employment laws.

For a country like Lithuania, with its growing economy and strategic location in northeastern Europe, EORs play a crucial role in facilitating international business operations and attracting foreign investment. They provide a bridge between global companies and the local workforce, ensuring compliance with Lithuanian labor laws and regulations while simplifying the hiring process for foreign entities.

How Does EOR Work?

The EOR model operates through a series of interconnected steps:

1. Client partnership: A company (the client) partners with an EOR to hire employees in Lithuania.

2. Employment contract: The EOR becomes the legal employer of the workers in Lithuania, handling all formal employment paperwork and contracts.

3. Payroll and benefits: The EOR manages payroll, tax withholdings, and benefits administration in accordance with Lithuanian laws.

4. Compliance: The EOR ensures all employment practices adhere to local regulations, including work permits, visa requirements, and labor laws.

5. Day-to-day management: While the client company directs the employees' daily work activities, the EOR handles HR-related issues and serves as the point of contact for employment matters.

Benefits of Using an EOR

Employing an EOR in Lithuania offers several advantages for international companies:

1. Rapid market entry: Companies can quickly establish a presence in Lithuania without the need to set up a legal entity, saving time and resources.

2. Compliance assurance: EORs have in-depth knowledge of Lithuanian labor laws, ensuring full compliance and minimizing legal risks for the client company.

3. Cost-effectiveness: By eliminating the need for a local subsidiary, companies can reduce overhead costs associated with maintaining a physical presence in Lithuania.

4. Flexibility: EORs allow companies to scale their operations in Lithuania up or down as needed, without long-term commitments.

5. Local expertise: EORs provide valuable insights into the Lithuanian business culture, helping companies navigate local customs and practices.

6. Risk mitigation: The EOR assumes much of the legal responsibility for employment, reducing the client company's exposure to potential employment-related disputes.

7. Focus on core business: By outsourcing HR and administrative tasks to the EOR, companies can concentrate on their primary business activities in Lithuania.

8. Access to talent: EORs can help companies tap into Lithuania's skilled workforce, particularly in sectors like IT, finance, and manufacturing.

By leveraging the services of an EOR, international companies can effectively expand their operations into Lithuania, taking advantage of the country's strategic location, growing economy, and talented workforce while minimizing administrative burdens and compliance risks.

Lithuania's employment landscape is characterized by a highly educated workforce, particularly strong in STEM fields, with a growing service sector and a significant manufacturing presence. The country faces challenges such as an aging population, emigration of skilled workers, and a mismatch between educational outcomes and labor market needs. Despite these challenges, Lithuania's workforce is known for its adaptability and increasing English proficiency, especially among younger generations in urban areas.

Overview of Labor Laws

Lithuania's labor laws are designed to protect both employees and employers, aligning with European Union standards. Key aspects include:

• A standard 40-hour workweek with provisions for overtime
• Minimum of 20 working days of paid annual leave
• Maternity leave of 126 calendar days and paternity leave of 30 days
• Protection against discrimination and unfair dismissal
• Collective bargaining rights for employees

Employers must comply with these regulations, ensuring fair treatment and safe working conditions for their workforce.

Cultural Considerations

When operating in Lithuania, it's crucial to understand and respect local cultural norms:

• Work ethic: Lithuanians are known for their strong work ethic and value diligence.
• Communication: Direct communication is appreciated, but maintain a degree of formality, especially in initial interactions.
• Hierarchy: While organizational structures are becoming less rigid, there's still respect for authority and seniority.
• Work-life balance: There's growing recognition of the importance of leisure time and family commitments.
• Regional differences: Workplace culture may vary between urban centers like Vilnius and smaller towns.

Adapting to these cultural nuances can significantly improve workplace relationships and overall business success.

Challenges of Direct Hiring

Direct hiring in Lithuania can present several challenges:

1. Skill shortages: Despite high education levels, there's often a mismatch between available skills and market needs.
2. Competition for talent: With ongoing emigration, retaining skilled workers can be difficult.
3. Language barriers: While English proficiency is increasing, it may still be a challenge in some sectors or regions.
4. Regulatory compliance: Navigating Lithuania's labor laws and EU regulations can be complex for foreign employers.
5. Cultural adaptation: Understanding and adapting to local work culture and communication styles is crucial but can be challenging.
6. Administrative burden: Managing payroll, taxes, and benefits in compliance with local laws can be time-consuming and complex.

These challenges highlight the potential benefits of partnering with a local expert or considering alternatives like using an Employer of Record service when entering the Lithuanian market.

Lithuania's payroll and tax system is designed to support both employers and employees while contributing to the country's social welfare programs. The system involves various contributions and deductions, with specific responsibilities for both employers and employees. Understanding these components is crucial for businesses operating in Lithuania and for individuals working in the country.

Employer Contributions

Employers in Lithuania play a significant role in the country's social security system by making several mandatory contributions. These contributions are essential for funding various employee benefits and social programs.

Social Security Contributions

The primary contribution employers make is to the social security system, managed by the State Social Insurance Fund Board (Sodra). The rates vary depending on the type of employment contract:

• For Permanent Employment Contracts: 1.77% of the employee's gross salary
• For Fixed-Term Employment Contracts: 2.49% of the employee's gross salary

These contributions cover a range of benefits, including pensions, sickness benefits, maternity/paternity benefits, unemployment benefits, and disability benefits.

Additional Contributions

Employers are also required to make contributions to two other funds:

1. The Guarantee Fund: 0.16% of the employee's gross salary This fund ensures basic payments to employees in case of company bankruptcy.

2. The Long-term Employment Benefit Fund: 0.16% of the employee's gross salary This fund supports severance payments for long-serving employees who lose their jobs.

It's important to note that as of 2023, there are no contribution ceilings for these mandatory contributions in Lithuania.

Employer Responsibilities

Employers in Lithuania have several key responsibilities regarding payroll and taxes:

1. Calculating and withholding both employee and employer social security contributions
2. Transferring these contributions to the relevant authorities (Sodra)
3. Ensuring compliance with all tax and social security regulations

Employee Contributions

Employees in Lithuania also contribute to the social security system and are subject to income tax. Understanding these contributions is essential for both employees and employers.

Income Tax

Lithuania employs a progressive income tax system with two main rates:

• 20% on annual taxable income up to 60 average monthly salaries (€90,246 in 2023)
• 32% on annual taxable income exceeding this threshold

Social Security Contributions

Employees are required to make the following social security contributions, which are withheld from their gross salary:

• Pension: 8.72%
• Sickness: 1.99%
• Maternity: 1.81%
• Health insurance: 6.98%

Non-Taxable Income (Tax-Free Amount)

Employees can benefit from a Non-taxable Income Amount (NTA), which reduces their taxable income. The NTA is calculated based on the employee's income level and ensures a minimum level of tax-free income.

Additional Deductions

Employees may be eligible for certain deductions from their taxable income, including:

• Life insurance premiums (up to €1,500 annually)
• Pension fund contributions (up to €1,500 annually)
• Expenses for home renovation, car repairs, and nursing services (up to €2,000 annually)

It's important to note that the total amount of eligible deductions cannot exceed 25% of the employee's taxable income.

Understanding these various components of Lithuania's payroll and tax system is crucial for both employers and employees. It ensures compliance with local regulations and helps in effective financial planning. As with any tax system, it's advisable to consult with local tax experts or authorities for the most up-to-date information and guidance tailored to specific situations.

Lithuania offers a comprehensive benefits package for employees, combining mandatory benefits required by law with optional perks that employers can provide to attract and retain talent. As an Employer of Record (EOR), Rivermate manages these benefits, ensuring compliance with local regulations while allowing companies to offer competitive packages to their workforce in Lithuania. This approach simplifies the process for businesses expanding into the Lithuanian market, handling the complexities of benefits administration and allowing them to focus on their core operations.

Mandatory Benefits

• Social Security Contributions:

  • State pension coverage
  • Sickness and unemployment benefits
  • Funded through employer and employee contributions

• Paid Time Off:

  • Minimum 20 working days of annual leave (35 days for single parents with children under 14)
  • 13 paid national holidays
  • Sick leave coverage (employer pays first two days, then state coverage)

• Maternity and Parental Leave:

  • 70 days of maternity leave before childbirth
  • 56 days of maternity leave after childbirth
  • 180 days of shared parental leave

Optional Benefits

• Health and Wellness:

  • Private health insurance (including dental and vision care)
  • Life and accident insurance

• Financial Security:

  • Private pension plans
  • Flexible benefits packages

• Work-Life Balance & Well-being:

  • Flexible working hours
  • Remote work options
  • Training and development programs
  • Perks such as free meals or gym memberships

By leveraging an EOR like Rivermate, companies can easily navigate the mandatory benefits landscape while also exploring optional benefits to create attractive compensation packages. This approach ensures compliance with Lithuanian labor laws and helps businesses compete effectively for top talent in the local market.

The process of termination and offboarding in Lithuania is governed by specific labor laws that protect both employers and employees. These regulations ensure fair treatment and provide a structured approach to ending employment relationships.

Grounds for Termination

In Lithuania, employers can lawfully terminate an employee's contract based on two main categories:

1. Dismissal with Employee's Fault: This includes serious misconduct such as:

   • Theft
   • Violence
   • Intoxication at work
   • Repeated failure to perform job duties
   • Absence from work without a valid reason

2. Dismissal without Employee's Fault: This covers situations like:

   • Redundancy or company restructuring
   • Employee's inability to perform job duties due to health reasons or lack of qualifications
   • Company liquidation or bankruptcy

Notice Requirements

The notice period for termination varies depending on the reason for dismissal and the employee's tenure:

• For dismissal without employee's fault:

  • Most employees: Minimum one month's notice
  • Employees with less than one year of service: Two weeks' notice
  • Employees within five years of retirement age: Double the standard notice period

• For dismissal with employee's fault:

  • Typically three working days' notice

Special categories of employees may be entitled to longer notice periods, up to triple the standard period. All notices must be communicated to the employee in writing.

Severance Pay

In cases of dismissal without the employee's fault, Lithuanian law mandates severance pay based on the employee's length of service:

• Less than one year: No severance pay
• 1-5 years: One average monthly salary
• 5-10 years: Two average monthly salaries
• 10-20 years: Three average monthly salaries
• Over 20 years: Six average monthly salaries

By following these guidelines, employers in Lithuania can ensure a smooth and legally compliant termination and offboarding process, while also respecting the rights of their employees.

Lithuania, a Baltic nation with a growing economy, has become an attractive destination for foreign workers seeking opportunities in various sectors. As the country continues to develop, understanding the visa and work permit requirements is crucial for those planning to work in Lithuania.

Visa Requirements

Foreign workers from non-EU/EEA countries typically need to obtain a visa before entering Lithuania. The most common types of visas for work purposes are:

1. National (D) Visa: This long-term visa allows stays of up to 12 months and is often used while waiting for a residence permit.

2. Schengen (C) Visa: For short-term stays of up to 90 days within a 180-day period.

EU/EEA citizens do not need a visa to enter or work in Lithuania.

Work Permit Requirements

The work permit process in Lithuania varies depending on the worker's nationality and the nature of their employment:

EU/EEA Citizens

• No work permit required
• Must register their place of residence if staying longer than 3 months

Non-EU/EEA Citizens

• Generally require a work permit
• Exceptions include highly qualified workers, intra-corporate transferees, and certain professions

The work permit application process typically involves:

1. The employer obtaining a decision from the Lithuanian Labor Exchange
2. The employee applying for a temporary residence permit
3. Obtaining a multiple-entry national visa (D) if necessary

Temporary Residence Permit

Most foreign workers will need to apply for a temporary residence permit, which allows them to live and work in Lithuania for up to two years. The permit can be renewed if employment continues.

Blue Card

Highly qualified non-EU/EEA workers may be eligible for an EU Blue Card, which simplifies the process of working in Lithuania and other EU countries.

Understanding these requirements is essential for foreign workers planning to work in Lithuania. It's advisable to start the application process well in advance of the intended start date of employment, as processing times can vary. Employers and employees should also stay informed about any changes in immigration laws and regulations that may affect their situation.