What is an Employer of Record (EOR)?

An Employer of Record is a company that becomes the legal employer of your staff in a country where you have no entity. It signs the employment contract, runs payroll, pays taxes and social contributions, and carries the formal employer obligations, while you manage the person's day-to-day work.

Do I need an EOR to hire in Lithuania?

Not always. If you plan to keep a small team long term, registering a Lithuanian entity is often cheaper and gives you full control. An EOR mainly makes sense for a fast start, a short project, or one or two people you want to hire before deciding on a permanent presence.

How much does hiring in Lithuania cost?

Employer social insurance contributions in Lithuania are low compared with most of Western Europe, roughly 1.77% of gross salary for an open-ended contract, plus the guarantee and long-term employment funds. The employee's income tax and social contributions are withheld from gross pay. An EOR provider adds a monthly service fee per employee on top.

Can I hire a contractor instead?

You can, but only if the relationship is genuinely independent. If the person works fixed hours under your instructions with your tools, Lithuanian labour authorities can reclassify it as employment, with back taxes and penalties. This is the most common mistake foreign companies make.

How long does it take to start?

Through an EOR, an EU or Lithuanian national can usually start within one to two weeks. Setting up your own entity typically takes several weeks. Hiring a non-EU national adds immigration timelines on top, from a few weeks to a few months depending on the permit type.

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Employer of Record (EOR) in Lithuania: options for small teams

If you want one, two or a handful of people in Lithuania, you have three realistic routes. Here is how they compare — and how we help you pick and set up the right one.

3 min read

1. What an EOR actually is

An Employer of Record is a company that becomes the legal employer of your people in Lithuania. It signs the employment contract, runs payroll, withholds taxes and social contributions, and carries the formal employer obligations. You keep full control of the work itself — tasks, priorities, performance.

The trade-off: you pay a monthly fee per employee, you are one step removed from the employment relationship, and terminations, benefits and salary changes go through the provider's process rather than yours.

2. The three routes compared

Route	Best for	Watch out for
EOR	1–5 people, fast start, testing the market, fixed-term projects	Monthly fee per person; less flexibility on benefits and exits
Own Lithuanian entity	A team you intend to keep, or growth beyond ~5 people	Setup time, accounting, and someone has to own local HR compliance
Contractor (B2B)	Genuinely independent specialists, short assignments	Reclassification risk if the person works like an employee

3. What it costs

Lithuania is one of the cheaper EU countries on the employer side. For a standard open-ended contract the employer pays roughly 1.77% of gross salary in social insurance, plus small contributions to the guarantee and long-term employment funds. Everything else — income tax and the employee's social contributions — is withheld from the gross salary, not added on top.

The full gross-to-net picture, with a worked example, is in our employee taxes and employer costs guide. On an EOR route, add the provider's monthly service fee per employee.

4. The mistake to avoid

The most common shortcut is putting a full-time worker on a contractor invoice. If the person works set hours, under your instructions, with your equipment, and only for you, the relationship can be reclassified as employment — with back taxes, social contributions and penalties landing on the company. If the role looks like a job, treat it like one from day one.

5. Non-EU hires

If the person is not an EU national, the employment route also determines the immigration route: work permits, EU Blue Cards and residence permits all attach to a specific employer. Plan the two together, not one after the other — see our immigration guide.

Frequently asked questions

What is an Employer of Record (EOR)?: An Employer of Record is a company that becomes the legal employer of your staff in a country where you have no entity. It signs the employment contract, runs payroll, pays taxes and social contributions, and carries the formal employer obligations, while you manage the person's day-to-day work.
Do I need an EOR to hire in Lithuania?: Not always. If you plan to keep a small team long term, registering a Lithuanian entity is often cheaper and gives you full control. An EOR mainly makes sense for a fast start, a short project, or one or two people you want to hire before deciding on a permanent presence.
How much does hiring in Lithuania cost?: Employer social insurance contributions in Lithuania are low compared with most of Western Europe, roughly 1.77% of gross salary for an open-ended contract, plus the guarantee and long-term employment funds. The employee's income tax and social contributions are withheld from gross pay. An EOR provider adds a monthly service fee per employee on top.
Can I hire a contractor instead?: You can, but only if the relationship is genuinely independent. If the person works fixed hours under your instructions with your tools, Lithuanian labour authorities can reclassify it as employment, with back taxes and penalties. This is the most common mistake foreign companies make.
How long does it take to start?: Through an EOR, an EU or Lithuanian national can usually start within one to two weeks. Setting up your own entity typically takes several weeks. Hiring a non-EU national adds immigration timelines on top, from a few weeks to a few months depending on the permit type.

How we help with small teams

We are not an EOR provider ourselves. What we do is help you set up small teams in Lithuania correctly: choose between EOR, your own entity or a contractor arrangement, compare real employer costs, prepare compliant employment documentation, and coordinate with payroll, accounting and immigration on your behalf — with one senior local contact instead of four vendors.

Disclaimer: This guide is general information, not legal or tax advice. Rates and rules change — always confirm the current figures before making decisions.

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