The new Labour Code and social insurance rates | KPMG | LT

The new Labour Code and social insurance rates

The new Labour Code and social insurance rates

As of 1 July 2017, new Labour Code and new social insurance rates came into effect.

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New Labour Code

As of 1 July 2017, new Labour Code came into effect. These are the main amendments:

  • Annual minimum vacation period is 20 working days, where 10 days have to be used continuously;
  • If an employment contract is terminated on the initiative of an employer without any fault of an employee, a 1 month notice period applies, provided the employee has been employed for longer than 1 year. Otherwise, if the employee has been employed for less than 1 year, a 2 weeks notice period applies;
  • Upon the termination of an employment contract on the initiative of an employer without any fault of an employee, the employee has to be paid a severance pay of his/her 2 average monthly salaries, or a severance pay of half of the monthly salary, provided the employee has worked for less than a year;
  • The average working time cannot exceed 48 hours (including overtime) and 52 hours if working under cumulative working time accounting. Maximum work week cannot exceed 60 hours including overtime and additional work;
  • Maximum term for a fixed-term employment contract is 2 years. If a fixed term employment contract is signed to perform different functions, the maximum term is 5 years;
  • New types of employment contracts are established: project based, job-sharing, apprenticeship employment contracts and one employment contract for several employers;
  • 5 different new working regimes are established: fixed working days (shifts) and weekly working days, cumulative working time accounting, flexible working schedule, split day and individual working time regimes;
  • Minimum monthly wage may only be paid for unqualified work;
  • An employer can amend the mandatory and additional terms of the contract, change the type of working time regime, move to work elsewhere, but only with a written consent of the employee.

Social insurance

As of 1 July 2017, a1.6% unemployment social insurance rate shall apply to permanent employment contracts, and 3.2% – for fixed-term contracts. Until now, a single rate of 1.1% has been applied to all contracts.
As of 1 July 2017, pension social insurance rate decreased from 23.3% to 22.3%. However, new contributions of 0.5% to Long-term Employment Payments Fund came into effect.
Following the above, the total standard employer’s rates as of 1 July are:

  • 31.18% – for standard employment contracts (the same as before);
  • 32.78% – for fixed-term employment contracts.

Due to different social insurance rates, as of 1 June 2017, a new obligation to report fixed-term employment contracts came into force. By 31 July 2017, newly approved forms TDS will have to be submitted to the social insurance authorities reporting valid fixed-term employment contracts concluded by 30 June 2017. Newly concluded fixed-term employment contracts will need to be reported specifically in the form 1-SD. 

 

© 2017 "KPMG Baltics", UAB, a Lithuanian limited liability company and a member firm of the KPMG network of independent members firms affiliated with KPMG International Cooperative ("KPMG International") a Swiss entity. All rights reserved.

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