Companies have a lot to think about during an expansion to Lithuania, including HR, taxes, compliance management, payroll setup, and more. As a global PEO, Globalization Partners’ goal is to help make your expansion faster and easier by running your payroll and lifting everything from compliance management to tax obligations off your shoulders and onto our own. When you work with us, you won’t have to set up your Lithuania payroll and learn the country’s employment compliance laws — we’ll take care of everything for you.
What Taxation Rules Exist for Payroll in Lithuania?
As an employer, you have to ensure your employees are paying taxes so they can keep working for you. Employees typically pay an income tax of 15% and contribute to health insurance at 6% and social insurance at 3%.
Employers also have their own taxes to worry about. You must pay a 27.98% social insurance tax that’s subject to a wage cap. Employers also need to contribute 3% to Lithuania health insurance and make a contribution of 0.25% to the State Guarantee fund. Keep in mind that Lithuania is working on changing its tax laws, particularly for low-wage workers, so you should watch for any tax law updates.
Lithuania Payroll Options
When you’re examining how to set everything up, remember that you have four main Lithuania payroll options:
- Internal: Larger subsidiaries that are committed to Lithuania long-term may choose to set up an internal Lithuania payroll. This option will require a larger budget to support a full HR staff.
- Remote: When using a remote payroll, you’ll add your subsidiary’s employees to your parent company’s payroll. Though doing so can streamline your payroll, all employees will have different tax and payroll regulations.
- Lithuania payroll processing company: If you’d rather outsource, you can work with a local Lithuania payroll processing company that will take care of your payroll. However, you’ll still have to worry about compliance.
- Lithuania payroll outsourcing: Globalization Partners is the Lithuania payroll outsourcing option you need to take care of both compliance and your payroll. We take on the risk of compliance, so you won’t have to worry.
What Do You Need to Set up Lithuania Payroll?
Companies looking to expand to Lithuania typically have to establish a subsidiary in the country first. This process is necessary before you can set up your Lithuania payroll, hire employees, and pay them. However, you can skip this step through Lithuania payroll outsourcing with Globalization Partners. As the Employer of Record, we use our existing subsidiary to help you start working faster.
Include These Entitlement and Termination Terms
Termination can prove difficult in any country, but it’s even more of a hassle in a foreign country with different employment compliance laws. You should include certain entitlement and termination terms in your employment contracts before choosing a Lithuania payroll option and adding your employees.
Lithuania allows fixed and indefinite contracts as well as probation periods up to three months. Employers can terminate an employee by giving two months’ notice, and that employee is generally entitled to severance pay based on their length of service if they’re terminated without fault.
Contact Globalization Partners
Globalization Partners can help make your expansion successful. Contact us today to learn more about Lithuania payroll outsourcing.