Lithuania, located at the heart of the Baltics, has rapidly transformed into a modern, innovation-driven economy. Known for its strong ICT sector, fintech leadership, life sciences research, and manufacturing capabilities, Lithuania has become one of Europe’s fastest-growing destinations for global business expansion.

The country is highly ranked for ease of doing business, digital infrastructure, and workforce competitiveness. Its capital, Vilnius, is considered a European fintech hub, attracting startups and multinational corporations alike. With EU membership and access to the Schengen area, Lithuania offers a strategic base for companies targeting the European market.

However, hiring in Lithuania comes with complex labor laws, EU-level employment protections, and tax regulations that require careful compliance. Setting up a legal entity takes time, with requirements for registration, payroll systems, and social security contributions.

By partnering with an Employer of Record (EOR) like Gloroots, businesses can hire employees in Lithuania quickly and compliantly, avoiding entity setup while ensuring global compliance with local labor laws, payroll, and benefits.

What are the key facts about Lithuania’s economy and workforce?

Lithuania’s economy is diverse, export-oriented, and digital-first. With a GDP per capita of nearly USD 28,000, the country is one of the fastest-growing economies in the EU.

Economic Highlights

• ICT & Fintech Hub: Vilnius is recognized as one of Europe’s top fintech hubs, hosting over 260 licensed fintech companies.
• Life Sciences Leadership: Lithuania invests heavily in biotechnology, pharmaceuticals, and medical research, supported by institutions like Vilnius University and Kaunas University of Technology.
• Manufacturing Strength: Strong in machinery, electronics, automotive parts, and textiles.
• Export-Oriented Economy: Key exports include refined petroleum, furniture, machinery, and biotech products.
• Global Companies: Barclays, Nasdaq, Danske Bank, and Western Union have established major operations in Lithuania.

Workforce Highlights

• Highly Educated: Over 90% of Lithuanians hold at least a secondary education degree; universities produce strong STEM and finance talent.
• Multilingual Workforce: High proficiency in English, Russian, Polish, and German.
• Talent Hubs:
  • Vilnius – ICT, fintech, shared services.
  • Kaunas – Engineering, R&D, manufacturing.
  • Klaipėda – Logistics, shipping, and maritime.

Lithuania’s workforce is young, skilled, and cost-competitive, making it attractive for foreign employers. However, compliance with EU labor directives, local tax codes, and social security laws can be challenging without local expertise.

With Gloroots EOR, employers can bypass entity setup delays and focus on building strong Lithuanian teams.

Contact us to explore compliant hiring in Lithuania with Gloroots.

What is the work culture and talent pool like in Lithuania?

Lithuania’s workforce combines European professionalism with a strong focus on innovation and adaptability. The country has rapidly shifted from a traditional manufacturing base to a knowledge-driven economy powered by ICT, fintech, and life sciences.

Work Culture Traits

• Professional & Detail-Oriented: Lithuanian employees are known for precision, especially in engineering, IT, and finance roles.
• Hierarchical but Evolving: Traditional hierarchies still exist in older industries, but in ICT and fintech, workplaces tend to be flatter and more collaborative.
• Multilingual & International: English proficiency is high, especially among younger professionals. Many also speak Russian, Polish, and German.
• Strong Work Ethic: Employees value punctuality, responsibility, and loyalty.
• Work-Life Balance: Growing emphasis on flexibility, remote work, and wellness — particularly in technology and shared service sectors.

Talent Strengths

Lithuania’s workforce is particularly strong in:

• Fintech & ICT: Lithuania hosts one of the EU’s largest fintech ecosystems.
• Engineering & R&D: Kaunas is home to major research centers and industrial production.
• Shared Services & Finance: Global banks and corporations have set up large service centers in Vilnius.
• Life Sciences & Healthcare: Rapidly growing biotech and pharma talent pool.
• Logistics & Trade: Klaipėda supports global logistics and maritime industries.

Hiring Hubs

• Vilnius – ICT, fintech, professional services.
• Kaunas – Engineering, manufacturing, R&D.
• Klaipėda – Logistics, shipping, port industries.

Q: What is the process of setting up an entity in Lithuania?

Lithuania offers a business-friendly environment, ranking high in the EU for digitalization and ease of doing business. However, foreign companies must comply with registration, tax, and labor law requirements before hiring. The most common setup is a Private Limited Liability Company (UAB).

Steps to Set Up an Entity in Lithuania

1. Choose a Business Structure
   • Options include: UAB (Private Limited Liability Company), AB (Public Limited Company), branch office, or representative office.
   • UAB is the most common, requiring at least one founder.
2. Reserve a Company Name
   • Must be registered with the Lithuanian Register of Legal Entities.
3. Prepare Incorporation Documents
   • Articles of association, shareholder agreements, and director details.
   • At least one director required (can be foreign).
4. Share Capital Requirement
   • Minimum EUR 2,500 for UAB.
5. Register with Authorities
   • Company registration with the Register of Legal Entities.
   • Obtain a company code and VAT number (if turnover exceeds EUR 45,000).
6. Open a Bank Account
   • Required for depositing share capital and ongoing business transactions.
7. Employment Compliance
   • Register as an employer with the State Social Insurance Fund Board (Sodra).
   • Ensure contracts comply with the Labour Code of Lithuania.

Timeline

The entity setup process typically takes 2–4 weeks, depending on approvals and document preparation.

For businesses seeking quick market entry, entity setup can delay hiring. With Gloroots EOR, you can onboard employees in days instead of weeks, without the costs and obligations of incorporation.

Entity Setup vs. EOR in Lithuania

Q: What are the main benefits of using Gloroots as an Employer of Record in Lithuania vs. setting up your own entity?

While setting up a UAB (Private Limited Liability Company) in Lithuania provides long-term control, it also brings capital requirements, administrative overhead, and compliance risks. For companies seeking fast, compliant hiring without incorporation delays, partnering with Gloroots EOR offers clear advantages.

Benefits of Using Gloroots EOR in Lithuania

• Rapid Hiring: Onboard employees in days, not weeks, by bypassing incorporation.
• Cost Efficiency: Avoid the EUR 2,500 minimum share capital and legal/accounting costs of entity setup.
• Local Compliance: Employment contracts, payroll, and benefits administered in line with the Labour Code of Lithuania.
• Payroll & Tax Management: Gloroots handles social security contributions to Sodra and tax filings with the State Tax Inspectorate (VMI).
• Immigration Support: Guidance on EU Blue Card, work permits, and residence permits for non-EU hires.
• Scalable Hiring: Add one employee or build a full team without heavy upfront investments.
• Risk Reduction: Minimized exposure to fines, back payments, or disputes from misclassification or non-compliance.

Direct Entity vs. Gloroots EOR in Lithuania

Q: What are the key employment laws in Lithuania that employers should know?

Employment in Lithuania is governed by the Labour Code of Lithuania and EU labor directives. Employers must provide written contracts, respect working hour limits, and ensure employees receive statutory benefits.

Core Employment Law Provisions in Lithuania

• Employment Contracts
  • Written contracts are mandatory and must include job role, pay, hours, leave entitlements, and termination terms.
  • Fixed-term contracts are allowed but limited to a maximum of 2 years (with some exceptions).
• Working Hours
  • Standard working week: 40 hours (8 hours/day, 5 days/week).
  • Maximum: 48 hours/week, including overtime.
• Overtime
  • Permitted only with employee consent or in exceptional cases.
  • Paid at 1.5x normal pay (2x on public holidays).
  • Capped at 180 hours/year unless otherwise agreed.
• Minimum Wage (2025)
  • Monthly minimum wage: EUR 924 gross.
  • Hourly minimum wage: EUR 5.65 gross.
• Annual Leave
  • At least 20 working days (4 weeks) of paid leave per year.
  • Employees under 18 and parents of young children are entitled to extended leave.
• Public Holidays
  • Lithuania recognizes 13 public holidays, all paid.
• Sick Leave
  • First 2 days: paid by employer (at least 62.06% of salary).
  • From day 3 onward: paid by Sodra (social insurance).
• Maternity Leave
  • Mothers entitled to 126 calendar days (70 before birth + 56 after), paid by social insurance.
• Paternity Leave
  • Fathers entitled to 30 calendar days within the first year of the child’s birth, paid by social insurance.
• Parental Leave
  • Parents may take up to 2 years of paid parental leave, funded by Sodra, with flexibility in payment percentages depending on duration chosen.

Employment Laws: Direct Entity vs. Gloroots EOR in Lithuania

Q: What visas and work permits are required for working in Lithuania?

Lithuania, as a member of the European Union (EU) and the Schengen Area, offers straightforward mobility for EU/EEA citizens but applies stricter rules for non-EU nationals. Employers must ensure that foreign employees hold the correct permits before work begins.

Key Work Permits & Visas in Lithuania

1. EU/EEA & Swiss Citizens
   • No visa or work permit required.
   • Must register with the Migration Department if staying longer than 3 months.
2. National (D) Visa
   • For short-term work up to 1 year.
   • Often used for contractors, temporary projects, or assignments.
3. Temporary Residence Permit (TRP)
   • Required for non-EU nationals working long-term in Lithuania.
   • Typically valid for 1–2 years, renewable.
   • Issued for employment, business, studies, or family reunification.
4. EU Blue Card
   • For highly skilled non-EU professionals.
   • Requires a university degree and a salary at least 1.5x the Lithuanian average.
   • Initially valid for 3 years, renewable.
5. Intra-Company Transfer (ICT) Permit
   • For employees transferred from multinational branches outside the EU.
   • Covers managers, specialists, and trainees.
6. Startup Visa Lithuania
   • Designed for entrepreneurs establishing innovative businesses.
   • Grants residence permits for founders and their families.

Employer Obligations

• Register the employment with the Lithuanian Labour Exchange (Employment Service).
• Ensure employment contracts comply with the Labour Code.
• Pay social security contributions to Sodra.
• Cover costs of recruitment compliance, including documentation.

How Gloroots Helps with Visas in Lithuania

Managing work permits in Lithuania involves multiple agencies, legal documentation, and strict timelines. Gloroots simplifies the process by:

• Advising on the right permit (D Visa, TRP, EU Blue Card, ICT).
• Employer Sponsorship: Hiring through Gloroots’ local entity removes the need for your company to gain Lithuanian accreditation.
• Application Management: Preparing and submitting visa applications with the Migration Department.
• Compliance Guarantee: Ensuring contracts and payroll meet visa requirements.
• Family Support: Assisting with dependent residence permits.
• Faster Onboarding: Employees can begin work through Gloroots while residence permits are in progress.

With Gloroots as your EOR in Lithuania, you gain seamless immigration support while staying fully compliant with Lithuanian law.

Q: What are the risks of misclassification in Lithuania?

In Lithuania, the distinction between an employee and an independent contractor is carefully regulated under the Labour Code of Lithuania and tax laws. Misclassification occurs when a company engages a worker as a contractor but manages them as an employee — for example, by setting working hours, controlling their tasks, or paying a fixed salary.

The State Labour Inspectorate and the State Tax Inspectorate (VMI) closely monitor employment arrangements, and violations may result in back payments, fines, and reputational risks.

Criteria for Employee vs. Contractor Classification

• Control – Employees work under employer supervision; contractors control their own work.
• Economic Dependence – Employees rely on one employer; contractors have multiple clients.
• Tools & Equipment – Employees use employer-provided tools; contractors provide their own.
• Work Integration – Employees are part of the business structure; contractors remain independent.
• Payment – Employees receive salaries with social contributions; contractors invoice per project.

Penalties for Misclassification

• Back Payment of Taxes & Social Contributions – Employers may owe unpaid income tax, Sodra contributions, and penalties.
• Employee Benefits Liability – Misclassified contractors may claim entitlements such as paid leave, sick leave, and termination protections.
• Administrative Fines – The Labour Inspectorate may impose significant fines for non-compliance.
• Reputational & Legal Risk – Misclassification disputes can lead to court cases and damage employer credibility.

Gloroots mitigates these risks by offering compliant employment contracts through its Employer of Record model, ensuring workers are properly classified.

Misclassification Risks: Direct Entity vs. Gloroots EOR in Lithuania

Use our Misclassification Risk Calculator to assess your risk in Lithuania.

Q: How does an EOR help you run payroll in Lithuania?

Payroll in Lithuania is governed by the Labour Code, the State Tax Inspectorate (VMI), and the State Social Insurance Fund Board (Sodra). Employers must ensure accurate tax withholding, social contributions, and statutory leave accruals.

Payroll Compliance Requirements in Lithuania

• Pay Frequency
  • Salaries are typically paid monthly (by the last working day).
• Tax Withholding
  • Employers must withhold Personal Income Tax (PIT), currently 20%, on salaries up to EUR 101,094 per year.
  • Salaries above this threshold are taxed at 32%.
• Social Security Contributions (Sodra)
  • Employer contributions: ~1.77% – 2.49% (for unemployment, accident insurance, and sickness benefits).
  • Employee contributions: ~19.5% (including health insurance and pensions).
  • Contributions are capped at 84 average monthly wages (approx. EUR 114,162/year in 2025).
• Holiday Pay
  • Employees are entitled to at least 20 working days of paid annual leave, and employers must accrue this in payroll.
• Sick Leave Payments
  • First 2 days: paid by employer (at least 62.06% of salary).
  • From day 3 onward: covered by Sodra.
• Reporting Requirements
  • Employers must submit monthly payroll and social insurance declarations to VMI and Sodra.

How Gloroots Simplifies Payroll in Lithuania

Gloroots manages payroll end-to-end, ensuring:

• Accurate tax withholding and compliance with PIT thresholds.
• Sodra contributions (employer + employee) filed on time.
• Leave management, including annual leave and sick leave entitlements.
• Localized payslips issued in Lithuanian and English.
• Multi-currency support for international employers.
• Compliance risk reduction with Lithuanian tax and labor authorities.

Payroll Compliance: Direct Entity vs. Gloroots EOR in Lithuania

Q: How does tax compliance work in Lithuania?

Lithuania has a straightforward but highly regulated tax system, overseen by the State Tax Inspectorate (VMI) and the State Social Insurance Fund (Sodra). Employers must ensure accurate income tax withholding, social contributions, and timely reporting.

Income Tax Rates in Lithuania (2025)

• Applies to employment income.
• Certain exemptions and deductions may apply (e.g., for dependents).

Social Security Contributions (Sodra, 2025)

• Employee Contributions (~19.5%)
  • Pension: 8.72%
  • Health Insurance: 6.98%
  • Unemployment + Other: 3.8%
• Employer Contributions (~1.77% – 2.49%)
  • Accident Insurance: 0.14–1.4% (risk-based)
  • Guarantee Fund & Long-Term Employment Fund: 0.32% + 0.16%

Contribution Cap: Applied to salaries exceeding 84 average monthly wages (~€114,162/year).

Other Taxes

• Corporate Income Tax (CIT): 15% standard, 5% for small companies.
• VAT: 21% standard, with some reduced rates.

Employer Obligations

• Withhold and remit PIT and Sodra contributions monthly.
• Register employees with Sodra before work begins.
• Submit monthly payroll declarations to VMI.
• Provide annual income statements to employees and tax authorities.

Tax Compliance: Direct Entity vs. Gloroots EOR in Lithuania

Q: What benefits and entitlements do employees in Lithuania receive?

Lithuanian employees enjoy comprehensive statutory benefits, mainly governed by the Labour Code of Lithuania, the Sodra (social insurance) system, and EU labor directives. Employers must provide paid leave, sick leave, parental leave, and social security coverage. Many companies also offer additional perks to attract top talent, especially in the competitive ICT and fintech sectors.

Statutory Benefits in Lithuania

• Annual Leave
  • Minimum 20 working days (4 weeks) of paid leave per year.
  • Employees under 18 or with disabilities receive additional leave.
• Public Holidays
  • Lithuania observes 13 paid public holidays.
• Sick Leave
  • First 2 days: paid by employer (at least 62.06% of salary).
  • From day 3 onward: covered by Sodra.
• Maternity Leave
  • 126 calendar days (70 before birth + 56 after).
  • Fully covered by social insurance.
• Paternity Leave
  • 30 calendar days within the first year after a child’s birth.
  • Fully covered by social insurance.
• Parental Leave
  • Up to 2 years of leave, with flexibility in benefit payment:
    • 1 year at 77.58% of salary, or
    • 2 years at reduced rates (54.31% in year 1, 31.02% in year 2).
• Pensions & Healthcare
  • Mandatory contributions to Sodra cover pensions, healthcare, unemployment, and disability.
  • Lithuania also has a universal public healthcare system, but many employers provide private health insurance as an additional perk.
• Other Leave
  • Paid bereavement leave, study leave, and military service leave are also provided.

Non-Statutory (Market-Driven) Benefits

• Private health insurance & dental coverage.
• Meal vouchers or food stipends.
• Flexible/remote working policies.
• Professional training & upskilling programs.
• Performance-based bonuses & stock options.

Gloroots helps employers design benefit packages that go beyond statutory requirements, aligning with global employee benefits best practices.

Employee Benefits: Direct Entity vs. Gloroots EOR in Lithuania

Q: What’s involved in hiring and onboarding employees in Lithuania?

Hiring in Lithuania requires compliance with the Labour Code, as well as registration with Sodra (social insurance) and the State Tax Inspectorate (VMI). Employers must provide written contracts, ensure tax and social contributions are set up, and respect employee rights from day one.

Steps in Hiring & Onboarding Employees in Lithuania

1. Job Advertising & Recruitment
   • Employers must follow non-discrimination laws in recruitment.
   • Job platforms like CVbankas, CVonline, LinkedIn, and Work in Lithuania are widely used.
2. Employment Contracts
   • Written contracts are mandatory and must outline job role, pay, working hours, leave entitlements, and termination terms.
   • Both fixed-term and indefinite agreements are allowed (fixed-term usually capped at 2 years).
3. Pre-Employment Requirements
   • Certain industries (e.g., healthcare, education) require medical checks or background verification.
4. Registration with Authorities
   • Employees must be registered with Sodra before they begin work.
   • Employers must also ensure correct tax withholding setup with VMI.
5. Payroll & Benefits Setup
   • Employers must set up PIT deductions, social contributions, and benefit entitlements (annual leave, sick leave, etc.).
6. Onboarding & Orientation
   • Employees should be introduced to workplace policies, compliance obligations, and safety rules.
   • Many companies also provide cultural onboarding and professional development planning.
7. Probationary Period
   • Typically 3 months, extendable up to 6 months.
   • Employees on probation are still entitled to minimum wage, leave, and protections against unfair dismissal.

Challenges for Foreign Employers

• Drafting contracts that fully comply with the Labour Code.
• Registering employees correctly with Sodra and VMI.
• Navigating probation rules and EU-level employee protections.
• Handling payroll integration with leave entitlements and social benefits.

With Gloroots EOR, companies can onboard employees in days, not weeks, while ensuring contracts, payroll, and benefits are fully compliant.

Hiring & Onboarding: Direct Entity vs. Gloroots EOR in Lithuania

Q: How do you successfully manage a workforce in Lithuania?

Managing employees in Lithuania requires a balance of compliance with the Labour Code and adapting to the country’s professional yet evolving workplace culture. Employees value structure, fairness, and security, but younger generations are increasingly focused on flexibility, innovation, and career growth.

Best Practices for Workforce Management in Lithuania

1. Respect for Structure & Rules
   • Lithuanian employees expect clear contracts, policies, and performance standards.
   • A well-documented HR framework builds trust and reduces disputes.
2. Balancing Hierarchy with Collaboration
   • Traditional industries maintain hierarchical structures.
   • In ICT, fintech, and startups, teams operate in flatter, more collaborative environments.
3. Work-Life Balance
   • Employees value time off and flexibility, particularly in younger talent pools.
   • Remote and hybrid work arrangements are increasingly expected in ICT and professional services.
4. Training & Upskilling
   • With strong STEM graduates, employees expect continuous learning opportunities.
   • Employers investing in professional development gain an edge in retention.
5. Union & Employee Representation
   • Trade unions exist but are less dominant compared to Western Europe.
   • Works councils or employee representatives may be required in larger firms.
6. Health & Safety Compliance
   • Employers must comply with the Law on Safety and Health at Work, ensuring risk assessments, safety training, and employee well-being.

How Gloroots Supports Workforce Management in Lithuania

Gloroots helps companies manage their Lithuanian workforce by:

• Administering payroll, Sodra contributions, and tax filings.
• Managing statutory leave, sick pay, and parental benefits.
• Ensuring compliance with Labour Code and EU directives.
• Supporting probation, termination, and redundancy in line with Lithuanian law.
• Advising on benefits packages that go beyond the statutory minimum.
• Providing cultural onboarding to help integrate global employees into Lithuanian teams.

With Gloroots as your EOR in Lithuania, companies can focus on scaling their business while we ensure compliance and smooth workforce management.

Q: What are the key steps and requirements in terminating employees in Lithuania?

Termination in Lithuania is regulated by the Labour Code of Lithuania, which provides strong protections for employees. Employers must ensure dismissals are justified, lawful, and procedurally correct.

Termination Process in Lithuania

1. Grounds for Termination
   • Valid reasons include redundancy, employee misconduct, poor performance, or mutual agreement.
   • Termination without valid grounds can be contested before labor courts.
2. Notice Periods
   • Standard: 1 month for employees with <1 year of service.
   • 2 months for employees with >1 year of service.
   • Extended notice applies to employees with long tenure, parents of young children, or nearing retirement.
3. Probationary Periods
   • Up to 3 months (extendable to 6 months by agreement).
   • Termination during probation requires 3 days’ notice.
4. Severance Pay
   • Depends on length of service:
     • <1 year: 0.5 month’s salary.
     • 1–5 years: 2 months’ salary.
     • 5–10 years: 4 months’ salary.
     • 10–20 years: 6 months’ salary.
     20 years: 8 months’ salary.
5. Special Protections
   • Additional safeguards exist for pregnant employees, parents on parental leave, and union representatives.

Q: What is the offboarding process in Lithuania?

1. Final Payroll Settlement
   • Includes outstanding wages, unused vacation pay, and severance if applicable.
2. Sodra & Tax Reporting
   • Employer must update employee status with Sodra and file final tax declarations with VMI.
3. Company Assets
   • Return of laptops, phones, ID cards, and secure data handling.
4. Exit Documentation
   • Employer must issue a certificate of employment detailing role and tenure.
5. Record Retention
   • Employment records must be kept for at least 50 years under Lithuanian law.

Termination & Offboarding: Direct Entity vs. Gloroots EOR in Lithuania

Q: What costs and financial planning do you need with an Employer of Record in Lithuania?

Hiring in Lithuania involves not just salaries but also social security contributions, taxes, leave entitlements, and severance obligations. Employers must carefully plan for these costs to remain compliant and competitive.

With Gloroots as your Employer of Record, you avoid the complexity of managing payroll, Sodra contributions, and tax filings directly. Instead, you pay a transparent monthly EOR fee plus employee compensation, making financial planning simple and predictable.

Typical Employer Costs in Lithuania

• Base Salary: Market-competitive, with fintech, ICT, and life sciences salaries above national averages.
• Employer Social Security (Sodra): ~1.77% – 2.49% of salary.
• Employee Social Contributions: ~19.5% (withheld from salary, employer remits).
• Personal Income Tax (PIT): Withheld at 20% up to €101,094, and 32% above that.
• Annual Leave & Public Holidays: 20 working days + 13 public holidays, all paid.
• Sick Leave: Employer covers first 2 days (62.06% of salary), then Sodra pays.
• Severance Pay: 0.5–8 months’ salary depending on tenure (applies in redundancy or certain dismissals).
• Entity Setup (Direct Employers only): €2,500 minimum share capital, plus legal, payroll, and accounting overhead.

Benefits of Using Gloroots EOR

• No entity setup costs — avoid the €2,500 capital requirement.
• Transparent pricing — salary + EOR fee.
• Payroll automation — PIT and Sodra fully managed.
• Compliance guarantee — no risk of penalties from VMI or Sodra.
• Faster onboarding — employees hired in days, not weeks.
• Scalability — ideal for testing the Lithuanian market or hiring niche specialists.

Direct Entity vs. Gloroots EOR: Cost & Financial Planning in Lithuania