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Payroll in Lithuania

The basic requirements for employment contract

An employment contract shall be concluded in written between the employer and the employee. The contract shall be drawn up in two copies, each one for each party. In every employment contract, the parties must agree on the essential conditions of the contract:

• workplace (enterprise, agency, organization, structural subdivision, etc.);
• working functions (work of a certain profession, specialty, qualification or specific duties),
• wage;
• rights;
• responsibilities;
• duties;
• other.

Types of employment contract

With account taken of the type of work and its performance method, the following employment contract may be concluded:
Reporting of the recruitment in Lithuania

• Non-term Employment Contract;
• Fixed-term Employment Contract;
• Temporary Work Employment Contract;
• Apprenticeships Employment Contract;
Hexagon Reporting of the recruitment - at least 1 working day before employee commences the work

• Contract on Project Work;
• Work Place Sharing Employment Contract;
• Employment Contract for Multiple Employers;
• Seasonal Employment Contract.

Hexagon Reporting of the recruitment - at least 1 working day before employee commences the work

The duration of the probation period

Lithuanian Labour Code foresees the opportunity to establish a probation period up to 3 months for the person to be employed. The duration and conditions of the probation period shall be specified in the employment contract.

Working time may be set for employees:

• standard working time: 8 hours per day and 40 hours per week;
• shorter working time regime is obligatory for:
  persons under 18 years of age;
  persons working at night;
  employees performing work involving higher mental, emotional strain. The procedure establishing shorter working time is stipulated in the resolutions of the Government of the Republic of Lithuania;
• part- time work (e.g., 1 hour per day).

Maximum working time, including overtime, must not exceed 48 hours per week. Maximum working time including overtime and additional work must not exceed 60 hours per 7 days and 12 hours per day. When working on a summary recording of working time, maximum weekly working time is 52 hours.

The minimum remuneration

Minimum hourly salary – EUR 3,39. Minimum monthly salary – EUR 555.

The rules for overtime

Overtime is permitted under the exceptional cases which are listed in the Lithuanian Labour Code. Overtime works shall not exceed for each employee 8 hours in one week and 180 hours per year. Upon the written consent of the employee, overtime can be extended up to 12 hours per week.

The pay for overtime shall be at least one and a half of the hourly pay established for the employee.

Annual leave

Annual Leave in Lithuania
Annual leave for the first working year shall be commonly granted after six months of uninterrupted work at the enterprise. For the second and subsequent working years annual leave shall be granted at any time of the working year in accordance with the schedule of granting annual leave.

The minimum annual leave is 20 working days per year if the employee is working five days per week and 24 working days if the employee is working six days per week. If the amount of working days per week is less than 5 days or different, then the employee is entitled to 4 weeks Annual Leave.

The average salary should be paid for Annual Leave. The average salary calculation rules are set by Government of Republic of Lithuania.

The types of other leave

Other Leave type is Lithuania

Other:
• educational leave;
• sabbatical leave;
• leave for performance of official or public duties;
• unpaid leave.

The end of employment relationship

The employment contract may be terminated for the following reasons:

• during probation period;
• by agreement between parties;
• upon employment contract’s expiry;
• upon the notice of an employee;
• on the initiative of an employer without any fault on the part of an employee
• without notice (when the employee performs his/her duties negligently or commits other    violations of labour discipline provided that disciplinary sanctions were imposed on him/her at least once during the last 12 months or when the employee commits one gross breach of duties);
• on the employer’s will.

In case of dismissal, the employee is entitled to severance pay in the amount from one to six average monthly salaries taking into account the ground of termination.

The public holidays in Lithuania

  • 1 January - New Year's Day;
  • 16 February - Day of Re-establishment of the State of Lithuania;
  • 11 March - Day of Re-establishment of Lithuania's Independence;
  • (Western Church) Easter and Easter Monday;
  • 1 May - the International Labour Day;
  • first Sunday in May - Mother's Day;
  • first Sunday in June – Father‘s Day‘;
  • 24 June - Midsummer and St. John’s Day
  • 6 July - Day of the State (Coronation of King Mindaugas);
  • 15 August - Assumption Day;
  • 1 November - All Saints’ Day;
  • 24 December – Christmas Eve Day;
  • 25 and 26 December - Christmas days.

The taxes applied on employment income

Taxes on employment income Lithuania

Source:
Personal Income Tax (PIT)
Employee’s social security contributions
Social security contributions paid by the employer

The tax-exempt amount for salary remuneration

Depending on the gross salary amount the following non-taxable amounts are applied for Lithuanian tax residents:

• gross salary amount is equal or less to EUR 555 - non-taxable amount is EUR 300;
• gross salary amount is more than EUR 555 but less than EUR 2.555 - non-taxable amount is calculated according to the following formula:
300 – 0,15 x (Gross Salary - 555);
• gross salary is above EUR 2.555 – all amount is taxed.

The following individual non-taxable amounts are applied for Lithuanian tax residents having a limited working capacity:

• EUR 353, in case the working capacity is 0-25%;
• EUR 308, in case the working capacity is 30-55%.

The progressive Personal Income Tax rate

The employment income is taxed by applying 20% PIT rate (15% PIT rate is applicable for sickness pay).

However, if in 2019 employment income exceeds 120 average monthly salaries, i.e. EUR 136.344, higher 27% PIT rate is applicable for exceeding amount. Please note that it is an obligation of the employee to report his/her annual income and pay Personal Income Tax obligation arising due to higher Tax rate.

The social security contributions “floor”

Companies have to pay social security contributions for part-time employees whose monthly salary is lower than the minimum monthly salary (hereinafter MMS) from gross amount of MMS (i.e. EUR 555).

There are the following exemptions of the social security contributions “floor”:

• the employee is employed by another employer in Lithuania (total wage is not required to reach the MMS);
• the employee receives a state pension for old age or lost capacity (disability) pension;
• the employee is not older than 24 years.

The social security contributions “ceilings”

If in 2019 employment income from the same employer exceeds 120 average monthly salaries, i.e. EUR 136.344, social security contributions “ceilings” become applicable. Please note that social security contributions rates indicated above include compulsory health insurance contributions (6,98%) for which “ceilings” are not applicable.

Therefore, if the employment income exceeds the threshold, only rate of 6,98% would be applicable for exceeded value.

Tax exempt benefits

The following payments are not considered as benefits in kind:
• small value (not exceeding EUR 200) prizes, non-monetary presents received from employer;
• compensation received from employer for health treatment when required by law;
• working clothes, shoes, equipment and other assets given by employer to use only for work functions;
• directly to educational institutions paid amounts for individual‘s education;
• benefit received by an employee when an employer pays for rail and road public transport tickets which are used to travel to and from the work;
• personal income tax, social security and compulsory health insurance contributions paid on behalf of an individual.

Benefit in kind is taxed as employment income.

Business trips guarantees to the employees

Employees shall be guaranteed that during the period of the business trip they retain their job/position and wage. Moreover, they shall be paid:
• per diem rates;
• the costs related to the business trip.

The rules in relation to per diem rates

The legislation establishes the minimum amount per diem.

For the business trip inside Lithuania, EUR 15 per diem rate is established.

Per diem for one day business trip inside Lithuania may not be paid under the Lithuanian Labour Code.

Per diem rates for the business trips outside Lithuania are established by the Government and differ depending on the destination.

The possibilities to pay rates per diem applied by the Group

In case rates are lower than regulated by the local law, it is possible to apply them provided that the rates are not lower than 50% of the regulated rates and it is foreseen in the working contract or collective agreement.

In case payable rates are higher than regulated by the local legislation, the difference is taxable.

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