Payroll Services for Lithuanian Companies

The Lithuanian Payroll Legal Framework

Labour Code — the employment basis

Every Lithuanian employee must have a signed employment contract under Articles 42 and 43 of the Labour Code before their first day of work. The employment contract defines the gross salary, the working hours regime, the probationary period (if any), and the notice period. Payroll is calculated based on the gross salary agreed in the employment contract — net pay is derived by deducting the employee’s tax and social insurance obligations from the gross.

GPM — personal income tax on employment income

Personal income tax (gyventojų pajamų mokestis — GPM) is withheld by the employer from each salary payment under the Law on Personal Income Tax (GPMĮ). The applicable rates under Article 6(1) GPMĮ are:

• From 2026, progressive annual GPM rates apply to the relevant combined taxable income: 20% up to 36 VDU (€83,237.40), 25% on the portion exceeding 36 VDU and not exceeding 60 VDU (€138,729), and 32% on the portion exceeding 60 VDU.
• The progressive thresholds are annual thresholds. Income categories subject to separate statutory tax treatment are excluded where required by law.

The tax is calculated on the taxable salary — the gross salary reduced by the non-taxable income allowance (NPD) for employees who are eligible. The employer is responsible for correctly applying the NPD based on the employee’s written declaration and for remitting withheld GPM by the applicable payment deadline: generally, by the 15th of the same month for payments made on or before that date, and by the last day of the same month for later payments. Special rules apply where salary is paid in instalments.

SoDra — social insurance contributions

Social insurance contributions (valstybinio socialinio draudimo įmokos) are administered by SoDra (Valstybinio socialinio draudimo fondo valdyba). Both the employer and the employee make contributions:

• Employee contributions generally total 19.5% of gross salary: pension insurance 8.72%, sickness insurance 1.99%, maternity insurance 1.81%, and compulsory health insurance 6.98%. An additional 3% pension accumulation contribution applies where applicable.
• For an indefinite-term employment contract in the lowest occupational accident risk category, employer contributions generally total 1.77%: unemployment insurance 1.31%, occupational accident insurance 0.14%, Guarantee Fund 0.16%, and Long-Term Employment Benefit Fund 0.16%. The rate varies according to contract type and occupational accident risk category.
• In 2026, the employee VSD contribution ceiling is 60 VDU, or €138,729 annually. Compulsory health insurance contributions are not capped. Employer contributions are subject to their own applicable rules and must not be treated as automatically ceasing at the employee VSD ceiling.

Non-taxable income allowance (NPD)

The non-taxable income allowance (neapmokestinamasis pajamų dydis — NPD) reduces the taxable base for GPM purposes for employees earning below a certain threshold. For 2025, the full NPD is €747 per month — meaning the first €747 of monthly gross salary is not subject to GPM for eligible employees. The NPD is progressively reduced as the employee’s gross salary increases and becomes zero at higher earnings levels. The NPD applies only where the employee has submitted a written NPD declaration (a written request to the employer to apply NPD) to the employer. The employer applies the NPD based on the employee’s declaration and is responsible for any over- or under-application.

How Lithuanian Payroll Is Calculated

The Lithuanian gross-to-net payroll calculation follows a defined sequence. The example below illustrates a standard calculation for an employee earning €2,000 gross per month (2025 rates), who has submitted an NPD declaration:

What Our Payroll Service Covers

Monthly payroll calculation

Each month, we receive the payroll data from the company — any changes to salaries, new joiners, leavers, bonuses, sick leave days, or other adjustments — and process the complete payroll calculation for all employees. The calculation applies the correct GPM rate, SoDra contribution rates, NPD for each eligible employee, and any other deductions specified in the employment contract (private health insurance premiums, pension contributions, attachment orders).

Payslips — English and Lithuanian

Individual payslips are prepared for each employee showing: gross salary; the NPD applied; SoDra deduction; GPM withheld; any other deductions; and the net salary amount. Payslips are prepared in English (for the employee’s and management’s understanding) and in Lithuanian (the legally required language). Under the Labour Code, the employer must provide payslips to each employee no later than the day of salary payment. We deliver payslips to the company for distribution by the 10th of the month, before the typical mid-month salary payment date.

GPM declaration (GPM313)

The monthly GPM declaration (GPM313) is filed with VMI through the EDS portal by the 15th of the following month. GPM313 reports aggregate amounts of the relevant payments and income tax for the month. Annual recipient-level payment and tax information is reported separately in GPM312. The declaration is prepared by us and filed electronically. We provide the company with the payment reference for the GPM transfer to VMI — the payment must be made separately from the declaration. We monitor the VMI portal for any VMI queries or corrections following the declaration submission.

SoDra monthly report (SAM)

The SoDra monthly earnings report (SAM) is filed through the SoDra electronic portal by the 15th of the following month. The report lists each employee’s earnings for the month and the corresponding social insurance contributions (both employer and employee components). SoDra uses this data to credit each employee’s individual social insurance account — the pension contributions, sickness benefits, and parental leave entitlements all depend on the SoDra records being accurate and current.

Payment instructions

We provide the company with three payment instructions each month: (1) the net salary bank transfer amounts for each employee (or a single bulk payment file where the company’s bank supports batch payments); (2) the GPM transfer amount to VMI with the correct payment reference; and (3) the SoDra contribution transfer amounts (employee + employer) with the correct SoDra payment reference. All payment instructions are delivered by the 10th of the month to allow the company to initiate payments before the 15th deadline.

Year-end obligations

The annual payroll year-end cycle includes two additional filings that are part of our standard service: the annual GPM reconciliation (GPM312) — filed with VMI by 15 February of the following year — which summarises each employee’s total earnings and GPM withheld during the year and reconciles against the monthly declarations. For employees who changed NPD declarations during the year or who had multiple income sources, the annual reconciliation may show a difference from the monthly withheld amounts — resulting in a refund or additional payment for the employee.

Payroll for the Employee Lifecycle

New employee onboarding — pre-payroll requirements

Before a new employee can be included in payroll, several steps must be completed:

• Signed employment contract — the contract must be signed by both parties before the employee starts work. Articles 42 and 43 of the Labour Code requires the contract to be in writing before or on the first day of employment.
• SoDra registration — the employer must submit the 1-SD notification to SoDra at least one working day before the employee’s scheduled start date. Late registration results in an administrative fine. For non-EU nationals, the valid work permit must be confirmed before SoDra registration.
• NPD declaration (written NPD request) — the employee submits a signed NPD declaration if they wish to apply the non-taxable income allowance. The employer applies the NPD from the first payroll run after receiving the declaration.
• Bank account details — the employee’s Lithuanian or EU bank account for salary payment. Salaries must be paid by bank transfer — cash salary payments are not permitted under the Law on Payments.
• Identification — the employee’s personal identification number (asmens kodas) is required for the GPM declaration and SoDra report; this is the Lithuanian 11-digit identity number.

Salary changes

When an employee’s salary is changed — through a pay rise, a position change, or a renegotiated employment contract — the change must be reflected in a written amendment to the employment contract (darbo sutarties pakeitimas) signed by both parties. The amended salary applies to payroll from the effective date agreed in the amendment. We process salary changes in the payroll system upon receiving the signed amendment and the effective date.

Sick leave — how it affects payroll

When an employee is on sick leave, the payroll treatment depends on the duration of the absence under Article 140 of the Labour Code:

• For ordinary employee sickness, the employer pays for the first two calendar days of incapacity that coincide with the employee’s work schedule, at 62.06%–100% of the employee’s average earnings.
• From the third day of ordinary sickness, SoDra generally pays the sickness benefit, subject to eligibility requirements, at 62.06% of the employee’s compensatory earnings.
• The employer records the absence, calculates any employer-paid sickness benefit and submits the required NP-SD2 information to SoDra.

Annual leave — how it affects payroll

Employees receive a minimum of 20 working days of paid annual leave per year under Article 127 of the Labour Code. Under Article 130 of the Labour Code, leave pay is generally payable no later than the last working day before annual leave begins. At the employee’s separate request, it may be paid under the ordinary salary payment arrangements. Other statutory exceptions also apply. The leave pay is calculated based on the employee’s average daily earnings over the prior 3 months. We calculate the leave pay in advance of the planned leave and include it in the payment instructions with the required timing.

Employee departure — final payroll

On termination of employment, all outstanding salary, unused leave pay, and any agreed severance must be paid on the last day of employment under Article 59 DK. The final payroll run includes: the salary for the final partial month; the monetary equivalent of any unused annual leave entitlement (at the standard leave pay calculation); and severance where applicable. The employer must submit the 2-SD notification to SoDra no later than the next working day after employment ends. We prepare the final payroll calculation, the leave pay equivalent, and the SoDra departure notification simultaneously with the termination documentation.

Special Payroll Situations

Director payroll — employment vs. civil contract

A UAB or AB manager must be engaged under an employment contract. An MB manager is engaged under a civil services contract under the rules applicable to small partnerships. The payroll treatment differs: a director on an employment contract receives a salary processed through the same payroll system as employees, with GPM and SoDra deductions at standard rates. The tax and social insurance treatment of an MB manager’s civil-contract remuneration depends on whether the manager is an MB member, their tax residence, annual income and the applicable rules. A universal 15% GPM rate and pension-only contribution treatment must not be assumed.

Bonuses and variable pay

One-off bonuses are subject to GPM and SoDra in the same way as regular salary — they are added to the gross salary in the month they are paid and tax is calculated on the combined amount. For large bonuses, this can temporarily push the taxable base above the 32% GPM threshold. We calculate the tax impact of proposed bonuses before payment so the company understands the net cost and the employee knows the expected take-home amount. Annual performance bonuses are declared in the monthly GPM return for the month of payment.

Benefits in kind

Benefits provided to employees that have a monetary value — company car private use, private health insurance premiums, gym memberships, and other non-cash benefits — are treated as employment income and are subject to GPM and SoDra unless they qualify for a statutory exemption. VMI has specific guidance on the valuation of benefits in kind — particularly company car private use (valued at 0.75% of the car’s acquisition cost per month). We advise on the tax treatment of proposed employee benefits before they are implemented and include the benefit value in the monthly payroll calculation where applicable.

Maternity and parental leave — payroll obligations

During maternity leave and parental leave, the employee’s salary is replaced by SoDra benefits. The employer does not pay the employee’s salary during this period — SoDra pays maternity or parental benefits directly to the employee. The employer’s payroll obligations during the leave period are limited to: maintaining the employee’s SoDra registration as active (so that the SoDra benefit is calculated correctly); and ensuring the employee’s return to their position (or an equivalent position) at the end of the leave under Article 136 DK.

Key Lithuanian Payroll Numbers for 2025

Payroll Services Pricing

Payroll is priced at €70 per employee per month — a fixed fee covering the complete monthly payroll cycle. There are no additional charges for standard monthly processing.

Frequently Asked Questions