Lithuania Labour Law: 10 Key Employment Rules

Lithuania has developed a modern and employer-aware labour law framework that balances employee protection with business flexibility. The country’s employment system is governed primarily by the Lithuanian Labour Code, which aligns closely with European Union standards while retaining local regulatory specifics that employers must understand. 

From a business perspective, Lithuania remains an attractive jurisdiction. According to Trading Economics, Lithuania’s employment rate for people aged 20–64 has consistently exceeded 75%, placing it above the EU average and reflecting a stable and skilled labour market. At the same time, labour inspections and enforcement have become more structured, increasing the importance of proper legal compliance.

For companies planning employment in Lithuania, compliance with labour regulations is not optional and directly affects operational stability, cost planning, and legal risk management.

1. Employment Contracts Must Be in Writing

Lithuanian labour law requires employment contracts to be concluded in written form. A verbal agreement does not provide sufficient legal protection and exposes employers to administrative penalties and disputes. 

The written contract must be signed before the employee begins work, as employment rights and obligations arise from the formal agreement rather than informal arrangements.

A compliant employment contract includes essential terms such as:

• Job position
• Remuneration
• Working hours
• Workplace location
• Employment start date

Employers that fail to formalize contracts properly risk sanctions from the State Labour Inspectorate and difficulties defending their position in employment disputes. Written contracts also serve as a key compliance document during labour inspections.

2. Employers Must Choose the Correct Type of Employment Contract

Lithuanian labour law recognizes several types of employment contracts, with the indefinite-term contract treated as the standard form of employment. 

Fixed-term contracts are permitted but subject to statutory restrictions and cannot be used freely to replace permanent employment relationships.

Fixed-term contracts are typically allowed for objectively justified reasons, such as temporary projects or replacement of absent employees. The law limits both the duration and repeated use of fixed-term contracts, aiming to prevent abuse. 

Part-time employment and remote work contracts are also permitted, provided working conditions and employee rights remain proportionate and compliant.

Selecting the correct contract type is particularly important for foreign-owned companies, as misuse of fixed-term arrangements is a common compliance issue identified during labour inspections.

3. Working Time Is Strictly Regulated

Working time regulations in Lithuania are clearly defined and closely monitored. The standard working time is 40 hours per week, usually spread across five working days. Daily working time typically does not exceed eight hours, although flexible schedules may apply in specific sectors or roles.

Lithuanian law establishes a maximum working time threshold that includes overtime, ensuring employee health and safety. Employers must also comply with daily and weekly rest requirements, which protect employees from excessive workloads. 

Proper documentation of working hours is mandatory and plays a critical role in compliance audits.

4. Overtime Is Limited and Must Be Properly Compensated

Overtime work in Lithuania is not unrestricted. Employers may require overtime only in legally permitted situations and within statutory limits. Overtime generally cannot exceed a set number of hours per week or year, except in exceptional circumstances defined by law.

Employees working overtime are entitled to increased compensation. Overtime pay rates exceed standard hourly wages and vary depending on timing, including night work or work performed during rest days. 

Employers must maintain accurate records of overtime hours, as undocumented overtime frequently results in penalties during inspections.

5. Minimum Wage and Salary Payment Rules Must Be Followed

Lithuania sets a statutory minimum monthly wage that applies nationwide and is reviewed annually, in 2026 it was raised to 1153 euro. 

Employers must ensure that full-time employees receive remuneration that meets or exceeds this threshold. Salary payments must be made regularly and within agreed deadlines, typically on a monthly basis.

Lithuanian labour law also enforces equal pay principles. Employees performing equivalent work under comparable conditions must receive equal remuneration, regardless of gender or other protected characteristics. 

Non-compliance with salary rules may lead to financial penalties and reputational damage.

6. Employees Are Entitled to Paid Leave and Rest Periods

Employees in Lithuania are entitled to a minimum of 20 working days of paid annual leave for a standard five-day workweek. This entitlement applies regardless of nationality and accrues proportionally during the employment period. Certain employee categories may qualify for extended leave under specific conditions.

In addition to annual leave, employees benefit from paid public holidays established under Lithuanian law. 

Employees also have statutory rights to sick leave, maternity leave, paternity leave, and parental leave, all governed by detailed regulations. Employers must respect these entitlements and ensure accurate leave tracking.

7. Social Security Contributions Are Mandatory

Employment in Lithuania involves mandatory social security contributions paid by both employers and employees. These contributions fund pensions, health insurance, unemployment benefits, and other social protections. Employers are responsible for calculating, withholding, and transferring contributions to the relevant authorities.

Failure to comply with social security obligations often results in financial sanctions and back-payment obligations. 

For foreign-owned businesses, payroll compliance represents a particularly sensitive area, as errors frequently arise during company establishment and early operational stages.

8. Termination of Employment Requires Legal Grounds

Termination of employment in Lithuania is regulated and cannot occur arbitrarily. Employers must rely on legally defined grounds for termination, such as:

• Redundancy
• Employee misconduct
• Inability to perform job duties

Each ground requires proper justification and documented procedures.

Employees also have the right to terminate employment unilaterally by providing notice in accordance with statutory timelines. 

Mutual termination agreements are permitted and often used in practice, provided employee consent is genuine and documented. Improper termination frequently leads to labour disputes and compensation claims.

9. Notice Periods and Severance Pay Are Statutory

Notice periods in Lithuania depend on the reason for termination and the employee’s length of service. 

Employers must respect statutory notice requirements and cannot shorten them unilaterally. In many cases, termination initiated by the employer triggers severance pay obligations.

Severance compensation is calculated based on the employee’s average salary and years of service. Additional guarantees may apply in redundancy cases. Employers must factor these costs into workforce planning, particularly during restructuring or downsizing.

10. Employers Must Respect Employee Rights and Equality

Lithuanian labour law places strong emphasis on employee rights and equal treatment. Employers must ensure non-discrimination throughout recruitment, employment, and termination processes. Discrimination based on gender, age, nationality, or other protected characteristics is strictly prohibited.

Health and safety obligations also form a core component of employment regulation. Employers must provide safe working conditions, conduct risk assessments, and offer appropriate training. 

Employee data protection is another critical area, as personal data must be processed in compliance with EU data protection standards.

Hiring Foreign Employees in Lithuania

Lithuania allows companies to hire both EU and non-EU nationals, though requirements differ. EU citizens benefit from free movement rights, while non-EU nationals generally require work permits and residence permits. Employers play a key role in sponsorship and documentation processes.

Failure to comply with immigration-related employment rules can lead to penalties and restrictions on future hiring. Businesses employing foreign staff must align labour law compliance with immigration regulations to avoid operational disruptions.

Common Labour Law Risks for Employers in Lithuania

• Misclassification of workers, particularly treating employees as independent contractors without meeting legal criteria
• Use of fixed-term employment contracts without valid legal grounds or exceeding statutory limits
• Failure to conclude written employment contracts before the employee starts work
• Incorrect calculation or late payment of salaries, overtime compensation, or minimum wage requirements
• Inadequate recording of working hours, overtime, and rest periods
• Non-compliance with statutory notice periods and severance pay obligations during termination
• Improper or insufficient justification for employee dismissal, leading to labour disputes
• Failure to comply with employee leave entitlements, including annual leave and sick leave
• Incomplete or incorrect social security and payroll contributions
• Breaches of health and safety obligations or insufficient workplace risk assessments
• Non-compliance with employee data protection and confidentiality requirements
• Employment of foreign workers without proper work or residence permits

Given the complexity of these risks, many employers rely on experienced legal advisors such as Lawhill to review employment structures and ensure ongoing compliance with local labour regulations.

Labour Inspections and Penalties

The State Labour Inspectorate monitors compliance with Lithuanian labour law through scheduled and unscheduled inspections. Inspectors review employment contracts, payroll records, working time documentation, and health and safety measures.

Penalties for violations range from administrative fines to mandatory corrective actions. Repeated or serious breaches may result in higher sanctions and increased inspection frequency. Proactive compliance remains the most effective risk-mitigation strategy.

Conclusion

Lithuania labour law establishes a structured and transparent framework for employment relationships. Employers that understand and apply the ten key employment rules benefit from legal certainty, workforce stability, and reduced compliance risks. 

As labour enforcement continues to strengthen, professional legal oversight plays an increasingly important role in business success.

Companies operating in Lithuania often rely on experienced legal partners such as Lawhill to support employment compliance alongside company formation, corporate restructuring, and ongoing legal management. A proactive approach to labour law ensures that businesses can focus on growth while maintaining full regulatory compliance in the Lithuanian market.