How to effectively tackle dismissal for economic reasons in Lithuania – in 7 Steps
Identify the economic reason for dismissal
Dismissal on economic grounds must be based on real and objective business needs. According to Article 57 of the Labour Code of the Republic of Lithuania, valid grounds include:
- A deteriorating financial situation, such as declining revenue, rising debt, or insolvency risks;
- Overstaffing due to reduced activity, fewer orders, or client losses;
- Technological or organizational changes, such as automation or restructuring;
- Relocation or closure of part or all of the business;
- Termination of activities, whether partial or complete;
- End of public funding or job subsidy that made the position viable.
Substantiate the dismissal: evidence is crucial
To ensure the dismissal is legally valid, collect and prepare supporting documentation, such as:
- Profit and loss statements;
- Internal restructuring plans;
- Business forecasts or downsizing decisions;
- Board or shareholder resolutions.
These documents should demonstrate not only the current situation, but also that future employment of the position is not viable.
Demonstrate that the job is structurally eliminated
The position must be removed permanently, not temporarily. You must show that the job function will no longer exist for a sustained period, not less than several months. This is important to distinguish between redundancy and temporary suspension or reorganization.
Follow the legal order of dismissal
Lithuanian law requires that employers apply objective selection criteria when more than one employee performs similar duties. These criteria include:
- Length of service;
- Qualifications;
- Work performance;
- Family status (e.g., single parent);
- Health or disability status (in some cases).
Employees in interchangeable positions must be assessed equally. You may not dismiss arbitrarily or based solely on managerial discretion.
Pay attention to dismissal prohibitions
Dismissal is not allowed in certain situations, including:
- During temporary incapacity for work (sick leave);
- During pregnancy or maternity leave;
- During paternity or parental leave;
- For protected employee categories (e.g., union representatives).
Exception: Employees may be dismissed during these periods only in cases of company liquidation (bankruptcy or closure), as defined by law.
Determine if you have an obligation to reassign
Before dismissal, you are obliged to offer any suitable vacancies in the company, including:
- Other departments or branches;
- Lower positions (if the employee agrees);
- Retrained roles (if training is feasible).
Only if no reassignment is possible can you proceed with dismissal.
Deliver the dismissal properly and respect notice periods
Under Article 57 of the Labour Code:
- Notice period is:
- 1 month for employees with over 1 year of service,
- 2 weeks for employees with less than 1 year.
- Severance pay is:
- 2 months’ average wage for those with over 1 year of service,
- 0.5 month’s wage for those with less than 1 year.
The dismissal must be delivered in writing, stating the reason and confirming that no reassignment was possible.
What about transition payments?
The severance pay listed above applies to both permanent and fixed-term workers, unless the employer is undergoing bankruptcy or liquidation, in which case different rules apply (Article 62 of the Labour Code).
Steps to take during reorganization
Economic dismissal is often part of a broader reorganization. You may also need to:
- Consult with the works council or trade union;
- Inform the State Labour Inspectorate if collective dismissals are planned;
- Communicate clearly with employees and prepare individual exit plans.