RegRally Insights: Labour and Migration Law

This edition of RegRally Insights outlines key recent changes in Lithuanian labour and migration law. We highlight new approaches to psychological violence at work, major personal income tax reforms effective from 2026, updates to Labour Code implementation rules, and developments at EU level on employees’ right to disconnect – all essential considerations for employers preparing for the year ahead.

Psychological Violence at Work Is a Labour Law Violation, Not a Personal Conflict

The State Labour Inspectorate (VDI) increasingly identifies cases of psychological violence in the workplace, recognising it as a serious breach of labour law rather than an internal interpersonal issue. Psychological violence includes repeated humiliating, hostile or offensive behaviour that intimidates or degrades an employee and may occur not only during working hours, but also during breaks, work-related events, commuting, or through digital communication. Employers have a legal duty to address such situations once informed; failure to act, or direct involvement by management, may result in administrative liability. Affected employees may also seek compensation for material and non-material damage through labour dispute mechanisms.

Our recommendation:

Document everything. Psychological violence is hard to prove, so keep written records: dates, times, what happened, witnesses, screenshots of messages, emails, etc.
Report internally first. Notify your employer in writing to ensure a traceable record that you have raised the issue.
If the employer ignores it or is involved, escalate. You can file a complaint with the State Labour Inspectorate (VDI).

Seimas Approves Major Reform of Personal Income Taxation Effective 2026

The Seimas has adopted amendments to the Personal Income Tax Act, introducing a substantially revised personal income taxation framework as of 1 January 2026. The reform introduces progressive tax rates based on total annual income, expands income aggregation across multiple sources, clarifies the treatment of tax reliefs, and strengthens family-related tax benefits.

Progressive rates:

Up to 36 VDU (average wage) – 20 %;
36-60 VDU (average wage) – 25 %;
More than 60 VDU (average wage) – 32 %.

The following are included in the annual income:

Income from employment;
Income from individual activities according to a certificate;
Royalties and remuneration for activities in management bodies;
Royalties from the employer;
Income of an MB manager who is not a member of that community for management activities;
Income from the sale of waste – over 12 VDU (average wage) of the annual portion;
Income from a business certificate – over EUR 50,000 of the annual portion;
Annual income from non-employment relationships exceeding 12 VDU (average wage).

A fixed 15% income tax rate applies to:

Dividends;
Sickness, maternity, childcare, and long-term work benefits;
Sale of shares/stocks held for more than 5 years;
The portion of pension fund benefits or refunded contributions equal to contributions previously deducted from income;
The portion of life insurance benefits or refunded contributions equal to contributions previously deducted from income;
The portion of investment account profits;
The sale of options is no earlier than 3 years after the right arises.

Non-taxable income amount (NPD) from 2027:

€1,044 additional annual NPD for each child – for employees working under an employment contract;
€208.80 – additional tax credit for each child for parents engaged in individual activities;
The relief applies only after the end of the tax period, when declaring annual income.

Other important changes from January 1 2026:

Supplementary health insurance – tax-free up to €350;
Notification of individual activity – no later than 1 day before the start of the activity.

Government Updates Key Labour Code Implementation Rules

A government resolution amends several implementing acts of the Labour Code, including the procedure for calculating average wages, the list of employee categories entitled to extended annual leave and its duration, and the specific regulation of working and rest time in certain economic sectors. The amendments take effect in stages: some provisions have been in force since 31 October 2025, while others will come into effect from 1 January 2026.

A key clarification concerns the calculation of average wages: bonuses are now included based on amounts calculated (accrued), not only those actually paid. This change affects wage calculations used for leave pay, compensation and other Labour Code-related payments, and is intended to ensure greater consistency and legal certainty in remuneration calculations.

Lithuania to Await EU Directive on Employees’ Right to Disconnect

Following the European Commission’s ongoing consultations on the right of employees to disconnect from digital devices outside working hours, the Lithuanian Government has proposed that the Seimas refrain from adopting national measures at this stage. The Cabinet of Ministers considers it more appropriate to wait for the forthcoming EU directive, which Lithuania, together with other Member States, will be required to transpose into national law.

While urging caution in the legislative process, the Government supports the underlying objective of the initiative: safeguarding employees’ physical and mental health, ensuring work-life balance, and protecting the right to private life, particularly in the context of remote work. The European Commission moved to the second phase of consultations in July, engaging with trade unions and employers’ organisations to develop a common approach and potential legal text. Although the final proposal has not yet been published, it is expected to enshrine the right to disconnect outside working hours and address risks such as burnout and work-related stress.