When can you dismiss staff as part of a reorganization?
Employee dismissal is allowed for economic reasons, such as:
- Deteriorating financial performance (e.g., losses or liquidity problems),
- Reduction in workload or overstaffing,
- Technological or organizational changes (e.g., automation, restructuring),
- Relocation or closure of part or all of the company,
- Termination or reduction of state-supported employment subsidies.
According to Article 57 of the Labour Code of the Republic of Lithuania, dismissal is permitted when a job position is eliminated, and reassignment is not possible.
How do you prepare for a reorganization?
Key steps include:
- Clearly identifying the reason and scope of the reorganization,
- Drafting a reorganization plan outlining affected roles and rationale,
- Evaluating whether reassignment to another role is possible,
- Consulting with the works council or trade union, if such exists,
- Notifying the State Labour Inspectorate if collective dismissal thresholds are met.
What legal requirements apply to a reorganization?
- Selection criteria must be objective and non-discriminatory (e.g., performance, qualifications, tenure).
- Notice periods (Article 57):
- At least 1 month for employees with over 1 year of service,
- At least 2 weeks for employees with less than 1 year of service.
- Severance pay (Article 57(2)):
- 2 months’ average wage if the employee has worked for over 1 year,
- 0.5 month’s average wage if the employee has worked for less than 1 year.
- Collective dismissal obligations arise if:
- 10+ employees are dismissed in companies with 20–99 employees,
- 10% of staff are dismissed in companies with 100–299 employees,
- 30+ employees are dismissed in companies with 300+ staff.
How long does a reorganization take?
Typically, a reorganization takes 2 to 6 months, depending on:
- The number of employees affected,
- Whether a collective dismissal procedure applies,
- Complexity of roles and contracts involved,
- Coordination with employee representation and authorities.
What is the role of employee representation?
If a works council or trade union exists:
- Employers must inform and consult them in advance,
- Provide detailed written information on reasons and scope,
- Consider feedback before implementing decisions.
Failure to consult may result in legal challenges or invalid dismissals.
How are interchangeable positions assessed?
When selecting employees for dismissal, employers must determine whether positions are interchangeable based on:
- Similar job functions,
- Required qualifications and competencies,
- Content and structure of the work,
- Comparable compensation levels.
Only employees in interchangeable positions should be compared when deciding who is dismissed.
What if there are no vacant positions for reassignment?
The employer is required to search for suitable vacancies within the company (including other departments or units). If no such position exists and retraining is not viable, the dismissal may proceed.
How should employers communicate reorganization plans?
An effective communication plan should include:
- Initial group meeting(s) to inform employees of reasons and timeline,
- One-on-one meetings with impacted employees,
- Formal written notice of dismissal and severance terms,
- Optional support services (e.g., career counseling, job placement, or retraining).
What are the typical costs involved in a reorganization?
- Severance pay and notice period wages,
- Costs of legal or HR consultation,
- Retraining or redeployment support,
- Administrative and communication costs,
- Potential costs of legal disputes if process is challenged.
What about sick or protected employees?
Under Lithuanian law, employees cannot be dismissed during:
- Temporary incapacity for work (sick leave),
- Pregnancy,
- Maternity, paternity, or parental leave.
Exception: Dismissal is allowed only in cases of employer bankruptcy or complete liquidation.
If a protected employee’s position is eliminated, dismissal must be postponed until the protection period ends.