Hire employees in Lithuania
What a foreign company needs to know before employing people in Lithuania: whether you need a local entity, why the employer's statutory cost is only 1.77% while the employee carries most social insurance, how the 2026 income tax bands and twice-monthly pay work, what a dismissal costs, and why the agency work rules shape how you structure a hire. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first.
Do I need a local entity in Lithuania to hire?
No. There are three routes:
- Employer of Record. Dryft Global employs the person in Lithuania through a compliant local employer, notifies Sodra before day one, files the monthly tax and Sodra returns and runs payroll in euro. You direct the work.
- Direct local entity. You form a private limited company (UAB), register with the State Tax Inspectorate (VMI) and Sodra and set up payroll: plan for 2 to 4 weeks before the first payroll.
- Independent contractor. Lawful only for genuinely independent work. Work with the features of employment but without a written contract and a prior Sodra notice is illegal work.
When should I use an EOR instead of registering locally?
Use an EOR for your first engineers, fintech or shared services staff in Lithuania, when you want to start in days and do not want to build Sodra notices, twice-monthly payroll and Lithuanian language documents yourself. Your own entity earns its keep for a sustained team or a sales office signing Lithuanian contracts.
What does an employee actually cost beyond salary?
Very little on top of gross pay. Lithuania places almost all social insurance on the employee, so the employer's statutory contributions are 1.77% of gross pay for an indefinite contract (2.49% for fixed-term). With typical health insurance the all-in figure is about 2.5%. The employee pays 19.5% in contributions plus income tax, so compare offers on net pay.
How difficult is termination in Lithuania?
Dismissal needs a Labour Code ground. Without the employee's fault, notice is usually 1 month (2 weeks in the first year, and doubled or tripled for protected groups) and severance is 2 months' pay after the first year, plus a long-term employment benefit for 5 or more years' service paid from a fund. Dismissal at the employer's will is possible with at least 6 months' pay. Mutual agreement is the common clean exit.
Can Dryft Global legally employ my team in Lithuania?
Yes. Dryft Global employs your team in Lithuania through a compliant local employer set up for the Lithuanian rules on temporary agency work. We issue Labour Code contracts in Lithuanian, notify Sodra before day one, run payroll at least twice a month, file the GPM313 and Sodra returns by the 15th, administer leave and benefits, and manage notice and severance.
Hiring routes compared
Speed, set-up burden and liability differ by route.
| Factor | Direct local entity | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Time to first payroll | 2 to 4 weeks | Days to 2 weeks | Days |
| Local entity required | Yes, UAB or branch | No | No |
| Sodra and VMI registration and returns | Your registrations | Handled by Dryft Global | Contractor's own |
| Agency work rules | Not applicable | Structured compliantly by Dryft | Not applicable |
| Statutory liability | Direct corporate exposure | Assumed by Dryft Global | High if the work is dependent |
| Best fit | Sustained team, local sales | First hires, engineering and fintech teams | Short independent projects |
What an employee costs in Lithuania
Since the 2019 reform the employee pays pension, sickness, maternity and health insurance, and the employer pays only four small contributions. The model below is a Vilnius software engineer on EUR 4,000 gross a month on an indefinite contract.
| Component | Employer share | Notes |
|---|---|---|
| Unemployment insurance | 1.31% | 2.03% for fixed-term contracts |
| Work accident and occupational disease | 0.14% | Lowest risk group; up to 1.40% by risk |
| Guarantee Fund | 0.16% | |
| Long-term Employment Benefit Fund | 0.16% | Funds the long-term benefit on dismissal |
| Statutory subtotal | 1.77% | Up to the ceiling of EUR 138,729 a year |
| Voluntary health insurance | ~0.7% | Typical budget, tax-free up to EUR 350 a year |
| Total employer on-cost | ~2.5% | Above gross salary |
For an employee on EUR 4,000 a month, budget roughly EUR 49,200 a year all-in before the EOR fee. The employee's own deductions are 19.5% Sodra contributions and 20% income tax, leaving net pay of about EUR 2,420 a month, or EUR 2,300 with the optional 3% second pillar pension. Ask us for a cost model with current rates applied.
Payroll and tax
Salaries are paid in euro at least twice a month, or monthly if the employee asks in writing, with a payslip at least monthly. Sodra must be notified before the employee starts work. The employer files the GPM313 income tax return and the Sodra monthly return, and pays tax and contributions, by the 15th of the following month.
Income tax withholding
From 1 January 2026 employment income is taxed at 20% up to EUR 83,237.40 a year, 25% up to EUR 138,729 and 32% above. A non-taxable amount of EUR 747 a month applies at the minimum wage and tapers to zero at EUR 2,677.49 a month, so most engineers pay a flat 20% on their whole salary.
Minimum wage 2026
The minimum monthly wage is EUR 1,153 gross (EUR 7.05 an hour) from 1 January 2026, up from EUR 1,038. A EUR 1,245 minimum for 2027 has been proposed. The minimum monthly wage may be paid only for unqualified work.
Leave and mandatory benefits
- Annual leave. At least 20 working days on a 5-day week, more for some groups and after 10 years' service.
- Public holidays. 13 public holidays over 14 calendar days in 2026, including Easter Monday, St John's Day and three days at Christmas.
- Sick pay. The employer pays days 1 and 2 at 62.06% to 100% of average pay, then Sodra pays from day 3.
- Maternity. 126 calendar days, paid by Sodra at 77.58% of compensatory wage, not by the employer.
- Paternity. 30 calendar days, paid by Sodra.
- Working time. 40 hours a week. Overtime is capped at 8 hours a week and 180 hours a year, paid at least 1.5 times.
- Remote work. Some groups, including pregnant employees and parents of young children, have a right to work remotely unless it is excessively costly.
- Common extras. Voluntary health insurance, extra leave days and performance bonuses.
Termination and notice periods
Probation can last up to 3 months, or up to 6 months for employees paid at least twice the average wage from 1 November 2026, and either party can end it with 3 working days' notice. After that, notice works as follows.
| Item | Rule |
|---|---|
| Notice, no fault of the employee | 1 month; 2 weeks if employed under 1 year |
| Protected groups | Notice doubled or tripled |
| Severance | 2 months' pay; 0.5 month if employed under 1 year |
| Long-term employment benefit | 1 to 3 months for 5 or more years' service, paid by the fund |
| Dismissal at the employer's will | 3 working days' notice and at least 6 months' pay |
- Labour Code grounds. Redundancy of the function, failure to achieve agreed results, unsuitability or a serious breach.
- Written notice. State the reason, legal basis and date; employees may take paid time to look for work during notice.
- Protection. No dismissal during sickness or statutory leave; notice is suspended until it ends.
- Collective redundancy. Thresholds start at 10 employees in 30 days, with works council consultation and notice to the Employment Service.
- Mutual agreement. The common clean exit.
Can I use independent contractors?
Only for genuinely independent work. The Labour Code defines employment by a job function, subordination and pay, and the label on the contract does not decide. Registration as self-employed does not prevent reclassification, and work with the features of employment without a written contract and a prior Sodra notice is illegal work. Placing a worker under another company's direction is regulated as temporary agency work, which only agencies on the State Labour Inspectorate list may carry out. Lithuanian law has no separate employer of record category, so the employing structure is a point to settle for each hire. For anyone who works like an employee, an EOR set up through a compliant local employer is the safe route.
The legal framework in brief
Lithuania is a civil law system where the Labour Code sets most terms directly. The instruments you will hear most:
- Labour Code. Contracts, probation, working time, leave, remote work, notice, dismissal, severance and temporary agency work, with a package for high earners from 1 November 2026.
- Law on State Social Insurance. Sodra contributions, the ceiling and benefits.
- Law on Personal Income Tax. The 20%, 25% and 32% bands and the non-taxable amount.
- Law on Employment. Illegal work and the duty to notify Sodra before work starts.
- Data protection. GDPR and the Law on Legal Protection of Personal Data, enforced by the State Data Protection Inspectorate.
- Immigration and right to work. EU nationals work freely. Others need a temporary residence permit for work, subject to an annual quota and new conditions since May 2026, or an EU Blue Card at EUR 3,617.10 a month.
- Authorities. The Ministry of Social Security and Labour, Sodra, VMI, the State Labour Inspectorate, the Employment Service and the Migration Department.
Where the talent is
About 2.9 million people, with unemployment of 6.1% in the second quarter of 2026. Lithuania ranked 33rd in the world for English proficiency in 2025. Time is UTC+2 (UTC+3 in summer), and Lithuania is in the EU, Schengen, the eurozone and NATO.
| Region | Talent and industry concentration |
|---|---|
| Vilnius | Capital, fintech, software and shared services |
| Kaunas | Engineering, IT and manufacturing |
| Klaipeda | Port, logistics and manufacturing |
Lithuania Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step.
- Step-by-step checklist, from route selection to first payroll
- Contract, probation and Sodra notice before day one
- Gross to net and employer cost set-up under the 2026 tax bands
- Twice-monthly pay and the GPM313 and Sodra calendar (15th)
- Contractor reclassification and agency work risk checklist
- Notice, severance and mutual agreement pack
- Every official Lithuanian authority with direct links
This guide is general information, not legal, tax or immigration advice. Lithuania revises the minimum wage, the average wage used for contributions and the foreign worker quota each year, and the Labour Code changed on 1 November 2026. Confirm current figures and the employment structure with a qualified adviser or with Dryft. Last reviewed November 2026.
Ready to hire in Lithuania?
Tell us who you want to hire and where they sit. You will get a cost model and a compliant route within a day, from a person who has done this before.