Payroll & Employment Guide Lithuania

Employment contracts in Lithuania must be documented in writing and outline key employment terms, such as wages, working hours, benefits, termination policies, and similar.

Notice periods: From 1 to 3 months.

Termination of employment: Mutual agreement, employee-initiated, or employer-initiated termination.

Employers in Lithuania are required to provide mandatory employment benefits in accordance with the country’s labour law. Many of them also offer extra perks to stay competitive in the job market. Understanding both of them is essential to attracting and retaining talent.

• Mandatory benefits: Health, pension, and unemployment insurance.
• Common perks: Meal vouchers, transport reimbursements.
• Leave policies: Paid annual leave, sick leave, maternity/paternity leave.
• Social insurance contributions: Both employees and employers must contribute to social insurance, which covers health insurance, pensions, and other social benefits.
• Health insurance: Employees are required to have health insurance coverage, which is usually included in the social insurance contributions.
• Sick leave compensation: Employees may receive allowances during sick leave, which is partially compensated through social insurance.
• Parental leave: There are provisions for parental leave, with allowances typically provided for a certain period.
• Vacation pay: Employees are entitled to annual paid leave, and employers must account for this in payroll.
• Minimum wage: Employers must comply with the national minimum wage regulations.
• Voluntary contributions: Individuals can voluntarily contribute to private pension funds to enhance their retirement savings.
• Types of Pension Funds:

1. Mandatory accumulation funds: For employees under 40, participation is mandatory, with both employee and employer contributions.
2. Supplementary pension funds: These are voluntary and can be set up by individuals or employers.

In Lithuania, employees typically must fill out reimbursement forms to claim expenses incurred during work-related activities. Expenses are paid to the employees in net.

Lithuania has a structured and progressive tax system, where employers are responsible for withholding personal income tax and social security contributions from employees’ salaries.

Resident taxpayers in Lithuania are individuals who have their permanent residence in the country, maintain their centre of personal, social, or economic interests there, or stay in Lithuania for 183 days or more within a tax period (or 280 days over multiple periods under specific conditions).

Income tax: Employment income and most other income sources are combined and taxed at progressive rates:

• 20% on income up to €82,962.
• 25% on income between €82,962 and €138,270.
• 32% on income exceeding €138,270.

Withholdings and contributions:

• Dividends: Taxed at 15% for residents. Non-residents are also subject to 15% withholding tax (may be reduced under a Double Tax Treaty).
• Interest: Taxed at a flat 15%. Non-residents are subject to a 15% withholding tax (treaty reductions may apply). Certain interest income may be exempt.
• Capital gains:
  Shares: Generally taxed at 15%, with preferential treatment for shares held over 3 years.
  Real estate: Taxed at progressive rates (20%-32%). Exemptions apply in specific cases.

Tax allowances and non-taxable benefits:

• Insurance: Employer-paid supplementary health insurance is tax-free only up to €350 per year. Any amount exceeding this limit is now taxed as a benefit-in-kind (PIT and Sodra apply to the excess).
• Gifts and prizes: Tax-free up to €200 per year.
• Education and training: Employer contributions to higher education or job-related training courses are tax-exempt.
• Public transport: Public transport costs for commuting are tax-free.

Deductions and tax reliefs:

• Minimum monthly wage (MMA): €1,153 gross (effective Jan 1, 2026).
• Basic tax-free allowance (NPD): Applies to lower - and middle-income earners. It is set at a maximum of €800 (for those earning MMA) and gradually phases out to zero for gross monthly salaries above approximately €2,865.
• Health insurance benefit: Tax-free only up to €350 per year. Any amount exceeding this limit is now taxed as a benefit in kind (PIT and Sodra apply to the excess).

Employers in Lithuania must submit salary payments as agreed upon in employment contracts, in accordance with the minimum wage requirements set by labour laws. Salaries are typically paid on a monthly basis, unless otherwise specified in the contract.

Monthly payroll declarations must be submitted to the State Tax Inspectorate, detailing total salaries paid, taxes withheld, and social insurance contributions.

Salary payment deadline: By the end of the month.

Taxes and contributions payment deadline: By the 15th of the following month.

Annual payroll declaration deadline: By the end of February of the following year.

Monthly payroll declarations deadline: By the 15th of the following month.

Payroll currency: EUR

Lithuania’s labour laws are governed by the country’s Labour Code, which outlines all the aspects of employment, including contract types, minimum wages, working hours, probation periods, termination rules, and employer obligations. Employers must understand and comply with all these regulations to remain compliant.

Total employment cost:

• Employer's social insurance contributions: 1.77%
• Employee’s social insurance contributions: 19.5% (6.9% above the wage limit of €126,532)
• Employee’s health insurance costs: 6.98%

Minimum wage: EUR 1,153 per month

Probation period: Up to 3 months

Foreign citizens seeking to work in Lithuania must obtain the necessary work permits and visas. The process, permit type, and costs are different depending on the applicant’s nationality, job role, and length of stay.

Types of permits: EU Blue card

Process length: Around 1 month

Process cost: 1200€

Using EOR services in Lithuania, you can legally employ individuals from the country without setting up legal entities there. The EOR will take over all the legal responsibilities as an official employer, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

PEO services provide HR and administrative support, while you remain the legal employer for your team in Lithuania. PEO services can be of benefit for employers who already have legal entities in Lithuania but need support to manage their workforce operations, including:

• HR and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams provides a payroll calculator adapted to Lithuania’s labour laws. Using our calculator, you can easily estimate net/gross salaries, employer/employee contributions, and other mandatory deductions in the country.

Here is a list of public holidays in Lithuania: