Hire and pay employees in Lithuania

Employer of Record (EOR) vs. entity

Foreign employers often begin by hiring Lithuanian contractors. But if you want to expand, you’ll need to set up a legal entity or hire employees through an EOR. 

• Legal entity in Lithuania. You’ll need to register with local authorities, open a Lithuanian bank account, and leverage local experts to understand tax rates and remain compliant with labor laws.
• Lithuanian EOR. A Lithuanian Employer of Record service handles more than hiring full-time employees. It also manages legal requirements for complying with EU and Lithuanian laws concerning payroll, benefits, and much more. 

Here are the pros and cons of each—and you can read more in our guide to hiring with an EOR in Lithuania.

Once you’ve picked an EOR that works in Lithuania, you can begin the onboarding process by collecting your new employee’s information, from date of hire to the relevant forms to register with the State Social Security Fund (see the list in our guide).

Classifying Lithuanian workers: employees vs. contractors

Lithuania’s worker protection laws apply to employees, but not to contractors—so it’s vital to classify new hires correctly. Get it wrong, and you risk being hit with penalties and back taxes—and misclassifying workers can tarnish your company’s reputation, too.

There isn’t one single test to tell the difference, but this breakdown can help you stay compliant with Lithuanian labor laws. For a deeper dive into classifying workers in Lithuania, read our guide.

Work permits for Lithuanian employees

Before hiring in Lithuania, you need to make sure your prospective hire has legal authorization to work there. If they aren’t a citizen of Lithuania and they don’t have permanent residency in Lithuania, they need one of these:

• Work permit
• “Decision on the Compliance of Foreign Work with Labour Market Needs” permit
• EU Blue Card
• Intra-Corporate Transfer (ICT) Card

Processing times vary according to the applicant’s nationality and the type of employment, but they typically take between two weeks and four months.

For more on who needs a work permit in Lithuania, and how to acquire one, read our guide to Lithuanian work permits.

New hire onboarding checklist

Now you’ve verified your employee can legally work in Lithuania, you can onboard them. With a comprehensive onboarding program, you can ensure all the relevant paperwork is signed and filed, and that your new employee is set up to thrive in their new role. 

Start with these steps, and read the full list in our guide to new hire onboarding in Lithuania.  

Before their first day

• Employment background check. 
• Employment agreement (more on that in the next section).
• Prepare income tax documents. 
• Enroll them in benefits.
• Add them to payroll. 
• Order and configure their devices. 
• Book orientation sessions and a team meet-and-greet.
• Schedule a meeting with their manager. 

On Day 1

• Send out a “welcome to the team” email. 
• Give them an agenda for their first one or two days. 
• Give them an office tour—or a virtual walkthrough of the company org chart. 

During their first 90 days

• Schedule training. 
• Assign work.
• Co-create their goals for the first quarter. 
• Book recurring check-ins. 
• Seek their feedback on how to improve the onboarding experience.

What to include in an offer letter in Lithuania

Offer letters (also known as employment agreements) cover your bases and set expectations with new hires up front. Here’s a checklist of what to include:

• Position, job description, and job duties
• Contact information
• Start date and working hours
• Probation period (if applicable)
• Compensation and benefits
• Vacation policy
• Termination policy
• Confidentiality and non-disclosure agreements

NDAs and confidentiality agreements in Lithuania

Non-disclosure agreements (NDAs) prevent people from disclosing confidential information to competitors. They’re enforceable under Lithuanian law, so they can be an effective way to ensure your proprietary information remains under wraps.

But NDAs in Lithuania need to follow certain rules to be enforceable:

• NDAs need to be in writing.
• They must identify the parties and their specific obligations.
• They must specify time limits. 
• They must explain what is and isn’t covered by the NDA. 
• They need to explain the consequences of breaking the NDA. 
• The laws and jurisdiction pertaining to the agreement must be clearly specified.

There are three crucial things you need to know, plus a breakdown of what makes an NDA enforceable, in our guide to non-disclosure agreements in Lithuania.

Running background checks on Lithuanian employees

By running background checks on your new hires in Lithuania, you can sleep easy. Not only do background checks help protect your company and your workers, but by executing them correctly you can stay on the right side of Lithuanian regulations. 

Here’s a rundown of the most common types of background screenings in Lithuania, plus a few other checks you can consider—depending on the type of role.

Dig deeper into the background checks permitted by the Lithuanian Labor Code in our guide to background screenings in Lithuania.

Paying employees in Lithuania

After you’ve decided between using an EOR or your own entity, you need to pick a payroll solution for your new hires in Lithuania. But before you can run payroll, you need to do the following:

• Ensure all of your Lithuanian employees are classified correctly.
• Collect employee information, like their name, date of birth, date of hire, and contact and bank information.
• Input the monthly salary amount in EUR—or get written permission from the employee if you’re planning to pay them in another currency.
• Make sure you’re adhering to statutory requirements when calculating payroll deductions (see a breakdown of employer costs in our EOR guide).
• Run payroll.

Mandatory employee benefits in Lithuania

The benefits you need to extend to employees in Lithuania include insurance, pension, and various types of time off:

• Health insurance
• Pension
• Sick leave
• Education leave
• Unemployment insurance
• Parental leave (i.e. paternity leave and maternity leave)
• Vacation entitlements (annual leave varies by years of service)
• Public holidays
• Severance pay 
• Other state social insurance fund entitlements 

Our Lithuania EOR guide has the list, along with other essential info for paying and managing your Lithuanian employees.

Managing remote employees’ computers and apps

Employment agreement? Check. Benefits? Check. Added to payroll? Check. But you also need to ensure your new employee in Lithuania has the right equipment, apps, and tools to hit the ground running on day 1. 

With global employment, you also have to manage the added complexity of configuring and updating their devices. But with Rippling, you can:

• Quickly set up and secure employees’ accounts, ensuring your new hires in Lithuania have the right access and permissions. 
• Set up, manage, and disable employee apps (like Google Workspace and Slack) from a single place. 

Get up to speed on remote device management with our guide.

Protecting company IP in Lithuania

Losing control of your company’s intellectual property (IP) is a death knell for any growing business, so it’s crucial to safeguard your inventions and creative works as you expand to Lithuania. But only a legal firm with on-the-ground knowledge of IP law in Lithuania can robustly protect your IP ownership and rights in Lithuania. 

Here are three things you need to know:

• You have to localize IP ownership clauses to Lithuania.
• In most cases, the employer owns the rights to IP created by an employee.  
• Contractors own the copyright to their work unless you override this in a written agreement—yet another reason it’s so crucial to classify your employees and contractors correctly.

Begin your deep dive into Lithuanian IP law with a little help from our primer.

Complying with Lithuanian labor laws

Hiring, onboarding, and paying your Lithuanian employees is just the beginning. You need to ensure you’re adhering to Lithuanian labor laws day to day, and there can be stiff penalties for any missteps.

Get an introduction with our guide to Lithuanian employment law—here are a few of the most important takeaways:

• The onus is on employers to ensure their employees’ health and safety in the workplace, and recent labor code amendments have strengthened employee protections from bullying, discrimination, and sexual harassment.
• Pay transparency is a must, and Lithuanian law demands that employers apply equality standards to recruiting, working conditions, and pay.
• Failing to offer benefits like healthcare insurance, unemployment insurance, and sick leave can leave you exposed to fines and repayment of those benefits.

Terminating employees in Lithuania

If you don’t follow the letter of the law when letting go a Lithuanian employee, you’re at risk of wrongful dismissal claims—so it pays to read up on termination requirements in Lithuania well in advance of needing them. 

Lithuania doesn’t recognize at-will employment. You can dismiss a Lithuanian employee for serious misconduct but it will qualify as wrongful dismissal if you can’t prove the reason for dismissing them—or if the reason is found to breach Lithuanian labor laws or the terms of the employment agreement.  

Lithuanian employees may also be entitled to a severance payment (which varies based on their tenure). Get an overview of notice period requirements and severance pay, and other FAQs on terminating employees in Lithuania, in our guide.

Disclaimer: Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.