Understanding Employee Benefits and Compensation in Lithuania

What are Employee Benefits?

Employee benefits are the additional monetary and non-monetary benefits a company provides its employees. The nature and value of the policy depend on the company’s policy and the budget allocated for employee benefits. 

There are several advantages of providing employee benefits to the employees. The company’s employee turnover tends to stabilize when a company gives relevant benefits to its employees. Also, an effective benefits plan will help you hire the best talent if you have an opening or a vacancy. These advantages are not just limited to employees; even employers get to retain the best talent in the company with an effective benefits plan. 

Employees in Lithuania have an array of benefits to choose from, and all these benefits address different problems employees face at the workplace. When you draft a compensation structure for the employees, you must consider the Federal laws on minimum wages, leave policy, etc. 

Along with the mandatory benefits, the company must also consider the cost of supplemental benefits. Some widespread benefits in Lithuania are health insurance, subsidized gym rates, etc. 

Before you curate employee benefits in Lithuania, you must research to understand the industry standards. This guide will help you create a lucrative compensation and benefits policy in Lithuania.

Compensation Laws in Lithuania

Lithuania has a wide range of compensation laws that govern the system and the company’s benefits plan. Some of the essential compensation laws applicable in Lithuania are:

• Both foreign and national employees come under the purview of the compensation laws in Lithuania. 
• All employees working in Lithuania must earn an amount equivalent to the pre-decided minimum wage of the country. Currently, the minimum wage decided by the Government stands at EUR 730 for all the employees working in Lithuania. 
• The companies in Lithuania must have a policy that chalks out different measures to promote employee equality. Employers cannot discriminate against their staff members based on gender, religion, and race. Employees have a right to equal pay when performing the same job function under the same conditions. Employers must employ all these measures in the organization.
• As per the compensation laws, all companies must provide a valid written employment contract to all the employees who are a part of the organization.
• As per the Labor Code of Lithuania, the company can have a three-month probation period for all new employees. However, a mutual agreement between the employer and the employee can reduce the period.
• The Labor Code of Lithuania mandates employment checkups for employees under 18 years or for employees with a significant risk to their health as detected by the risk assessment.

All employees must adhere to all the compensation and benefits policy in Lithuania that the Government implements. Before drafting the employees’ benefits plan, you must also check for any collective agreements. 

How to Design an Employee Benefits Program for Employees in Lithuania

Designing an employee benefits program is quite comprehensive and involves several variables. You need to check the company’s budget before you launch the employee compensation policy in Lithuania and inform the employees of its components. Once you have a budget, you will get a fair understanding of the kind of benefits you can provide.

You can follow the steps to create the best benefits plan for your employees. The steps in designing a compensation package in Lithuania are discussed here. 

Step 1: Decide on the goals and define a budget

You can start creating a compensation structure in Lithuania by listing all the objectives you want to achieve from a benefits plan. While setting the goals for the plan, you must consider the company’s size and the industry in which the company operates. 

Also, you must consider any collective agreements affecting employee benefits directly or indirectly. Also, you must analyze the existing business environment to identify the needs of the employees before drafting the plan.

Some common goals while creating an employee compensation policy in Lithuanian can include:

• Retaining the existing employees by providing them with intrinsic and extrinsic motivators
• Adhering to the budget while crafting the benefits plan
• Complying with all the provisions of the Federal laws 

Step 2: Check the industry standards and the needs of the employees

Sticking to the budget is essential, but you should be open to the idea of maximizing the benefits for the employees. You must conduct thorough research on the kind of benefits other companies in the industry offer. You must look into the benefits your competitors provide to their employees to attract top talent. 

Additionally, you should conduct an internal survey to understand the employees’ expectations from the benefits plan. It gives you an overview of the employees’ benefits and so you can work on the gaps in the existing plan. Using the survey results, you can eliminate the benefits that the company employees are not using.

Step 3: Create a flexible compensation structure

You should begin developing a framework for worker’s compensation in Lithuania as soon as you have enough data from various surveys and analyses.

Since every employee has unique demands, forming a single framework that can work for all employees might be difficult. You must consider every employee’s needs, and the benefits package must be accommodating. Employees can choose benefits, but companies must clarify how to make the most of them.

Step 4: Communicate the plan

Now that you have a benefits policy, you must communicate the plan and its benefits to all. In this case, an open dialogue is beneficial. Employees can evaluate the approach and offer feedback. You can consider and incorporate the feedback from employees into the benefits plan. 

Step 5: Analyze the benefits plan

The benefits program might be affected by the volatile and dynamic nature of the economy and business. You need to assess your benefits package periodically to decide whether the benefits are practical and adequate as per the current market status. Additionally, evaluate the program’s components before using them to ensure the plan is error-free. You can evaluate the efficacy of the benefits package for the employees using exact metrics and, if necessary, take corrective action.

Types of Guaranteed Benefits in Lithuania

All employers offer different types of employee benefits in Lithuania to their employees. Some of the mandatory benefits that all employees enjoy in the country are:

Minimum wage

• In Lithuania, the minimum wage is EUR 730 per month. 
• For employees who are paid based on the number of hours worked, the minimum wage stands at EUR 4.47 per hour.

Working hours and overtime

• The regular working hours in Lithuania is 40 hours a week. Therefore, an employee works for 8 hours every five days a week.
• Employees working more than 40 hours a week are entitled to overtime pay. Collective agreements regulate these payments. 
• An employee can work 8 hours a day for seven consecutive days as overtime. However, if there is a mutual agreement between the employee and employer, the maximum hours can go up to 12. 
• The employee receives an overtime payment equivalent to 150% of the regular salary. However, if they work additional hours during the night shift, the pay increases to 200%.

Paid time off

• The employee’s number of paid leaves depends on their years of service. If the employee has worked with the company for ten years, they will get a paid time-off of 20 days. 
• Once the employee completes ten years in the company, they are entitled to additional three days of paid time off.
• After that, an additional day of leave is added after every five years.

Public holidays

• All employees are entitled to 16 public holidays in Lithuania. All companies follow the standard list of public holidays in the country. 
• Employees working on a public holiday will be compensated for the additional hours. 

Sick leaves

• In Lithuania, employees can take two paid sick leaves if they are unwell.  
• If the number of sick leaves exceeds two days, Lithuania’s State Social Insurance Fund Board (SODRA) will pay 62.06% of the employee’s regular salary to compensate them for the leave.
• The pay goes up to 65.94% if the employee is on leave as they are no longer capable of working,

Maternity leaves

• Pregnant employees can avail of maternity benefits in Lithuania  for 126 days.
• The payment for these leaves comes from the social security contributions. Employers do not pay for maternity leaves in Lithuania. 
• The employees are only paid 77.58% of their regular salary during maternity leave. However, the minimum maternity benefits for pregnant employees in Lithuania cannot go below EUR 240.
• The number of leaves increases by 14 days if the employee has multiple or complicated births.

Paternity leaves

• Male employees are eligible for a paternity leave of 30 days after the child’s birth.
• The employee will have to avail of these leaves within the first three months of childbirth.
• The employees receive a paternity benefit of 77.58% of their regular salary if they are on paternity leave. 

Year-end bonus

• There are no provisions for mandatory bonus payments in Lithuania.
• However, if the employer has promised the employee a bonus, as stated in the employment contract, the employer will have to pay the same.
• It is common for employers to offer performance-based bonuses to employees. 

Employee Benefits for Expatriates

Lithuania treats all its foreign employees like native employees. Hence, they enjoy all the rights and benefits offered to native employees in Lithuania. Ex-pats can use health insurance and leave benefits in Lithuania, similar to regular employees working there. Some other benefits given to the ex-pats include:

• Residential expenses
• Relocation expenses
• Fuel expenses

How are Employee Benefits Taxed in Lithuania?

Most ancillary perks and fringe benefits included in an employee’s salary are taxed in Lithuania. Benefits, including housing allowances and living expenses, are taxed according to Lithuania’s standard income tax brackets. These taxes must be paid by everyone who works in Lithuania, including foreign employees. Additionally, the employees must pay social security accounts from their monthly earnings.

Employee benefits like life insurance contributions, pensions, etc., are exempt from taxes in Lithuania. Also, the employees do not have to pay taxes on the expenses incurred during a business trip, the daily allowance given by the company, etc. The transport cost is exempted from taxes if the employee takes public transport to work.

Restrictions for Lithuania Benefits and Compensation

Most benefits in Lithuania are taxable, like in other economies. Therefore, you need to know their financial worth to calculate how much tax the employee will have to pay to the tax authorities. As an employer, you must also ensure that all tax payments are sent on time to the tax authorities in Lithuania.

Make sure your company is legally incorporated, and you can conduct business in Lithuania before drafting an employee benefits plan. Companies must follow the industry-specific minimum salaries for employees.

Supplemental Benefits for Employees in Lithuania

All the employees in Lithuania enjoy different kinds of supplementary benefits from their employers. These supplementary benefits act as an extrinsic motivator for the employees and make them stick to the company. Some supplemental benefits given to employees in Lithuania include

• Private health insurance: In Lithuania, several employers provide their employees with private health insurance. Lithuania has a good public healthcare system. However, accessing the system gets difficult during emergencies. Companies offer medical benefits for employees in Lithuania that also cover employees’ dental and vision health. Most companies cover the employees as well as their dependents.
• Private pension plan: Most companies offer a private pension plan to their employees in Lithuania. The country has three systems of pension payments where employers can make voluntary contributions apart from mandatory contributions. Most employers make an additional 3% to 8% contribution to the pension plan to motivate their employees.
• Flexible working hours: Most companies in Lithuania provide their employees with the flexibility of choosing their working hours. Employees may also opt for remote work. Therefore, the employees in the country have a work-life balance. 
• Training: Several companies in Lithuania give their employees a budget to take up training like online courses to upskill themselves. Additionally, the company organizes internal training to improve the employees’ performance and motivate them.
• Gym membership: Some employers in Lithuania have created innovative benefits to keep their employees motivated. They offer discounts on a gym membership or give a fitness stipend to their employees that they can spend on buying fitness equipment or taking a gym membership. 

How Multiplier Can Help with Benefits Management in Lithuania

Starting a business and finding employees abroad could be challenging. Employers must follow local laws and ordinances while creating employment contracts and offering employee benefits in Lithuania. You can get help with this process from a worldwide PEO platform like Multiplier.

Multiplier ensures that your firm meets international workers’ credentials and compliance with Lithuanian labor laws. Our knowledgeable personnel can help you manage the workforce without establishing a national subsidiary. As a result, you can decrease your employment costs and explore new markets.