One of the most significant waves of amendments to the Labour Code in recent years is currently brewing in Lithuania. If the Seimas approves the changes currently under consideration, they will affect very diverse groups of employees—from those earning more than two average monthly wages to the public sector and state-owned enterprises. While employers may see increased flexibility, trade unions perceive greater risks, and for lawyers, it is becoming evident that the very philosophy of employment relations is shifting.
Transposition of the Pay Transparency Directive: Mandatory Remuneration Systems and Comprehensive Criteria
In implementing the requirements of the Pay Transparency Directive, the Labour Code is set to establish an obligation for all employers to apply a clear and mandatory remuneration system for all employees. This system will have to include objective and verifiable criteria allowing for the identification of positions considered to be work of equal value. Criteria allowing for the application of different remuneration levels will also need to be established.
Furthermore, the basis for determining the size, forms, and procedures for increasing remuneration must be defined.
The legislator also envisages a broad spectrum of information disclosure regarding pay: employees and their representatives must be provided with clear information on the applicable remuneration, its structure, and the criteria for its determination. The rights of state institutions to access data on remuneration are also being expanded: information will have to be provided to the State Labour Inspectorate and the Equal Opportunities Ombudsperson. Additionally, employees will receive guarantees regarding information and protection concerning the gender pay gap, including an obligation for the employer to identify and justify any unfounded differences and to take remedial action.
High Earners: Freedom of Contract or “Contractual Risk”?
Amendments to Articles 33 and 36 of the Labour Code also cover individuals earning at least two average monthly wages (AMW). They would be permitted to deviate significantly further from the mandatory provisions of the Labour Code: agreeing on longer notice periods, lower severance pay, and different conditions for concluding and terminating the employment contract. In reality, this could lead to situations where an employer and employee agree, for example, on a two-week notice period and limited compensation—even where current laws provide longer terms and greater protection, such as for employees raising children.
At the same time, a longer probationary period of up to six months is proposed for this group. While attractive to employers wishing to “test out” high-skilled employees for a longer duration, for the employee, this means a longer period on the “hot seat”: during probation, the contract can be terminated in just a few days.
The arguments in favour are clear: greater responsibility and higher salaries imply greater risk for the employer, thus requiring more flexibility. However, one should not be deceived—a higher salary does not automatically equate to equal bargaining power. Some high-earning specialists may still find themselves in a weaker position due to, for instance, a narrow market or dependence on a specific employer.
Article 59 Enters the Public Sector
Another fundamental change is the extension of Article 59, which allows for the termination of an employment contract at the employer’s initiative without any fault on the part of the employee, to the public sector. Until now, this option did not apply to budgetary institutions and state-owned organisations—dismissals in the public sector had remained relatively “frozen” for many years, and employees felt comparatively secure.
If the amendments are adopted, this provision would apply to budgetary institutions, state and municipal enterprises, public establishments, and the Bank of Lithuania. The wording “for reasons other than those specified in Article 57” is being changed to “for important reasons”, while maintaining the 3-day notice period and a severance payment of no less than 6 months’ average salary.
In theory, this provides employers with more managerial tools—to resolve situations where an employee does not formally violate rules but is clearly “no longer a fit”. In practice, this opens a wide space for subjectivity: reasons such as “does not fit in with the team” or “clash of character” are not measurable categories. Such dismissals will likely frequently end up in court, creating new case law—but until such precedents exist, there will be significant uncertainty for both sides.
Article 60 – Termination in the Absence of the Will of the Parties
Additionally, it is proposed to clearly establish the possibility of terminating an employment contract upon the loss of impeccable reputation or the right to work—highly relevant for regulated sectors. This is logical, as employee activities in such sectors usually involve increased risk; therefore, adherence to legal requirements and maintaining established professional standards is crucial.
A new basis for terminating an employment contract is also introduced: when a foreigner, due to their own fault, loses the right to work in Lithuania under an employment contract. In such cases, no severance pay would be mandated.
Employee Guarantees: From Passive On-Call Duty to Settlement Deadlines
There are several provisions that genuinely strengthen the position of employees and provide more clarity in daily situations.
Remote work is regulated more clearly: specifications are introduced regarding when an employer must satisfy an employee’s request to work remotely, and how breaches of duty and investigation deadlines are to be assessed. This helps reduce the “grey zone” where conflicts have frequently arisen.
Greater clarity also emerges regarding pre-holiday hours—when the working day is shortened, how the shortened hour is paid for those working according to output norms, and how settlements are handled for dismissed employees. It is stipulated that one average monthly wage must be paid on the day of dismissal, with the full amount settled no later than within 10 working days if agreed by the parties, alongside increased late payment interest for delayed settlements. These are practical but vital matters that employees often misunderstood, leaving them feeling vulnerable.
The regulation of passive on-call duty (standby at home) also becomes more concrete: a clear maximum number of hours per 4 weeks is established, along with proportionate extra pay for actual standby time. This resolves many practical disputes, particularly in the healthcare, energy, and IT sectors.
Changes to Strikes and Social Dialogue – Where More Clarity is Needed
The planned changes to strike regulation are perhaps evoking the most emotion. On one hand, there is an aim to make processes clearer: extending the duration of warning strikes, setting clearer rules on minimum services, and providing protection for employees participating in strikes after the fact. On the other hand, the wording prohibiting “encouraging employees not to strike by any means” is indeed too broad and arguably open to varied interpretation.
If applied mechanically, an employer could risk turning any attempt to speak with employees in the face of a strike into “encouragement not to strike”. In such a case, social dialogue would not be strengthened but paralysed. Social dialogue is not only the right to strike but also the right to talk, negotiate, and seek compromise. If the fear of speaking outweighs the desire to reach an agreement, there will be no winners.
What Does This Mean for Business and Employees Today?
It is important to remember that these are drafts, not yet adopted laws. However, serious discussions should begin now. Employers will need to review standard employment contract templates, internal rules, remuneration policies, dismissal procedures, and remote work and standby policies. Employees need to clearly understand what they are signing, especially if they fall into the higher income bracket.
The Labour Code is always a document of compromise. It will never be equally convenient for all parties. However, the most important thing is that it does not create situations where one side has formal freedom while the other has only a theoretical right to litigate. Flexibility, responsibility, and respect for agreements must go hand in hand. If one of these elements is missing, the risks will outweigh the benefits.
Ultimately, much will be determined not by what is written in a specific article or clause, but by how these norms are applied in reality—how they are reflected in court practice, collective agreements, internal policies, and the daily culture of employers and employees.
Prepared by Brigida Bacienė, Senior Associate and Employment Law Expert at Glimstedt.
