Are you considering expanding your business to Lithuania? If so, you’ll need to understand the costs associated with hiring employees in the country. Let’s go through the various costs associated with hiring an employee in Lithuania, from the minimum wage requirements to the optional costs of providing health plans and other perks. Gain a better understanding of the financial costs associated with hiring an employee in Lithuania.
Hire from Lithuania
Hiring employees in Lithuania can be a great investment for global employers. Not only do Lithuanian workers have the skills and experience necessary to complete challenging tasks in the workplace, but they can also be a cost-effective and talented alternative to workers in places like the US, UK, or Canada. All of these factors contribute to making Lithuania an attractive destination for hiring employees.
The cost of hiring an employee in Lithuania depends on several factors, including the size of the company, industry sector, and location. Generally speaking, employers should expect to pay an average of €1,900 per month for full-time Lithuanian employees depending on their skill level.
In addition to relatively low labor costs, more than 30% of Lithuanians speak English and 70% speak Russian. Lithuanians tend to be at least bilingual.
Overall, there are many advantages associated with hiring employees from Lithuania that make it a great option for global employers looking for value when staffing their business operations abroad. From a cost perspective alone, it is clear that employing staff from this country provides significant savings compared with other European countries while still providing quality candidates.
Required costs of hiring
When it comes to the cost of hiring an employee in Lithuania, there are several factors employers need to consider.
Salary & Minimum Wage
According to the Lithuanian Labor Code, as of January 2023, the current gross minimum wage is €840 per month for full-time employees aged 18 and over, which breaks down to €5.14 per hour. This is the basic salary expectation but may differ depending on industry and skillset.
Paid Time Off and Other Leaves
All full-time employees in Lithuania are entitled to at least 20 days of paid annual leave each year. Lithuania also observes 15 public holidays.
In Lithuania, employees are entitled to 18 weeks of paid maternity leave by Lithuania's State Social Insurance Fund Board (SODRA), paid at a rate of 77.58% of the employee’s average salary after one year of employment. Maternity leave must be taken 70 days before the birth of the child and 56 days after. The maternity leave allowance is paid all at once for the entire 18 weeks of leave.
Additionally, fathers are entitled to 30 days of paid paternity leave following the birth of a child. This must be used before the child turns one year old. SODRA pays paternity leave at 77.58% of the employee’s average salary.
Parental leave is also granted in Lithuania. Parents, adoptive parents, grandparents, and guardians are entitled to parental leave until their child turns three years of age, which can be shared between parents. Parental leave is taken at the end of maternity leave and continues until the child turns one, and is paid at 77.58% of the employee’s salary. As of 2023, two of the months of parental leave are non-transferable between parents.
Taxes, Health Insurance & Pension Contributions
Employers in Lithuania must also factor pension contributions into the cost of hiring an employee. Employees and employers are required to make compulsory contributions. In addition, employers should account for statutory social security payments, which include health insurance and unemployment insurance. All these costs amount to 30.7% of gross wages. Employers pay 21.2% up to gross wages for pensions.
Overtime
In Lithuania, a typical work week should not exceed 40 hours. Weekly overtime should not exceed 8 hours, since 48 hours per week is the maximum length of time a Lithuanian employee can work. Longer overtime may be agreed upon in a collective agreement.
Overtime is paid at a rate of at least 1.5 times the employee’s regular hourly pay at any time. Employees who work overtime on a day of rest are entitled to 2 times the employee's salary.
Severance Pay
In compliance with Lithuania’s Labor Code, employers who dismiss employees are still subject to severance payments. This differs depending on the reasons for termination, length of service, type of contract, and other factors.
When terminating an employment contract, employers must pay employee severance pay of twice the average salary after a year. The amount is reduced to one average salary if the length of employment is less than one year.
Optional Costs of Hiring
In addition to the mandatory costs of employing a worker in Lithuania, employers may also choose to pay for optional flexible global benefits such as health plans, fitness memberships, and other employee perks. While these are not required, they can be an attractive incentive when recruiting employees and can also encourage higher levels of employee loyalty and job satisfaction.
Health plans are one of the most popular types of optional benefits in Lithuania. Although there is a healthcare system that everyone contributes to, employers can offer a comprehensive health plan. Depending on the particular plan chosen, employers may need to pay a premium each month for their employees, which could range from €50-200 (USD60-240) per month. In some cases, employers may even choose to offer life insurance or disability insurance coverage as part of their health plan package.
Fitness memberships are another optional benefit employers in Lithuania might offer employees. Depending on the specific fitness program chosen, employers should expect to pay anywhere from €20-100 (USD24-120) per employee each month.
Finally, there is always the option for employers to provide additional perks, such as discounts on products or services related to their business or even free snacks and drinks in the office canteen. Although these are not mandatory costs associated with hiring an employee in Lithuania, they can go a long way toward improving morale and job satisfaction within your workforce.
Average Salary vs. Gross Salary
The average salary in Lithuania is €1,900 (USD2,086) per month, according to data from 2022. However, salaries vary greatly depending on industry and level of experience. For example, the top three industries with the highest salaries are management and business (€3,341/USD3,748), IT (€3,254/USD3,573), and aviation (€3,208/USD3,523).
When it comes to the gross salary of employees in Lithuania, employers must consider a number of government-mandated taxes and contributions that are required to be paid. These include costs like social security contributions and health insurance.
Gross salary typically accounts for deductions and withholdings like income tax and national insurance contributions. Employers should also bear in mind that there are additional costs for hiring employees, such as pension contributions and health insurance.
Employers must also pay social security contributions when hiring employees in Lithuania. These contribution rates range from 10%-19%, depending on the type of job being done by the employee and their level of income. Additionally, employers must make payments for unemployment insurance at 1% of their employee’s gross salary each month.
These figures vary depending on individual skillsets and qualifications as well as location within Lithuania since salaries can differ across regions too. Employers should ensure they have done adequate research into local labor costs before hiring an employee to ensure they are paying fair wages for their chosen industry sector while staying competitively priced against other employers hiring for similar roles.
Total Estimated Cost to Employer
When looking at the total cost of hiring an employee in Lithuania, employers must take into account all mandatory costs as well as any optional benefits or bonuses. The minimum wage for a full-time employee is €5.14 per hour or €840 (USD 922) per month.
In addition to this, employers must also pay 6% of their employee’s gross salary towards pension contributions and 3% towards health insurance each month. Unemployment insurance is paid at 1% of the gross salary each month. Optional benefits such as health plans and fitness memberships can cost employers between €50-200 (USD60-240) and €20-100 (USD24-120), respectively, per employee each month.
Overall, employers can expect to spend between approximately €900 to €2,500 per month on one full-time employee in Lithuania when taking into account all mandatory and optional costs based on a minimum wage.
Once again, salaries may vary greatly depending on industry and experience level, so it is important that employers research local labor costs before making hiring decisions in order to remain competitive in the market. Additionally, any additional bonuses or perks provided by employers may be subject to taxation depending on how much they exceed the base salaries set out by law or collective agreements so it is important for employers to be aware of these regulations before offering employees additional compensation packages.
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