Do I Need a Local Entity to Hire in Lithuania?

In Lithuania, a "local entity" typically refers to a subsidiary or branch office that allows a foreign company to be recognized as an employer. This setup is essential for managing payroll, tax obligations, and employment protections under Lithuanian law.

Without a local entity, you can't effectively register as an employer, manage mandatory social security processes, or issue compliant employment contracts. An alternative is using an Employer of Record (EOR), which can handle these responsibilities on your behalf.

What is Required to Employ Someone in Lithuania?

• Local employing entity required to directly employ? Yes (you must register with the State Tax Inspectorate)
• Payroll registration required? Yes (mandatory for all employers through the State Tax Inspectorate)
• Withholding/tax remittance required? Yes (employers must withhold income tax and social security contributions)
• Social contributions required? Yes (employers are responsible for social security contributions)
• Local employment agreement required? Yes (written contracts are mandatory under Lithuanian labor law)
• Mandatory benefits to budget? Yes (includes paid leave, sick leave, and social security)
• Works council/collective agreements considerations? Often (many sectors have collective agreements that may apply)

Best Options If You're Hiring in Lithuania

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should be cautious about misclassification risks.

While hiring contractors in Lithuania doesn't require a local entity, the country has strict regulations regarding employment classification. If your contractor's work resembles that of an employee, you may face legal challenges.

• Ensure contractors have autonomy over their work.
• Avoid controlling their hours or methods.
• Be wary if the contractor performs core business functions.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Lithuania, depending on registration requirements.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated €200–€600 per month ($220–$660)
• Payroll provider: Estimated €20–€50 per employee per month ($22–$55)
• Employer registrations and recurring compliance: Estimated €300–€800 per year ($330–$880)
• Corporate tax filings and annual reporting: Estimated €1,000–€3,000 per year ($1,100–$3,300)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 p/month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions, typically around 30% of gross salary)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Lithuania

Hiring in Lithuania can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Lithuania quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.