When Is Vacation Pay Paid in Lithuania?

Vacation is not only a time for rest but also a right guaranteed by the Labour Code. Therefore, it is important to know not only how much annual leave you are entitled to, but also when vacation pay must be paid.

Late payment may lead to misunderstandings between the employer and employee and, in some cases, may even result in violations of employment laws.

In this article, you will learn:

• when and how vacation pay must be paid;
• what determines the amount of vacation pay;
• what to do if it is not paid on time;
• and how to calculate it correctly and efficiently.

The procedure for paying vacation pay is regulated by the Labour Code of the Republic of Lithuania, specifically Article 122, which states that payment for annual leave (i.e., vacation pay) must be made no later than three calendar days before the start of the employee’s leave.

There are several important legal aspects to keep in mind:

• This deadline is mandatory, unless the employer and employee have agreed otherwise in writing.
• The employer must ensure that the employee receives the payment on time so that they can properly plan and enjoy their leave.
• Failure to pay vacation pay on time may be considered a violation of labour law and can result in administrative liability for the employer.
• If an employee is entitled to financial compensation for unused annual leave upon termination of employment, this amount must also be paid on the employee’s last working day.

In addition, vacation pay is treated as part of an employee’s remuneration. Therefore, it is subject to the same taxes and social security contributions as regular wages, including personal income tax and social insurance contributions.

According to Article 122 of the Labour Code of the Republic of Lithuania, vacation pay must be transferred to the employee no later than three calendar days before the start of annual leave.

This deadline applies regardless of whether the leave begins on a working day or a rest day.

Example 1

An employee plans to start annual leave on Monday, July 22. In this case, the employer must pay the vacation pay no later than July 19 (Friday).

Example 2

Annual leave begins on Wednesday, August 7. The vacation pay must therefore be paid by August 4 (Sunday) at the latest.

It is important to note that:

• If the payment deadline falls on a weekend or public holiday, the payment should be made earlier to ensure that the funds reach the employee’s account on time.
• In certain situations, such as when leave is granted on short notice, the employee may agree to receive the vacation pay later. In such cases, the employer should obtain the employee’s written consent.

Proper and timely payment of vacation pay helps ensure compliance with labour law requirements and allows employees to begin their leave without financial uncertainty.

If an employer fails to pay vacation pay within the legally required timeframe (i.e., no later than three calendar days before the start of annual leave), this constitutes a violation of labour law. In such cases, employees have several options for protecting their rights.

1. Contact the Employer in Writing

The first step is to formally contact the employer, either in writing or by email, reminding them of the missed deadline and requesting immediate payment of the vacation pay.

In many cases, this is enough to resolve the issue quickly without further action.

Tip: Keep copies of emails, letters, or other communications, as they may serve as evidence if the dispute escalates.

2. Report the Issue to the State Labour Inspectorate (VDI)

If the employer does not respond or refuses to fulfill their obligation, the employee may file a complaint with the State Labour Inspectorate (VDI).

A complaint can typically be submitted:

• online through the VDI website;
• by email;
• in person at a regional VDI office.

The State Labour Inspectorate has the authority to:

• initiate an investigation;
• require the employer to pay the outstanding vacation pay;
• impose administrative penalties for labour law violations.

3. Initiate a Labour Dispute or Apply to Court

If the issue is not resolved or involves broader wage-related claims, the employee has the right to initiate a labour dispute through:

• the Labour Disputes Commission under the State Labour Inspectorate, which is a free and often efficient dispute resolution process;
• the courts, if the employee chooses to pursue the matter through legal proceedings.

In addition to claiming the unpaid vacation pay itself, employees may also seek late-payment compensation or default interest, where applicable under the law, for each day that payment remains overdue.

Vacation pay is calculated based on an employee’s average salary (Average Earnings / Average Wage), which is determined using the employee’s earnings from the previous three months.

Calculation Steps

1. Calculate the average daily wage
   Average Daily Wage = Total salary earned during the last 3 months ÷ Actual number of days worked during that period
2. Multiply the average daily wage by the number of vacation days
   For example, if an employee takes 10 working days of annual leave:
   Vacation Pay = Average Daily Wage × 10
3. Apply the applicable taxes and contributions
   The resulting amount is subject to the same taxes and social security contributions as regular salary. The net amount paid to the employee will depend on the applicable deductions.

Example

An employee earned €6,000 during the last three months and worked 60 days during that period.

• Average Daily Wage = €6,000 ÷ 60 = €100
• Vacation Duration = 10 working days
• Vacation Pay = €100 × 10 = €1,000 (gross)

The employer must then calculate and deduct the applicable taxes before transferring the final amount to the employee.

Important Note

If an employee was on sick leave during the reference period, the calculation may be affected. Periods of temporary incapacity for work are generally excluded from the calculation of average earnings, which may result in a different average wage depending on the employee’s circumstances.

Accurate vacation pay calculations are important to ensure compliance with labour law requirements and to guarantee that employees receive the compensation they are entitled to while on annual leave.

The amount of vacation pay depends on several key factors:

• The employee’s earnings during the previous three months;
• The length of annual leave (number of vacation days taken);
• The employee’s work schedule (for example, whether they work a full-time or part-time schedule);
• Periods of sick leave or temporary incapacity for work, which may affect the calculation of average earnings;
• Additional compensation included in salary calculations, such as performance bonuses, incentive payments, and other remuneration components that form part of the employee’s regular pay.

Because vacation pay is based on the employee’s average earnings, higher salary payments and bonuses received during the reference period generally result in higher vacation pay. Likewise, the more vacation days an employee takes, the greater the total vacation pay amount will be.

For this reason, employers should ensure that average earnings are calculated accurately and in accordance with applicable labour law requirements, while employees may benefit from understanding how their salary history affects the amount they receive during annual leave.

Can Vacation Pay Be Paid Together with the Regular Salary?

No. Under Lithuanian labour law, vacation pay must be paid no later than three calendar days before the start of annual leave. Therefore, it should not normally be paid together with the employee’s regular monthly salary.

Can Vacation Pay Be Paid Later?

Generally, no. Delayed payment of vacation pay may constitute a violation of the Labour Code. However, in certain cases, the employer and employee may agree on a different payment date, provided that such agreement is made in writing.

What Happens if an Employer Does Not Meet the Deadline?

If an employer fails to pay vacation pay within the required timeframe, the employee may:

• contact the employer and request immediate payment;
• submit a complaint to the State Labour Inspectorate (VDI);
• initiate proceedings before the Labour Disputes Commission or a court.

Employers who fail to comply with labour law requirements may be subject to inspections, administrative measures, or other legal consequences.