How to Hire Employees or Contractors in Lithuania

As one of the fastest-growing economies in Northern Europe, Lithuania has become a preferred destination for international employers and entrepreneurs. The country’s workforce is dynamic, highly educated, and supported by a transparent legal and tax environment. 

Companies that hire in Lithuania benefit from the combination of modern digital infrastructure, business-friendly policies, and access to the EU single market.

In this complete guide, you will find practical information on hiring both employees and independent contractors in Lithuania. 

Legal Framework for Hiring in Lithuania

Employment in Lithuania is governed by the Labour Code, which outlines the rights, obligations, and protections of both employers and employees. 

All employment contracts must be written, specifying job title, responsibilities, salary, working hours, and duration of employment.

Below are key aspects of Lithuanian labor law that employers must understand:

• Workweek: The standard workweek consists of 40 hours, typically spread across five days (Monday to Friday). Daily working hours usually total 8 hours.
  
• Overtime: Overtime is permitted only with the employee’s consent and must be compensated at no less than 1.5 times the regular hourly rate.
  
• Annual Leave: Employees are entitled to a minimum of 20 working days of paid annual leave per year. For those working six days per week, this equals 24 working days.
  
• Public Holidays: Lithuania observes 13 national public holidays, during which employees are generally entitled to a day off with pay.
  
• Maternity Leave: Female employees receive 126 calendar days of paid maternity leave, typically divided equally before and after childbirth.
  
• Paternity Leave: Fathers are entitled to 30 calendar days of paid leave during the first year after a child’s birth.
  
• Sick Leave: Employees receive paid sick leave funded jointly by the employer and social insurance for the initial days, with longer-term compensation covered by Sodra.
  
• Probation Period: Employers may apply a probation period of up to three months to evaluate performance.

Hiring Employees in Lithuania: Step-by-Step Process

Employers planning to hire in Lithuania must follow a structured process to ensure compliance and efficient onboarding.

Step 1: Register a Legal Entity or Branch

Before hiring, a foreign business must establish a presence in Lithuania, usually as a Uždaroji Akcinė Bendrovė (UAB) or a branch office. 

In Lawhill you can find full legal assistance with company registration, obtaining a tax number, and preparing corporate documentation.

Step 2: Advertise the Position and Recruit

Employers may post vacancies on popular job platforms, recruitment agencies, or business networks. Job offers must clearly state the position, salary range, qualifications, and working conditions to comply with Lithuanian labor transparency requirements.

Step 3: Prepare and Sign the Employment Contract

Once a candidate is selected, both parties must sign a written employment contract before the employee begins work. The agreement should specify the position, responsibilities, salary, work schedule, and benefits. 

Step 4: Register the Employee with Sodra

Every employee must be registered with Sodra, the State Social Insurance Fund, before starting work. Registration ensures social insurance coverage for health, pension, and unemployment benefits.

Step 5: Set Up Payroll and Tax Payments

Employers must establish a payroll system that automatically withholds income tax and social insurance contributions. Regular reports must be submitted to both Sodra and the Lithuanian State Tax Inspectorate.

Step 6: Maintain Employment Records

Employers must store all employment-related documentation securely, including contracts, payroll records, and social insurance submissions. Inspections may occur periodically to confirm compliance.

Hiring Contractors in Lithuania: What You Need to Know

Hiring independent contractors is a flexible alternative to employing staff directly. Contractors in Lithuania operate under the Civil Code, not the Labour Code, and are typically self-employed professionals who invoice clients for their services.

Key Features of Contractor Arrangements

• Legal Independence: Contractors are not considered employees. They manage their own work schedule, tax payments, and social insurance coverage.
  
• Service Agreements: The relationship is formalized through a service or consultancy agreement that outlines project terms, deadlines, and compensation.
  
• Tax Responsibility: Contractors pay personal income tax and can register as small businesses or self-employed individuals.
  
• Use Cases: Common in sectors such as IT, design, consulting, and marketing.
  
• Legal Risks: Employers must ensure the agreement does not mimic an employment relationship to avoid reclassification penalties.

Lawhill helps companies draft clear and legally compliant contractor agreements that minimize risk and define intellectual property ownership, confidentiality, and payment structures.

Comparing Employees vs. Contractors in Lithuania

Aspect	Employees	Contractors
Legal Basis	Labour Code	Civil Code
Tax Handling	Employer withholds taxes	Contractor pays own taxes
Benefits	Paid leave, insurance, and pension	No mandatory benefits
Flexibility	Fixed schedule	Project-based
Legal Risk	Employer obligations	Risk of reclassification

Each model has advantages. Employees provide stability and long-term integration, while contractors allow greater flexibility and faster onboarding.

Work Visas and Employment Permits in Lithuania

Foreign nationals who are not EU or EEA citizens require authorization to work in Lithuania. The country offers several visa and residence permit options for professionals and investors.

EU and EEA Citizens

Citizens of the European Union and European Economic Area can work in Lithuania without a visa or work permit. They only need to register their residence if they stay longer than 90 days.

Non-EU Nationals

Non-EU nationals must obtain a work permit or a temporary residence permit before beginning employment. The type of permit depends on the nature of work and the duration of stay.

Main categories include:

• Standard Work Permit: For regular employment based on a signed contract with a Lithuanian employer.
  
• EU Blue Card: Designed for highly qualified professionals who meet specific education and salary requirements.
  
• Seasonal Work Permit: For short-term employment in agriculture, tourism, or hospitality.
  
• Intra-Company Transfer Permit: For employees transferred from a foreign branch or headquarters.

Social Security and Sodra Contributions in Lithuania

Social insurance in Lithuania is administered by Sodra, which covers healthcare, maternity, paternity, unemployment, and pension benefits.

• Employee Coverage: All employees are automatically covered under Sodra through their employer.
  
• Employer Contributions: Employers contribute approximately 1.77% of the employee’s salary toward social security.
  
• Employee Contributions: Employees contribute around 19.5% of their income for pension and health insurance.
  
• Voluntary Coverage: Contractors and self-employed professionals can register for voluntary contributions to access similar protections.

Taxes and Payroll in Lithuania

The Lithuanian tax system is straightforward and transparent, which simplifies payroll administration. 

• Personal Income Tax (PIT): 20% flat rate.
  
• Corporate Income Tax: 16% standard rate, with a reduced 6% for small businesses meeting certain conditions.
  
• Payroll Reporting: Employers must submit monthly tax and insurance reports electronically.
  
• Withholding Obligations: Employers are responsible for withholding and remitting taxes and contributions on behalf of employees.

Employment Costs and Benefits

Hiring costs in Lithuania depend on the position, experience level, and industry. Average gross monthly salaries are lower than in Western Europe, making the country attractive for international employers.

Employers should consider the following key costs:

• Base Salary: Determined by job market standards and employee qualifications.
• Social Security Contributions: Shared between the employer and employee.
• Health Insurance: Covered under the national system through Sodra.
• Paid Leave: Includes vacation, public holidays, and sick leave.

Many companies offer additional benefits to attract talent, such as:

• Flexible working hours and hybrid work models
• Health insurance packages
• Annual performance bonuses
• Professional training and career development

Conclusion

Building a team in Lithuania is one of the most effective ways to expand your business in the European market. The country’s modern approach to employment, transparent taxation, and competitive costs provide an advantage for companies ready to grow internationally.

Hiring employees or contractors in Lithuania opens opportunities for efficient operations and long-term partnerships with skilled professionals. 

Lawhill, with extensive experience in company formation and employment law, ensures that every stage of the hiring process-from contracts to work visas-is handled with precision and full compliance. 

Building a successful team in Lithuania begins with expert legal guidance and a reliable local partner.