Taxes and payrolls: the peculiarities of the Lithuanian labour market
Each labour market has some peculiarities. It may be tricky for foreigners to fully understand the payment methods, taxes and other related benefits. In TalentUp we are starting a series of different blog articles, one for each country. This article analyses the Lithuanian labour market.
General data about the Lithuanian labour market
| Minimum wage | 840€ |
| Payment basis | Monthly |
| Payment | Must be paid by the 10th of the following month |
| Maximum working hours a week | 40 hours |
| Maximum overtime hours a week | 8 hours – 12 hours |
| Working hours compensation | – Overtime compensation rate: 150% of the employee’s regular pay. – Overtime performed at night between 10 pm and 6 am compensation rate: 200% of the employee’s regular pay |
Payroll taxes in Lithuania
Social Security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.
| Contingencies | Employer % | Employee % |
| Social Insurance | 1.77% | |
| Social Insurance (up to a ceiling of 90,246 EUR) | 19.50% | |
| Social Insurance (in excess of 90,246 EUR) | 6.98% | |
| Total | 1.77% | 19.5% – 26.48% |
Once contributions are paid, employees need to pay an income tax that varies depending on their gross salaries.
| Gross salary | Income tax |
| Up to 101,094 EUR | 20% |
| Greater than 101,094 EUR | 32% |
Contingencies from self-employees
There are two ways to deduct expenses from income sourced from self-employment under an individual activity certificate:
- deduct expenses actually incurred and documented; or
- deduct 30% of the generated income (without documentation).
Example of net salary in Lithuania
As a reference, we use the average salary of a software engineer. In Lithuania, software engineers earn an average of 41,400 € per year.
| Employer | Employee | |||
| % | € | % | € | |
| Gross salary (annually) | 41,400€ | |||
| Social Insurance | 1.77% | 732.78€ | 19.50% | 8,073€ |
| Total | 732,78€ | 8,073€ | ||
| Income tax | 20% | 6665.4 | ||
| Net salary (annually) | 26,661.6 |
The employer contributes 732,78€ to social security and the employee, 8,073€.
After paying the income tax, the employee has a net salary of 26,661.60€, coming from a gross salary of 41,400€.
Unemployment regulation in Lithuania
Regarding employment regulations in Lithuania, it’s worth noting that the standard notice period for all employees who have worked for at least one year is 30 days. For those with less than one year of service, the notice period is reduced to two weeks.
In terms of severance pay, an employee who has worked for up to 12 months is entitled to receive one month’s salary. On the other hand, if an employee has worked for 20 years or more, they are entitled to six months’ salary as severance pay.
While probationary periods are not mandatory under Lithuanian law, it’s common practice for employers to impose a probationary period of three months for new hires.
Different kinds of leaves in Lithuania
The annual paid leave is 20 days, with three extra days if the employee has worked for the employer for more than 10 years. One day extra, for each five years worker after that.
There are 16 paid public holidays. The day before a public holiday, the working hours are reduced by one paid hour.
The first two days of illness are paid at 62.06% – 100% by the employer. From the third day, the National Social Insurance Fund (SODRA) will pay 62.06% of the average salary. The sick pay is only paid for working days. Should an employee take incapacity for work absence to care for a patient, they will be entitled to a payment of 65.94% paid directly by SODRA.
Paid parental leave
Maternity leave lasts for 126 days at 77.58% of the employee’s standard rate of pay. The minimum maternity leave is 240 euros.
Maternity leave can be extended for 2 weeks in the case of multiple or complicated births.
Paternity leave lasts for 30 days during the first 3 months after birth. It is also at a 77.58% rate.
Parental leave for up to one year is also available. It is at 100% during the first year, 70% in the second year, and 40% after that.
Other common Lithuanian benefits
| Benefit | % of companies with this benefit |
| Health insurance | 21.6 |
| Free snacks | 21.3 |
| Casual dress code | 19.5 |
| Gym | 19.1 |
| Free parking | 4.5 |
How to employ a Lithuanian worker
The main work authorization categories are the EU Intra-Company Transferee (ICT) Permit, suitable for transfers of managers, specialists, and trainees, and issued for up to three years; and the EU Blue Card, ideal for highly skilled local hires, and issued for up to three years.
Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service, which helps companies hire in countries where they do not have any offices.
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