Overview
Payroll Cycle
Employer Contributions
Employee Contributions
Minimum Wage
Hiring
Hiring Employees
Hiring Contractors
Hiring Expats
Background Checks
Employment Contracts
Onboarding
Employee Benefits
Social Security
Healthcare and Insurance
Leave Policy
Public Holidays
Work Permit and Work Visa
Probation Period
Notice Period
Termination and Severance
Personal Income Tax
An employer of record in Lithuania oversees essential aspects of employment, such as the payroll cycle, employer and employee contributions, minimum wage requirements, hiring procedures for employees, contractors, and expats, background checks, employment contracts, onboarding processes, employee benefits, social security, healthcare and insurance, leave policy, public holidays, work permit and work visa regulations, probation period, notice period, termination and severance procedures, as well as personal income tax obligations.
| Overview | |
| Continent | Europe |
| Country | Lithuania |
| Capital | Vilnius |
| Time zone | UTC+02:00 (EET) |
| Total Time zones | 1 |
| Working hours per week | 40 |
| Working week | Monday–Friday |
| Typical hours worked | 8 |
| Personal Tax filing deadline | 1 May (for annual individual's PIT return) |
| Financial Year | 1 January to 31 December |
| Date format | yyyy/mm/dd |
| Currency | Euro (EUR) |
| VAT | the standard rate is 21% |
Employer Payroll Contributions in Lithuania
| Employers | % of Gross Salary |
| Open-ended Contract | 1.77% |
| Fixed-term Contract | 2.49% |
| Total Employment Cost | 0% to 2.49% |
Employee Payroll Contributions in Lithuania
| Employees | % of Gross Salary |
| State Social Insurance | 12.5% |
| Health Insurance | 6.98% |
| Pension (employee choice) | 0% to 3% |
| Total Employee Cost | 0% to 22.5% |
Minimum Wages in Lithuania
| Minimum Wage | |
| Minimum Wage | 642 EUR per month |
Payroll Cycle in Lithuania
| Payroll | |
| Payroll Cycle | Monthly |
| 13th Salary | Not required by law. |
Personal Income Tax in Lithuania
| Income Tax | |
| Less than 81,162 EUR | 20% |
| Over 81,162 EUR | 32% |
Employee Benefits in Lithuania
In Lithuania, mandatory employee benefits encompass a comprehensive three-tiered pension system, maternity leave and benefits, and employment insurance. Additionally, employees may receive supplementary benefits such as health insurance, retirement plans, and flexible benefits. However, it is worth noting that perks are not commonly provided in the country.
The pension system in Lithuania consists of three Pillars, each with its own method of pension accumulation.
Pillar I represents the state's social security system, which provides individuals with social insurance coverage for their pension. It ensures that individuals are insured or have the option to insure themselves for a social insurance pension.
Pillar II of the Lithuanian pension system introduced new financing sources in 2019, including a person's private contribution amounting to 3% of their gross wage and the state's contribution equivalent to 1.5% of the national average wage. Once individuals have set up a pension fund scheme, they are unable to withdraw funds until they reach the eligible pension age.
Eligibility for the pension scheme extends to employed individuals under the age of 40 and those already participating in the pension scheme, with the option to opt-out if desired. Pension accumulation companies are obliged to offer participants life cycle funds that are most suitable based on their age, aiming to maximize returns on investments while securing accumulated wealth as retirement approaches.
As of July 1, 2020, the State Social Insurance Fund has become the centralized provider of annuity services. There are two types of annuities available: deferred annuities and standard annuities. The mandatory annuity purchase limit has been reduced to €10,000, meaning that annuity purchases should only occur after accumulating at least €10,000.
Regarding the accumulated sum in the pension fund, if it is equal to or less than €5,403, the individual will receive a single payment, which can be inherited. If the accumulated sum falls between €5,403.01 and €10,806.99, the individual will receive periodic payments that will cease once all the funds have been utilized. These periodic payments are also inheritable. If the accumulated wealth exceeds €6,4841, the individual has the right to receive the excess amount as a single payment from the pension accumulation company.
The standard pension annuity ensures that pension benefits are paid immediately and continue throughout the person's lifetime.
Pillar III of the Lithuanian pension system encompasses voluntary contributions to a pension fund or participation in a life insurance scheme. It allows individuals who do not contribute to SoDra (Pillar III) or participate in Pillars I and II to participate.
The following individuals are eligible to receive a pension from SoDra:
- Those who have reached the retirement age, which is currently being gradually increased year by year to 65.
- Individuals who have a minimum social insurance pension record of 15 years. The required number of years of contributions to receive the full pension has been incrementally increasing since 2018 by 6 months each year, with the goal of reaching 35 years in 2027. As of 2022, the contribution period was 32 years and 5 months.
Maternity benefits in Lithuania
Maternity benefits in Lithuania are provided to expectant mothers based on certain criteria. Here are the key details:
- Maternity Social Insurance Record: Before the start of pregnancy and childbirth leave, the expectant mother should have a maternity social insurance record of at least 12 months within the last 24 months. If the person had been on childcare leave before, the maternity social insurance period is calculated from 24 months before the child reaches 2 years of age.
- Benefit Amount: The maternity benefit is 78% of the recipient's compensated wages. This calculation is based on the person's insurable income for 12 consecutive calendar months preceding the month when the right to maternity benefits arises. The minimum monthly maternity benefit cannot be lower than 6 basic social insurance benefits, which is currently €276.
- Benefit Duration: The maternity benefit is paid for 126 calendar days after 30 or more weeks of pregnancy. In the case of complicated childbirth or the birth of multiple children, an additional 14 calendar days of benefits are provided. If a woman has not utilized the right to pregnancy and childbirth leave before the date of birth, the benefit is paid for 56 calendar days after childbirth. In the case of a complicated delivery or the birth of multiple children, and if the woman has not used the right to pregnancy and childbirth leave before the date of childbirth, the benefit is paid for 70 calendar days after childbirth.
These provisions ensure that expectant mothers in Lithuania receive financial support during their maternity period based on specific eligibility criteria and benefit durations.
In Lithuania, paternity and childcare benefits are provided to parents to support them during the early stages of parenthood. Here are the details of these benefits:
Paternity Benefit:
- The paternity benefit amounts to 78% of the recipient's compensated wages. The calculation is based on the individual's insurable income received in the 12 consecutive calendar months prior to the month when the right to paternity benefits arises. The paternity benefit is paid for a duration of 30 calendar days and can be utilized until the child reaches 3 months of age.
Childcare Benefit:
Parents have the option to take childcare leave for either 1 or 2 years, depending on their preference. The benefit levels vary based on the duration of the leave:
- 1-year childcare leave (until the child reaches 1 year of age): During this period, the benefit amounts to 78% of the replacement wage.
- 2-year childcare leave (until the child reaches 2 years of age): The benefit is divided into two stages. In the first year, the replacement wage is 45%, and in the second year, it is 30% of the recipient's wage.
These benefits aim to provide financial support to parents, enabling them to take time off work and care for their newborn or young child.
Employment Insurance in Lithuania
Employment insurance in Lithuania provides income replacement to individuals in various circumstances. Here are the details of the coverage:
Sickess:
If an employee falls ill, the employer is responsible for paying a minimum benefit of 62.06% and potentially up to 100% (at their discretion) of the recipient's average wages for the first two days of illness. From the third day onward, the National Social Insurance Fund pays 62.06% of the recipient's compensated wages. The monthly sick pay provided by the National Social Insurance Fund cannot be lower than 11.64% of the domestic average monthly wages valid for the last quarter before the temporary work inability was determined.
Disability Allowances:
Statutory benefits are granted when an individual has a continuous loss of work capacity (paid as a fraction if the capacity is less than 45%). The benefit is calculated either as a multiple of the Lith uanian Insured Income (€476 per month) or as a fraction based on the degree of incapacitation.
In addition to these sickness and disability benefits, employment insurance also covers other aspects such as maternity, parental leave, and pension benefits. These measures aim to provide financial support and protection to individuals during different life circumstances, ensuring a safety net for workers in Lithuania.
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