How to Use An Employer of Record in
Lithuania

Hiring in Lithuania means navigating the Darbo kodeksas (Labour Code), which mandates written employment contracts within three business days of work commencing, and requires employer social security contributions of 23.3% on top of gross salary. An Employer of Record in Lithuania becomes your employees' legal employer, handling payroll, statutory filings, and compliance while you retain full operational control and avoid setting up a UAB (private limited company). The EOR removes the risk of late Sodra (State Social Insurance Fund) registrations, which trigger immediate fines, and ensures contracts meet all mandatory clause requirements under the Darbo kodeksas.

What Is an Employer of Record in Lithuania

An Employer of Record in Lithuania is a third-party organisation that becomes the legal employer of your staff under Lithuanian law, handling all statutory obligations, payroll, tax withholding, and compliance while you retain full operational control over day-to-day work, performance management, and business deliverables. The EOR holds the employment contract, registers the employee with government authorities, and assumes liability for meeting all Labour Code requirements.

Under the Darbo kodeksas, every employment relationship requires a written contract specifying job function, salary, working hours, and probation period. Employers must register employees with Sodra before the first day of work, withhold 20% income tax (gyventojų pajamų mokestis, GPM) and 19.5% employee social contributions, and remit their own 23.3% employer social contributions monthly. If your employee falls under a collective agreement (kolektyvinė sutartis), additional sector-specific leave, notice periods, or pay scales may apply, and the EOR ensures adherence to all such terms.

You retain all operational decisions: assigning tasks, setting objectives, conducting performance reviews, determining promotions or role changes. The EOR owns the legal employment relationship: issuing compliant contracts, processing payroll in euros, filing monthly declarations with the Valstybinė mokesčių inspekcija (State Tax Inspectorate, VMI) and Sodra, managing statutory leave, handling termination procedures, and ensuring every obligation under Lithuanian employment law is met on time.

How Does an Employer of Record Work in Lithuania?

When you hire through an Employer of Record in Lithuania, the EOR steps in as the legal employer while you direct the employee's work. The process involves contract preparation, government registrations, payroll setup, and ongoing compliance management, all governed by the Darbo kodeksas and administered through Sodra and VMI. Here is how it works step by step.

Step 1: Define Role and Terms

You identify the candidate, agree on salary, job title, start date, and working conditions. The EOR checks whether the role falls under a collective agreement, which can impose sector-specific minimum wages, additional leave days, or extended notice periods. If no collective agreement applies, the statutory minimum wage of €924 gross per month (2026) serves as the floor. The EOR confirms classification: employee versus contractor status is strictly defined under the Darbo kodeksas, and misclassification exposes you to back taxes, social contributions, and penalties from VMI and Sodra.

Step 2: EOR Compliance Check

The EOR verifies that the proposed terms meet all statutory minimums and working time limits under the Darbo kodeksas. The standard working week is 40 hours, and overtime is capped at 8 hours per week (averaged over four months) unless a collective agreement permits more. The EOR confirms the salary meets the minimum wage threshold, checks whether the role requires specific qualifications or licenses, and ensures the contract structure (indefinite or fixed-term) complies with Lithuanian law. Fixed-term contracts are permitted only for objective reasons and cannot exceed five years in total duration across renewals.

Step 3: Employment Contract Preparation

The EOR drafts a written employment contract in Lithuanian, as required by the Darbo kodeksas. Mandatory clauses include: job function and place of work, salary and payment terms, working hours and rest periods, probation period (if applicable), and notice period for termination. The maximum probation period is three months for most roles and one month for seasonal or temporary work. Fixed-term contracts must state the objective reason and end date. The contract must be signed by both parties and provided to the employee in hard copy or secure electronic form before the first day of work.

Step 4: Government Registrations

The EOR registers the employee with Sodra before the start date, using the Sodra portal to submit the employee's personal details, contract start date, and salary. The Darbo kodeksas requires registration no later than the first day of work; late registration triggers automatic fines starting at €200. The EOR also registers the employee with VMI for income tax withholding purposes, ensuring the employee's tax residency status and applicable tax rate are correctly recorded. If the employee is a foreign national, the EOR verifies work permit or residence status and liaises with the Migration Department (Migracijos departamentas) as needed.

Step 5: Payroll in Euros

Payroll runs monthly in euros, with salaries typically paid on the last banking day of the month or the first banking day of the following month, depending on your company's preference and the employment contract. The EOR withholds 20% GPM and 19.5% employee social insurance contributions (comprising 12.52% pension, 6.98% health, and contributions to sickness and maternity funds) from gross salary. The EOR then remits the withheld amounts plus 23.3% employer contributions (comprising 18.3% pension, 5% health, and unemployment contributions) to Sodra and VMI by the 15th of the following month. The employee receives a payslip detailing gross salary, all deductions, and net pay.

Step 6: Ongoing Compliance

The EOR handles all recurring statutory obligations throughout the employment. This includes submitting monthly GPM502 forms to VMI declaring income tax withheld, filing monthly Sodra declarations (Form SD2) reporting contributions, maintaining compliant payroll records for five years as required by VMI, processing statutory annual leave (20 working days minimum under the Darbo kodeksas, increasing to 25 days for those under 18 or over 50), and managing sick leave (first two days unpaid, from day three paid by Sodra at 80% of average salary for first 90 days). The EOR also tracks any amendments to the Darbo kodeksas, updates to collective agreements, or new regulations issued by the Ministry of Social Security and Labour (Socialinės apsaugos ir darbo ministerija, SADM).

Step 7: Termination and Severance

Termination in Lithuania requires compliance with strict notice and severance rules under the Darbo kodeksas. Notice periods range from two weeks to four months depending on length of service and the termination reason: two weeks for employees with less than one year of service, one month for one to five years, two months for five to ten years, and four months for over ten years. Termination by the employer requires just cause (such as redundancy, poor performance, or breach of duty) and must follow procedural steps including written notice, explanation of grounds, and opportunity for the employee to respond. Severance pay is required for employer-initiated termination without employee fault, calculated as two months' average salary for employees with over one year of service, three months for those with five to ten years, and four months for over ten years. The EOR prepares the termination documentation, calculates severance and accrued leave, issues final pay, and de-registers the employee from Sodra and VMI.

Employment Laws and Compliance an Employer of Record Handles in Lithuania

When you hire through an Employer of Record in Lithuania, the EOR assumes full legal responsibility for compliance with the Darbo kodeksas, tax law, and social insurance regulations. This means you do not need to build an in-country HR or legal function to manage statutory obligations, track regulatory changes, or file returns with Lithuanian authorities.

• Employment Contracts: Every employment relationship requires a written contract in Lithuanian, signed before the first day of work and containing mandatory clauses on job function, salary, working hours, probation period, and notice period as specified in the Darbo kodeksas. The EOR prepares, issues, and stores all contracts in compliance with the five-year record retention requirement imposed by VMI. Non-compliant contracts or missing documentation expose you to penalties from the State Labour Inspectorate (Valstybinė darbo inspekcija, VDI) during workplace audits.
• Payroll Tax and Income Tax Withholding: The EOR withholds 20% GPM from every employee's gross salary and remits it to VMI by the 15th of the following month alongside a GPM502 declaration. The rate is flat for residents; non-residents pay 15% on certain income types. Incorrect withholding or late filing triggers interest charges of 0.03% per day plus penalties up to 50% of the underpaid amount, and VMI may audit your entire payroll history.
• Social Security and Pension Contributions: Employer contributions total 23.3% of gross salary, comprising 18.3% to the pension fund and 5% to the health insurance fund, plus unemployment and sickness contributions within the total. Employees contribute 19.5%, withheld from gross pay. The EOR files monthly declarations via the Sodra portal and remits all contributions by the 15th. Late or incorrect submissions result in immediate fines, interest accrual, and loss of the employee's entitlement to sickness and maternity benefits until arrears are cleared.
• Statutory Leave Entitlements: Employees accrue a minimum of 20 working days of paid annual leave per year under the Darbo kodeksas, with the right to take leave after six months of continuous service (or earlier by mutual agreement). Employees under 18 or over 50 receive 25 working days. The EOR tracks accrual, processes leave requests, and ensures leave is granted within the calendar year or carried over only with documented agreement. Failure to grant accrued leave or pay in lieu upon termination violates the Darbo kodeksas and can result in VDI penalties and employee claims for compensation.
• Termination and Severance: Termination by the employer requires just cause and adherence to statutory notice periods ranging from two weeks to four months, depending on tenure. Severance pay is mandatory for redundancy or employer-initiated termination without fault, calculated as two to four months' average salary based on length of service. The EOR handles the entire termination process, including written notice, procedural fairness, calculation of severance and accrued leave, and final reporting to Sodra and VMI. Procedural errors or underpayment of severance expose you to claims in Lithuanian labour courts and reinstatement orders.
• Working Time and Overtime: The standard working week is 40 hours, and overtime is capped at 8 hours per week averaged over four months unless a collective agreement allows more. Overtime is compensated at 1.5 times the regular rate or with compensatory time off. The EOR tracks working hours, ensures compliance with rest period requirements (11 consecutive hours daily, 48 hours weekly), and maintains records for VDI inspection. Systematic overtime violations or unpaid overtime trigger VDI enforcement action, including fines and orders to pay back wages.
• Health and Safety: Employers must conduct workplace risk assessments, provide occupational health services, and comply with the Darbo sauga (Occupational Safety and Health) framework enforced by VDI. The EOR registers each employee with an occupational health provider, ensures mandatory health checks are completed, and maintains health and safety documentation. Non-compliance with safety obligations can result in VDI fines, work stoppages, and civil or criminal liability if an employee is injured due to employer negligence.
• Data Protection and Employee Privacy: Processing employee personal data (name, ID number, salary, health information) must comply with the GDPR and Lithuania's Asmens duomenų teisinės apsaugos įstatymas (Law on Legal Protection of Personal Data), enforced by Valstybinė duomenų apsaugos inspekcija (State Data Protection Inspectorate). The EOR acts as data controller or processor, implements lawful processing grounds (employment contract or legal obligation), secures employee data, and responds to data subject access requests. GDPR breaches can result in fines up to €20 million or 4% of global turnover, whichever is higher.
• Collective Agreements: If your employee's role or industry is covered by a kolektyvinė sutartis, the terms (including extended notice periods, additional leave days, or sector-specific pay scales) take precedence over standard Darbo kodeksas minimums. The EOR identifies applicable collective agreements, incorporates their terms into the employment contract, and ensures ongoing compliance. Violating collective agreement terms exposes you to trade union claims, VDI intervention, and potential compensation orders.
• Foreign Employee Work Permits: Hiring non-EU nationals requires a work permit or single permit (leidimas dirbti) issued by the Migration Department under Lithuania's Užsieniečių teisinės padėties įstatymas (Law on the Legal Status of Aliens). The EOR verifies the employee's immigration status, applies for or renews permits as needed, and ensures the employee's registration with local authorities. Working without a valid permit results in immediate fines for the employer (up to €6,000 per employee), deportation of the employee, and potential criminal charges for facilitating illegal employment.

How Much Does It Cost to Use an Employer of Record in Lithuania?

The total cost of hiring through an Employer of Record in Lithuania has two components: statutory employer contributions mandated by Lithuanian law, and the EOR service fee. Statutory costs are fixed percentages of gross salary, governed by the Darbo kodeksas and collected by Sodra and VMI. Playroll's EOR service fee starts from $399 per employee per month and is billed separately from the payroll costs you pay directly to your employee and the Lithuanian authorities.

Let's look at an example that includes a base salary and the EOR service fee.

The EOR service fee covers preparation and maintenance of compliant employment contracts under the Darbo kodeksas, monthly payroll processing and remittance of GPM and Sodra contributions, government registrations and filings with VMI and Sodra, ongoing compliance monitoring including updates to the Labour Code and collective agreements, management of statutory leave and sick leave, and handling of termination procedures including severance calculation and final reporting.

Employer of Record vs Setting Up an Entity in Lithuania

Choosing between an Employer of Record and setting up your own entity in Lithuania depends on your hiring scale, timeline, and commitment to the market. The standard legal structure for foreign companies is a UAB (uždaroji akcinė bendrovė, private limited company), which requires a minimum share capital of €2,500, registered office address in Lithuania, at least one director (who can be foreign), and registration with the Register of Legal Entities (Juridinių asmenų registras) maintained by the State Enterprise Centre of Registers. The incorporation process takes four to eight weeks and costs between €3,000 and €8,000 when accounting for legal, notary, and filing fees, plus the need to appoint a local accountant or payroll provider for ongoing compliance.

For companies hiring fewer than 10 employees in Lithuania, an Employer of Record is almost always the faster and more cost-effective route.

Playroll also supports your long-term growth through its Global Entity Setup product, which handles entity incorporation and local payroll in 120+ countries, so you can transition from EOR to your own compliant entity in Lithuania when the time is right, without switching providers or rebuilding your HR processes.

How Long Does It Take to Hire Someone in Lithuania Through an Employer of Record?

Hiring an employee in Lithuania through an Employer of Record typically takes 10 to 15 business days from finalising the candidate's employment terms to the employee starting work and appearing on the first payroll.

• Stage 1: Contract preparation and signing (2 to 4 business days): The EOR drafts a compliant employment contract in Lithuanian under the Darbo kodeksas, incorporating all mandatory clauses and any applicable collective agreement terms. Timing depends on how quickly you and the employee review and sign the contract, and whether any negotiation or revision is required. If the employee requests changes to probation period, notice period, or working hours, expect the upper end of this range.
• Stage 2: Government registrations (1 to 3 business days): The EOR registers the employee with Sodra and VMI before the first day of work, as required by law. Sodra registration is completed via the online portal and is usually instant or processed within one business day. Failure to register by the start date results in automatic fines starting at €200 and loss of the employee's eligibility for sickness and maternity benefits until the registration is corrected.
• Stage 3: Payroll configuration and first cycle (3 to 5 business days): The EOR configures the employee in the payroll system, sets up bank details for salary payment in euros, and schedules the employee for the next monthly payroll cycle (salaries are typically paid on the last banking day of the month). If the employee starts mid-cycle, the first payslip will be prorated. The employee receives their first payslip and net salary at the end of their first full or partial month of work.
• Stage 4: Lithuania-specific requirements (1 to 3 business days, in parallel): If the employee is a foreign national, the EOR verifies work permit or residence status and liaises with the Migration Department if a single permit application is required (this process can take several weeks, so it must be initiated well before the intended start date). For EU nationals, no additional permits are needed, so this stage does not extend the timeline. Occupational health registration is completed shortly after the employee starts work and does not delay onboarding.

The timeline can extend if the employee is a non-EU national without a valid work permit, which triggers a separate permit application process that can take four to eight weeks depending on the Migration Department's current workload and whether the role qualifies for fast-track processing. Additionally, if the employee's contract is subject to a collective agreement that requires trade union consultation or specific documentation, allow an extra two to three business days for review and clearance.

Compared to setting up your own UAB entity in Lithuania, which takes six to twelve weeks from incorporation filing to hiring your first employee and running your first compliant payroll, the Employer of Record route is at least four times faster.

How Playroll's Employer of Record Process Works in Lithuania

Playroll makes hiring in Lithuania straightforward, compliant, and fast, without requiring you to set up a UAB or navigate Lithuanian employment law on your own.

1. You define the role and terms

You tell us who you want to hire, the job title, salary, start date, and any specific terms such as probation period or working hours. We check whether the role falls under a collective agreement and confirm the terms meet all Darbo kodeksas minimums, including the €924 monthly minimum wage and 40-hour standard working week.

2. We prepare a compliant employment contract

Playroll drafts a written employment contract in Lithuanian that includes all mandatory clauses: job function, salary and payment terms, working hours, probation period (up to three months), and notice period. The contract complies fully with the Darbo kodeksas and any applicable collective agreement. Both you and the employee review and sign the contract before the start date.

3. We onboard the employee and activate payroll

Within 10 to 15 business days, Playroll registers the employee with Sodra and VMI, sets up payroll in euros, and ensures the employee is ready to start work on the agreed date. We notify all required Lithuanian authorities, configure the employee in our payroll system, and provide the employee with their contract, payslip access, and onboarding documentation. The employee appears on the first monthly payroll cycle, with salary paid on the last banking day of the month.

4. We manage ongoing compliance and support your growth

Playroll handles all recurring obligations: monthly payroll, GPM and Sodra filings, statutory leave, sick leave administration, and any updates to the Darbo kodeksas or collective agreements. We also monitor regulatory changes and implement them automatically, so you stay compliant without needing in-country HR or legal expertise. If your hiring in Lithuania grows to the point where a local UAB makes sense, Playroll offers global entity setup, so you can transition to your own compliant entity without switching providers or disrupting your team.