RegRally Insights: Employment and Migration Law

The March 2026 employment law update from ECOVIS explores the latest developments and examines the issues that matter most to employers.

VDI Guidance on Remuneration Systems Ahead of Labour Code Changes

To support preparation for upcoming Labour Code amendments, the State Labour Inspectorate (VDI), together with the Ministry of Social Security and Labour (SADM), has issued recommendations on remuneration systems, helping employers assess current practices and plan necessary changes.

All employers will be required to establish a remuneration system accessible to employees and adopted in accordance with information and consultation procedures. The system must group positions based on objective, gender-neutral criteria and define pay structures, including wage ranges, bonuses, allowances and indexation. Employers with fewer than 50 employees will not be required to include formal criteria for wage increases.

Positions of equal value must be assigned to the same job group, and employers must ensure equal pay for men and women performing the same or equivalent work.

Our recommendations:

Review or develop a job remuneration system. Ensure that the organization has a clear, objective, and gender-neutral remuneration system in place, which defines job groups, pay scales, procedures for awarding bonuses and allowances, and criteria for salary increases.
Update job descriptions. Review whether all employee job descriptions accurately reflect the actual functions, responsibilities, and competency requirements. If necessary, revise them or develop new ones.
Evaluate and group positions. Create or appoint a working group to evaluate positions according to objective criteria and assign them to appropriate position groups based on the complexity of the work, responsibility, and contribution to the organization.
Set salary ranges. It is recommended to set minimum, average, and maximum salary levels for each job group and to differentiate individual employee salaries within these limits, taking into account competencies, work performance, and experience.
Establish a procedure for reviewing and indexing remuneration. It is recommended to regularly review salaries and pay scales, taking into account market changes, changes in the cost of living, changes in the minimum wage, or growth in employee competencies.
Ensure transparency and non-discrimination. Inform employees of their right to access data on wages and monitor possible differences in pay between men and women. If unjustified differences are identified, take action to eliminate them in cooperation with employee representatives.

Supreme Court Clarifies Rules on Wage Reduction and Implied Employee Consent

The Supreme Court of Lithuania ruled on the legality of wage reductions initiated by the employer and the consequences for termination of employment.

The dispute arose after an employee sought to terminate the contract, claiming the employer had failed to pay the agreed salary for more than 2 months. Although the employment contract provided for a salary exceeding €2,000, the employer unilaterally reduced it on two occasions, arguing that the employee had verbally agreed to the reductions due to poor performance.

The Court clarified that under Article 45(3) of the Labour Code, if an employee does not actively challenge changes to remuneration, this may be treated as implied consent to the revised terms. In such cases, the salary change is not unlawful, as the employer is deemed to have obtained the employee’s agreement.

The ruling highlights that employees must actively defend their rights regarding remuneration changes, while employers may rely on implied consent where changes are not contested.

Employees must be proactive in defending their rights. If an employee notices that they are being paid less than the amount agreed in their employment contract, they must contact the body responsible for resolving labour disputes within the specified time limit.

Supreme Court Clarifies Distinction Between Employment and Civil Contracts in Illegal Work Cases

The Supreme Court of Lithuania examined when illegal employment can be established and how to distinguish employment relationships from civil contracts.

The Court confirmed that illegal employment exists only where a person has commenced work, the relationship has the characteristics of employment, and the mandatory employment contract formalities have not been complied with.

It emphasised that employment relationships are defined by the performance of an ongoing work function and subordination to the employer, including compliance with internal rules and instructions. In contrast, civil contracts relate to the completion of specific tasks without subordination.

The Court highlighted that qualification of a relationship must be based on the totality of circumstances, including actual performance, rights and obligations, and how the agreement is implemented in practice, rather than the contract’s title or the parties’ subjective view.

In the case at hand, the Court found that the relationships were civil in nature and therefore did not constitute illegal employment, meaning the company director could not be held liable.

When a company enters into civil contracts with individuals to provide services, it is necessary to assess, in each case, whether the contract will be considered an employment contract. Such an analysis must be carried out considering the functions performed by the individuals and their subordination.