How to Hire and Pay Employees in Lithuania: A Step-by-Step Compliance Guide

Lithuania’s tech scene is having a moment. While everyone’s fighting over the same talent in Silicon Valley, savvy companies are discovering this Baltic powerhouse where developers speak three languages before breakfast and innovation comes standard. You get European Union access, a thriving startup ecosystem, and professionals who’ve been quietly building world-class products while the rest of us weren’t paying attention.

But hiring in Lithuania isn’t just about a different legal framework—it’s specific in ways that can trip up even experienced global employers. Employment contracts need particular clauses. Payroll runs on cycles you might not expect. And those benefits packages everyone mentions? They’re not suggestions, they’re requirements with real teeth.

This guide cuts through the confusion. We’ll walk you through exactly how to hire in Lithuania, from setting up your first employment contract to making sure payroll hits on time, every time. No corporate speak, no assumptions—just the practical steps you need to build your Lithuanian team the right way.

Step-by-step roadmap to hiring employees in Lithuania

Hiring in Lithuania is highly regulated and process-driven, but manageable when broken into steps. Here’s your roadmap:

1. Decide how you want to hire
   Choose between hiring directly or using an Employer of Record (EOR). Hiring directly means setting up a legal entity with registration at the State Enterprise Centre of Registers and the State Tax Inspectorate (VMI). For faster, lower-risk hiring, an EOR handles payroll, tax compliance, and contracts on your behalf.
2. Draft a legally sound employment contract
   Written employment contracts are mandatory in Lithuania and must include:
   • Job title and description
   • Compensation details (including bonuses, if applicable)
   • Probation period (up to three months)
   • Working hours and location
   • Paid leave entitlements
   • Notice period, depending on length of service
3. Understand employment types
   Lithuanian law distinguishes between:
   • Indefinite-term employment (most common)
   • Fixed-term contracts, used for temporary projects (up to two years)
   • Independent contractors, not protected by labor law—careful classification is vital to avoid misclassification penalties
4. Ensure work authorization for foreign hires
   • EU/EEA citizens don’t require a work permit.
   • Non-EU nationals generally need a national visa (D-type) and a work or residence permit. Lithuania’s Startup Visa offers a structured route for skilled talent, and the EU Blue Card applies to high-skilled professionals across the EU. For more on legal steps, see Pebl’s guide to Lithuania work visas and legal authorization.
5. Register with authorities and onboard your employee
   Employers must:
   • Register the employee with SODRA (social insurance)
   • Declare employment to the VMI (State Tax Inspectorate)
   • Report payroll and contributions monthly via the EDS system

Ensuring payroll compliance and efficient payment

Lithuanian payroll requires strict adherence to local laws, tax codes, and social contributions. Here’s how to stay on track:

1. Register for payroll taxes
   Employers must register with both SODRA (social insurance) and VMI (income tax withholding).
2. Withhold and remit correct tax contributions
   As of 2025:
   • Income tax: 20% on annual income up to €126,532; 32% for income above that threshold (VMI)
   • Social contributions: Employer ~1.77% (plus ~0.16% accident insurance); employees ~19.5%
3. Align with payment frequency and norms
   • Salaries are paid monthly—typically by the last working day.
   • Bonuses must be contractually outlined if recurring.
   • Payments go directly into employees’ Lithuanian bank accounts.
     
     Sample monthly payroll timeline:
   • 1–10: Time tracking/data gathering
   • 10–15: Payroll calculation and review
   • 15–20: Income tax and SODRA reporting
   • 25–30: Salary transfer to employees
4. Manage benefits and leave entitlements
   • Annual leave: Minimum 20 business days (25 for some industries)
   • Sick leave: 80% salary from day three via SODRA
   • Maternity leave: Up to 126 calendar days via SODRA
   • Paternity leave: 30 calendar days via SODRA
   • Public holidays: Typically 13 national days per year

Voluntary benefits like private health insurance and flexible policies are increasingly common.

Key salary benchmarks and cost structure breakdown

Here are the employment costs you should fold into your budget.

1. Minimum and average wages (2025)
   • Minimum wage: €924/month gross
   • Average gross salary: €1,950/month (Statistics Lithuania)
2. Typical salaries by role
   • Junior Software Developer: ~€1,600 gross/month
   • HR Manager: ~€2,300 gross/month
   • Manufacturing Worker: ~€1,300 gross/month
3. Employer cost breakdown
   For a €2,000 gross salary:
   • Employer contributions: ~€36–€40
   • Total employer cost: ~€2,040
   • Net salary: ~€1,414 (after ~29.3% deductions)

Mitigating common hiring and payroll pitfalls in Lithuania

Hiring in Lithuania is relatively straightforward—if you know what to watch out for.

• Missing written contracts: Oral agreements are invalid
• Misclassifying contractors: Can trigger fines and retroactive obligations
• Late social contribution filings: Lead to penalties from SODRA

Tips and resources for a successful application and utilizing support from EOR providers

What is an employer of record, and how it helps

An EOR is a local legal entity that hires employees on your behalf. They handle:

• Employment contract drafting compliant with Lithuanian labor law
• Payroll processing, tax withholding, and social security contributions
• Local compliance, reporting, and benefits administration

Learn more about how an Employer of Record in Lithuania supports hiring, payroll, and compliance.

When to use an EOR

• If you’re not ready to establish a legal entity in Lithuania
• When you need fast market entry with minimized risk
• To test market feasibility before scaling operations

Before choosing an EOR, confirm they offer transparent pricing and complete compliance management—from contracts to timely payroll.

Start hiring and paying Lithuanian employees with confidence

With this roadmap, salary benchmarks, and EOR insights, you’re now equipped to build a compliant, efficient hiring and payroll process in Lithuania. Start with your hiring checklist, benchmark salaries, and consider EORs to streamline expansion.

For comprehensive hiring strategies across multiple markets, check out Global Expansion Guide Part 4: Recruitment and Hiring Research.

How Pebl can help

At Pebl, our EOR services simplify global hiring with smart tech and local expertise—no entity setup required. From compliant employment contracts to on-time payroll in Lithuania, our turnkey services help you scale fast and confidently. Let’s talk about where in the world you want to hire.

This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error‑free.

© 2025 Pebl, LLC. All rights reserved.