What it actually costs to employ someone in Lithuania

One of the first questions international employers ask is: “What is my total cost if I hire someone on a €2,000 gross salary?” The answer depends on the employee’s tax setup, but the overall structure is straightforward once you know the components.

1. Employee-side deductions

From the employee’s gross salary, the following are withheld by the employer and paid to the authorities:

• Pension social insurance: 19.5% of gross (part may go to a private pension fund if the employee has opted in).
• Health insurance: 6.98% of gross.
• Personal income tax (PIT): 20% applies to most income, calculated on the taxable amount after social contributions and the applicable non-taxable income allowance (NPD).

The NPD reduces taxable income for lower earners, so net pay is not a flat percentage of gross. For a single employee on €2,000 gross, the net is typically around €1,450–1,500, depending on personal circumstances.

2. Employer-side costs

In addition to the gross salary, the employer pays several contributions from its own funds:

• Social insurance: approximately 1.77% (guarantee fund) plus 0.16% long-term employment fund, plus other statutory social insurance components, with the total employer rate depending on the employee’s risk class.
• Accident insurance: variable rate based on the employer’s activity and risk class, typically between 0.14% and 1.7%.
• Guarantee fund: covers unpaid wages in case of employer insolvency.

Overall, employer-side social costs are relatively low compared with many Western European countries. The employer’s total payroll tax burden is typically around 2–3% of gross on top of salary for office-based roles, plus accident insurance.

3. A practical example

Figures are indicative and depend on the employee’s tax profile, NPD, and employer risk class. Always confirm with current rates or a local payroll specialist.

4. Other costs to budget for

• Annual leave: 20 working days minimum (plus public holidays).
• Sick pay: employer pays for the first 2 days; the Social Insurance Fund (SODRA) takes over from day 3.
• Benefits: supplementary health insurance, remote-work allowances, meal vouchers, or bonuses are common but not mandatory.
• Payroll provider or software: if you do not run payroll in-house.

Need help setting up payroll in Lithuania?

We help companies prepare compliant employment contracts, set up payroll calculations, and explain tax obligations in plain language. You remain the employer; we provide the documents and guidance.