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Global Payroll Team
Written by Global Payroll Team
Last updated May 7, 2026
Expert Reviewed
Payroll in Lithuania
Tax in Lithuania
Immigration in Lithuania

Lithuania map

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Mercans offers complete payroll, PEO and HR services in Lithuania

Lithuania offers a strong business and investment climate supported by skilled talent, EU market access, modern digital infrastructure and a streamlined business environment. It remains a regional hub for technology, shared services, manufacturing and life sciences, with employers benefiting from a transparent regulatory framework and advanced e-government services.

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Doing Business in Lithuania

Lithuania continues to offer business opportunities across technology, fintech, cybersecurity, software, business services, advanced manufacturing and life sciences. Its legal and tax environment is relatively predictable by regional standards, and employers benefit from a digital-first public administration system and access to the wider EU labor and consumer market.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Lithuania is straightforward. Choose how your company operates from a range of entity types that suit your individual circumstance.

Banking

Banking hours vary by institution and service channel. Many banks operate on business days with shorter branch hours than digital service availability.

Working Week

The standard working week is generally Monday to Friday, and the standard working time is 40 hours per week unless reduced working hours apply under labor law.

Labor Law

The employment relationship is regulated by the Labor Code of the Republic of Lithuania.

Main Industries

Information technology, shared services, manufacturing, petroleum refining, food processing, chemicals, furniture, wood products

GDP Growth

2.8%

Dates & Numbers

yyyy/mm/dd

Official State Name

Republic of Lithuania

Population

2.88 million

Capital

Vilnius

Major Languages

Lithuanian

Currency

Euro (EUR)

Internet Domain

.lt

International Dialing Code

+370

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Lithuania
Vilnius, LT
4:40 pm, May 13, 2026
10°C
light rain
91 %
Wind Gust: 0 mph
Clouds: 75%
Sunrise: 5:16 am
Sunset: 9:13 pm

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Payroll

Employers are required to implement payroll and remuneration practices in line with the Labor Code and tax and social insurance rules. The remuneration system must be transparent and non-discriminatory where such internal rules are required.

It is acceptable to provide employees with online payslips

Payslip

Payroll reports and supporting records should generally be kept for at least 10 years

Reports

Employees are entitled to receive paid annual leave of at least 20 working days

Annual Leave

For sickness, the employer generally pays for the first 2 days and social insurance benefits may apply from day 3, subject to eligibility

Sick Leave

Employees are entitled to maternity leave and paternity leave under Lithuanian law, with benefits administered through the social insurance system subject to eligibility

Maternity & Paternity Leave

Notice periods vary by ground for termination, with 2 weeks to 1 month being common in standard employer-initiated cases

Employee Termination

There are no provisions mandated by law regarding the 13th month salary

13th month salary

1,153 Euro per month

Minimum Wage

Overtime payment is generally calculated at 1.5x the employee’s ordinary rate of pay, with higher rates applying in specific cases such as work on rest or public holiday days

Overtime

Severance pay depends on the ground for termination and length of service, with 2 months’ average pay being common in standard no-fault employer terminations

Severance Pay

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Tax and Social Security

The Lithuanian tax system includes corporate income tax, personal income tax and VAT. Lithuanian tax residents are generally taxed on worldwide income, while the social insurance system covers pensions, sickness, maternity, health, unemployment and work-related accident insurance.

Tax

Lithuania offers a competitive tax framework together with incentives in areas such as R&D and investment. Employers should also ensure correct payroll withholding, declaration and social insurance reporting through the relevant electronic systems.

15%

Corporate Income Tax

20%

Personal Income Tax

21%

Sales Tax

21%

VAT

Social Security

Lithuania has social insurance covering pensions, sickness, maternity, health, unemployment and accidents at work. Employee contributions are a major part of payroll deductions, while employers also contribute at applicable rates depending on category and risk profile.

21.27%

Social Security Rate

1.77%

Social Security Rate for Employers

19.5%

Social Security Rate for Employees

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Employment Law

Mandatory employer requirements include clear employment terms, equal treatment obligations and internal policies where required by law. Employers with larger workforces may also need internal remuneration and equal opportunity policies, depending on employee count and current legal thresholds.

Employment Agreement

An employment agreement must be concluded before an employee starts work. The employer must also notify the State Social Insurance Fund Board before the scheduled commencement of employment.

Working condition

The Labor Code provides for several working time arrangements, including fixed schedules, flexible schedules, shift work and individualized working time regimes. Standard full-time work is generally 40 hours per week.

Leaves

Annual leave is calculated in working days. Additional leave may apply for long service and in certain family or social circumstances. Maternity, paternity, parental and sick leave are also regulated by law and social insurance rules.

Employment termination

Employment may be terminated by mutual agreement, employer initiative, employee initiative or other grounds set by law. Notice and severance obligations depend on the legal ground, employee status and length of service.

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14 days

Minimum notice period for terminating an employee

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16 days

Total number of public holidays

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40

Working hours per week

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Varies

Total number of days for Compassionate & Bereavement Leave

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Immigration

EU and EEA citizens may work in Lithuania under free movement rules, though registration requirements can apply for longer stays. Many non-EU citizens need an appropriate basis to work and reside in Lithuania, such as a temporary residence permit for work or an EU Blue Card for highly qualified employment.

Immigration procedures have been tightened in recent years, and employers should verify the correct route before hiring non-EU nationals.

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Residency permits

Business owners, employees and highly qualified specialists may obtain temporary residence permits where the legal requirements are met. Validity, processing route and required documents depend on nationality, permit category and whether the individual is applying through Lithuania or via an external service provider abroad.

Work Permit Validity

Usually up to 1 year for standard work authorization, while some residence-based work routes may be granted for longer periods

Required Documents

An application form completed through the relevant system

A valid passport meeting validity requirements

A recent passport photo

Employer mediation documents or sponsorship information, where required

A work permit or decision confirming eligibility to work, where applicable

Proof of sufficient funds and means of support

Proof of health insurance, where required

Any additional documents requested by the Migration Department or other competent authority

Compliant, reliable, error-free and touchless payroll in Lithuania

Build the best team and hire top talent compliantly in Lithuania. Get in touch with Lithuania payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in Lithuania and how does it support foreign companies?

    An Employer of Record in Lithuania, provided by Mercans, serves as the legal employer for your team in the country. Mercans manages employment contracts, payroll, taxes, benefits, and compliance with Lithuanian labor laws, allowing foreign companies to hire locally without establishing a legal entity.

    Why should businesses use an EOR instead of setting up a legal entity in Lithuania?

    Using Mercans as your EOR in Lithuania simplifies expansion by eliminating the time and cost of forming a local company. It ensures full compliance with Lithuanian employment and tax regulations, reduces administrative work, and allows businesses to focus on core operations while Mercans handles all employment requirements.

    How does payroll outsourcing in Lithuania ensure compliance with labor and tax regulations?

    Mercans ensures complete payroll compliance by accurately processing salaries, income tax, and social contributions according to Lithuanian law. With continuous monitoring of local regulations, Mercans guarantees that all filings and payments remain compliant and up to date.

    Can an Employer of Record in Lithuania hire employees and manage work permits for international companies?

    Yes. Mercans can hire employees on behalf of your company and manage all visa and work permit procedures for foreign nationals. This ensures legal and compliant employment of both local and expatriate staff in Lithuania.

    What are the main benefits of using EOR and payroll services in Lithuania for global expansion?

    Mercans offers fast market entry, complete compliance with Lithuanian laws, reduced legal and operational risk, access to local HR and payroll expertise, and flexibility to scale your workforce efficiently as your business grows.

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