Thinking about hiring in Lithuania? You’re in good company. With a strong digital economy, multilingual talent, and a business-friendly environment, Lithuania is quickly becoming a go-to destination for international hiring. But to build a compliant, effective team, it’s important to understand how local employment laws, taxes, and cultural norms shape the hiring process.

This guide breaks it all down, whether you’re hiring your first Lithuanian employee or expanding an existing global team. From contracts and payroll to visas and vacation days, we’ve got you covered.

Table of Contents show

How to Hire Employees in Lithuania

Hiring in Lithuania can be a smart move for businesses looking to tap into a skilled, tech-savvy workforce. But before you onboard your first employee, you’ll need to decide how you want to hire, and how much local infrastructure you’re ready to manage.

Companies typically hire in Lithuania in one of three ways:

Setting Up a Local Entity

Establishing a Lithuanian legal entity allows for direct hiring and full control over operations. However, it involves registering with tax authorities, setting up local payroll, and maintaining compliance, making it better suited for businesses with long-term plans in the region.

Working with an Employer of Record (EOR)

An EOR acts as the legal employer for your team in Lithuania, handling contracts, payroll, tax reporting, and local compliance on your behalf. You still manage day-to-day work, while the EOR keeps everything running smoothly behind the scenes. It’s a fast, low-risk way to enter the market.

Hiring Independent Contractors

If flexibility is a top priority, hiring contractors may seem appealing. But misclassification risks are real. If a contractor works under conditions that mirror a full-time employee, your company could face fines or penalties for non-compliance.

Choosing the right hiring method depends on your goals, timeline, and how hands-on you want to be with local operations.

2025 Update — New Restrictions on Lithuania Employer of Record

As of 2025, Lithuania Employers of Record (EoRs) are explicitly included under Lithuania’s quota system for employing foreign nationals. This means EoR arrangements must now adhere to the stricter quota requirements, and they cannot bypass the country’s caps on hiring third-country nationals. Given that the authorities have reduced the overall quota (from 40,250 to 24,830)and eliminated sector-specific allowances, it may now be more difficult to use a Lithuania EOR.

Any EOR that fails to comply could receive fines reaching several times the minimum monthly salary, and authorities can impose additional penalties such as banning foreign hires for a year or labeling companies “unreliable” in a broader regulatory sense. 

Get in touch with Remote People to see if a Lithuania EOR arrangement will still work for your company, or whether you would be better to use an EOR service in neighbouring states like Latvia or Estonia. 

Ready to get started with a Lithuania EOR?

Let us handle the hiring, compliance, and payroll complexities in Lithuania while you focus on growing your team.

  • Hire employees in Lithuania with a Lithuania EOR
  • No local entity is needed
  • Pricing starts at USD 199 per employee
  • Remote People can also help you find the best talent in Lithuania

👉 Get Your Customized Lithuania EOR Proposal Today!

Lithuania EOR vs Legal Entity in Lithuania

Lithuania is often a preferred country for starting a business due to its strategic location, favorable business environment, and EU membership. This raises the question, what is preferable for Lithuania expansion and hiring, setting up an entity, or a Lithuania EOR service?

Lithuania has simplified the process of business incorporation, whether you are a domestic or a foreign investor. The first part involves determining the legal structure that is most appropriate for your business operations. The most common business structures in Lithuania are sole proprietorship, private limited liability company (UAB), and public limited liability company (AB).

The next step is naming your business and confirming whether the chosen name is available through the Lithuanian Centre of Registers or Registrų Centras. Also, depending on the business structure, you’ll need to draft and notarize specific documents, including Articles of Association for a limited liability company, Partnership Agreements for partnerships, and Founder’s Resolution for sole proprietorships.

For a Private Limited Liability Company (UAB), the minimum share capital required is €2,500, and you will be required to show proof of this deposit during the registration process. The next step is submitting your business application to the Registrų Centras. You will also be required to produce identification of all the founders and shareholders, the business address, and a registration fee. Generally, registration takes 2 to 5 business days. Every legal entity in Lithuania is also required to register with the State Tax Inspectorate (VMI) for a tax identification number (TIN).

An EOR relieves foreign businesses of this process by assuming the legal responsibility for employment compliance and payroll in Lithuania. This option is most attractive for companies that are initially entering the market and/or do not have many employees. They become the legal employer responsible for payment of salary, taxes, benefits, etc., making it easier for businesses to concentrate on their core functions. For organizations engaged in market testing strategies when entering a new country or for organizations with short-term projects in Lithuania, EORs also remain a cheaper solution.

Using an Employer of Record in Lithuania

Expanding into Lithuania becomes straightforward with the assistance of an Employer of Record (EOR). Acting as the legal employer for your workforce, an EOR enables businesses to hire employees in Lithuania without establishing a local legal entity. The EOR handles payroll, tax compliance, employment contracts, and benefits administration, ensuring full compliance with Lithuania’s labor laws while you focus on managing your operations.

Lithuania Employer of Record

Key Benefits of Partnering with a Lithuania EOR:

  • Quick Market Entry – Begin hiring in Lithuania rapidly without the complexities of setting up a local entity.
  • Legal and Tax Compliance – Ensure your operations align with Lithuanian labor regulations, tax codes, and employment standards.
  • Payroll and Benefits Management – The EOR processes payroll in euros, manages tax filings, and administers benefits, providing seamless HR solutions.
  • Administrative Efficiency – Free up internal resources by outsourcing workforce management to the EOR.

A Lithuania EOR simplifies your expansion into this Baltic nation, providing a compliant and cost-effective way to tap into its skilled workforce while ensuring operational stability.

How an Employer of Record Helps You Hire in Lithuania

Hiring in Lithuania without setting up a local entity might sound complicated, but it doesn’t have to be. That’s where an Employer of Record (EOR) comes in. An EOR allows you to legally hire and manage talent in Lithuania without going through the long, costly process of establishing a local business presence.

The EOR becomes the legal employer on paper, while you maintain full control over the employee’s day-to-day responsibilities and goals. They handle everything behind the scenes, employment contracts, labor law compliance, social contributions, and tax filings, so you don’t have to become an expert in Lithuanian employment law overnight.

This is especially useful for companies expanding into the region for the first time, testing the market, or scaling fast. An EOR simplifies onboarding, reduces legal risk, and ensures that your team is hired compliantly from day one.

In short, you get boots on the ground without all the paperwork and hassle, making it easier to focus on growth.

How Much Does an Employer of Record Cost in Lithuania?

Lithuania EOR offerings, like the pricing of most outsourced services, vary by location and service, taking into account factors such as the number of employees under management, the complexity of local payroll requirements, and the types of additional services needed.

EOR fees are either expressed as a percentage of the employee’s gross salary or a fixed numerical value per employee. Even though it can be seen as an extra cost, the cost is usually offset by the savings in time, administrative overhead, and legal compliance.

Employment and Labor Laws in Lithuania

Lithuania’s labor laws are designed to create a fair, transparent working environment that protects both employees and employers. Regulated by the national Labor Code, these laws set clear expectations around contracts, working hours, compensation, and employee rights.

Employment Contracts

Every employment relationship in Lithuania must be formalized with a written contract before work begins. These contracts are typically in Lithuanian, though a dual-language version may be used if the employee doesn’t speak the local language. Contracts must include:

  • Employer and employee details
  • Job title, responsibilities, and place of work
  • Start date and type of contract (fixed-term or indefinite)
  • Base salary and any bonuses or benefits
  • Working hours and schedule
  • Probation period (if any)
  • Terms for termination and notice

Failing to draft a compliant contract can result in legal disputes or penalties, so it’s essential to get it right from day one.

Probation Period

Lithuanian employers often include a probation period of up to three months for most roles, and six months for managerial or specialized positions. During this time, termination is simpler but still requires proper documentation.

Learn more about probation period in Lithuania

Workplace Protections

Lithuanian law prohibits workplace discrimination and ensures equal treatment regardless of gender, age, religion, or other protected characteristics. Employees are also entitled to join trade unions and engage in collective bargaining, especially in larger organizations.

Employee Registration

All employees must be registered with the State Social Insurance Fund Board (Sodra) prior to starting work. Employers are responsible for this registration, along with tax and social security filings on an ongoing basis.

Staying compliant with Lithuania’s labor laws means more than just ticking boxes; it’s about building trust with your team and avoiding costly legal missteps. If you’re unsure where to start, an Employer of Record can handle all of it for you.

Payroll Management in Lithuania

Managing payroll in Lithuania involves more than just sending out paychecks. Employers must stay aligned with local laws around taxes, social contributions, and employee entitlements, and all of it must be calculated and submitted with precision.

Salaries are typically paid once per month, in euros, and employers are required to provide a clear payslip detailing earnings, deductions, and contributions. Alongside base pay, payroll may also include bonuses, sick pay, holiday pay, and overtime compensation, depending on the employment agreement.

Employers are responsible for registering employees with Sodra (the State Social Insurance Fund) and withholding all applicable taxes and contributions at the source. These include income tax, health insurance, pension contributions, and unemployment insurance.

Payroll errors or delays can lead to fines or strained employee relationships, so attention to detail is key. Many companies choose to partner with a local payroll provider or an Employer of Record to ensure everything runs smoothly.

Whether you’re managing a small team or building a larger workforce, having the right systems and support in place helps you stay compliant, on schedule, and trusted by your employees.

Payroll and Employment Taxes in Lithuania

In Lithuania, both employers and employees are responsible for contributing to the country’s tax and social security system. Understanding the local tax structure is essential for maintaining compliance and budgeting correctly for each hire.

Employer Tax Contributions

Employers are required to contribute around 1.77% of an employee’s gross salary toward social insurance. This covers areas like sickness, maternity, and occupational accidents. Though relatively low compared to some other EU countries, these contributions are mandatory and must be paid monthly to Sodra (the State Social Insurance Fund).

Employee Payroll Contributions

Employees contribute a larger portion, with about 19.5% deducted from their gross salary to cover:

  • Pension and social insurance
  • Health insurance
  • Unemployment insurance

In addition, personal income tax (PIT) is withheld at a flat rate of 20%, though a higher rate of 32% may apply to income above a certain threshold. Non-taxable income allowances (NPD) may reduce the tax base, depending on the employee’s earnings.

Tax Reporting and Deadlines

All tax filings and payments must be submitted monthly to the relevant Lithuanian authorities. Employers are responsible for ensuring both their share and the employee’s share of taxes are reported and paid on time.

Staying up to date with shifting thresholds, benefit caps, and reporting rules can be tricky, especially if you’re hiring from abroad. That’s why many companies lean on local payroll experts or an EOR to keep tax compliance stress-free.

How an EOR Helps You Run Payroll in Lithuania

Running payroll in Lithuania means dealing with multiple moving parts – income tax, social contributions, payslip compliance, and ever-changing legal requirements. It’s not just about cutting checks. It’s about getting it right, every time.

That’s where an Employer of Record (EOR) can make a big difference. An EOR takes over the full administrative burden of payroll while ensuring your business stays compliant with Lithuanian law. You still manage your team’s performance and day-to-day work, but the EOR handles everything behind the scenes.

Here’s how an EOR can support your payroll operations in Lithuania:

  • Calculates gross-to-net salaries accurately, based on Lithuanian tax rates
  • Withholds and remits employee income tax and social contributions
  • Pays employer contributions to Sodra (State Social Insurance Fund)
  • Provides compliant, detailed payslips to each employee
  • Handles bonuses, paid leave, overtime, and severance payments
  • Ensures all payroll activity is aligned with local labor laws and deadlines
  • Prepares and submits monthly tax filings and reports
  • Keeps you up to date with any legal changes affecting payroll

By working with an EOR, you remove the risk of payroll errors or missed deadlines and give your team the confidence that their compensation is being managed professionally and fairly.

Work Permits and Visas in Lithuania

If you’re hiring foreign nationals in Lithuania, it’s important to understand the local rules around work authorization. While citizens of EU and EEA countries can work freely in Lithuania without a visa or work permit, non-EU nationals must go through a formal process to secure employment rights.

The most common path is a temporary residence permit with the right to work, which is typically tied to a specific job offer. Employers are responsible for initiating the application and must show that the role cannot easily be filled by a Lithuanian or EU citizen, unless the position qualifies for a shortage occupation exemption.

In certain cases, highly qualified professionals may be eligible for the EU Blue Card, which streamlines the permit process and offers additional mobility within the EU.

Key steps in hiring a non-EU employee include:

  • Providing a signed employment contract that meets Lithuanian labor standards
  • Applying for a work permit or Blue Card through the Lithuanian Migration Department
  • Submitting documents such as educational qualifications, proof of experience, and a clean criminal record
  • Registering the employee with local authorities and ensuring Right to Work compliance

Processing times can vary, but most permits are issued within 1 to 2 months. If you’re hiring internationally for the first time, partnering with an Employer of Record can help you manage the paperwork, timelines, and compliance steps with far less stress. With the right support, you can confidently expand your team across borders, without getting tangled in red tape.

Time Off and Leave in Lithuania

In Lithuania, time off is encouraged and it’s protected by law. Employees are entitled to a generous amount of paid leave, and companies are expected to respect and support a healthy work-life balance. If you’re hiring in Lithuania, offering compliant and competitive leave policies is essential.

Mandatory Leave Entitlements

Full-time employees in Lithuania are legally entitled to at least 20 working days (or 4 weeks) of paid annual leave per year. For employees working a six-day week, that number increases to 24 working days. Leave must be used within a year and cannot be replaced with monetary compensation unless the employee is leaving the company.

Employees typically take vacation in coordination with their employer, and many companies encourage workers to use their time off consistently throughout the year to prevent burnout.

Additional Leave Types

Beyond annual vacation, Lithuania offers several forms of protected leave, including:

  • Sick leave, partially compensated through social insurance
  • Maternity leave (up to 18 weeks) and paternity leave (30 calendar days)
  • Parental leave, available to both parents until the child reaches age 3
  • Unpaid leave for study, personal reasons, or caregiving

Working Hours

In Lithuania, the standard full-time workweek is 40 hours, typically spread across five 8-hour days. While this is the legal norm, many companies offer some flexibility depending on the role or industry. Remote and hybrid arrangements are becoming more common, especially in the tech and services sectors.

Employees are entitled to at least 11 consecutive hours of rest between shifts and a minimum of 35 hours of uninterrupted rest each week, usually covering the weekend. A lunch break of at least 30 minutes is also required if the workday exceeds six hours.

Overtime Regulations

Overtime is allowed, but it’s closely regulated. It must be agreed upon in writing and is generally limited to 8 hours per 7-day period, unless a collective agreement allows for more. Overtime is compensated at a minimum of 150% of the employee’s regular hourly wage, or through equivalent paid time off.

Flexible and Part-Time Work

Part-time arrangements are legal and relatively common, especially for students, parents, or older workers. Employers and employees must clearly define hours and expectations in the employment contract.

Respecting working hours and rest periods is about compliance, and it’s also a core part of employee well-being. In Lithuania, it’s expected that employers support work-life balance and avoid practices that lead to burnout.

Company Policies and Internal Agreements

While the law provides a strong baseline, many companies go further, offering additional perks such as mental health days, flexible work schedules, or paid wellness time. Any extra policies should be clearly outlined in the employment contract or internal handbook and must align with national labor regulations.

By supporting rest and respecting personal time, you not only stay compliant, you build trust, loyalty, and a workplace culture that people want to be part of.

Terminations and Severance in Lithuania

Ending an employment relationship in Lithuania must follow strict procedures to ensure fairness and legal compliance. Whether the termination is due to company restructuring, performance issues, or mutual agreement, employers are required to follow the guidelines set by the Lithuanian Labor Code.

Notice Periods

The standard notice period for terminating an indefinite employment contract is 30 calendar days. For employees with less than one year of service, this is reduced to two weeks. In cases of serious misconduct, termination may be immediate, but the employer must be able to clearly document the reason.

Employees can also resign at their own discretion with a 14-day notice, unless a longer period is agreed upon in the contract.

Severance Pay

If an employee is dismissed due to downsizing, economic reasons, or other employer-driven causes, severance pay is required. The amount depends on the employee’s length of service:

Length of ServiceSeverance Pay
Less than 1 year1 month’s average wage
1 to 3 years2 months’ average wage
More than 3 years3 to 6 months’ wage (depending on circumstances)

In cases of mutual agreement, severance terms can be negotiated, but it’s still recommended to follow best practices and document everything in writing.

Legal Protections

Certain employees, such as pregnant individuals, new parents, or those on sick leave, have additional protections and cannot be terminated except under very specific conditions. Employers are also expected to provide proper documentation, final pay, and settle any unused vacation balances upon termination.

Navigating termination can be complex, especially across borders. An Employer of Record helps ensure all local requirements are met, minimizing risk and supporting a respectful, legally sound offboarding process.

Using an Employer of Record to Administer Benefits in Lithuania

Offering the right benefits in Lithuania goes beyond meeting legal requirements; it’s about showing your team they’re valued and supported. But figuring out what’s mandatory, what’s customary, and how to manage it all can get overwhelming, especially if you’re hiring from abroad.

An Employer of Record (EOR) can take the weight off your shoulders by managing benefits administration from start to finish. They handle enrollment, compliance, and communication with local authorities, ensuring your employees receive all required entitlements and any extras you choose to offer.

With an EOR, you can confidently provide:

  • Access to Lithuania’s national health insurance and social security system
  • Legally required benefits like paid leave, parental leave, and sick pay
  • Optional benefits such as private health insurance, wellness programs, or transportation stipends
  • Transparent onboarding and benefits education for your local hires
  • Ongoing compliance with benefit-related labor laws and tax rules

Because the EOR acts as the legal employer, they stay on top of evolving regulations and take care of the administrative details, so you don’t have to. This ensures that your benefits packages are not only compliant, but also competitive in Lithuania’s growing talent market.

In short, an EOR helps you take care of your people, while you take care of your business.