Lithuania: Many employment contracts become partially null and void

As of 1 July 2022, statutory daily allowances can only be reduced to the level provided for in a collective agreement.

In Lithuania, employers are required by law to pay daily allowances for business trips. These statutory daily allowances could previously be reduced by up to 50% in a collective agreement or in an individual employment contract — which was very often used.

However, by 1 July 2022, reduction of statutory daily allowances must be laid down in a collective agreement or, in the absence of such an agreement, in a local legal act of the employer company.

Concrete amounts must be specified in the collective agreement or in the company’s local legal act, i.e. it is not sufficient to state that the daily allowance can be reduced “by up to” 50% if necessary. The reduced amount must be clear and should not be changeable spontaneously by a separate order of the managing director.

However, differentiation is possible according to objective criteria. For example, it can be stipulated that for business trips to Germany the employee is paid 50% of the daily allowance stipulated by law (i.e. 50% of EUR 62), whereas for business trips to Poland the employee is paid 60% (i.e. 60% of EUR 48).

This shows that the new regulations not only entail greater complexity and advance planning for employers, but also a variety of structuring options.

Information and consultation procedures provided for in the Lithuanian Labour Code (i.e. with participation of a works council, if applicable) must be followed in determining daily allowances, so all necessary measures should already be initiated now to ensure that the changes are implemented by 30 June 2022.

Should the employer fail to make the changes in time, existing clauses in the employment contract will become ineffective and the employer will be obliged to pay the employee the full statutory daily allowance for each day of a business trip. This poses an enormous cost risk, especially for companies that provide temporary employment services or post employees for other reasons over long periods.

Source:

Government Decision No. 277 of 30 March 2022 amending Government Decision No. 526 of the Council of Ministers of 29 April 2004 «On the Payment of Daily Allowances and Other Expenses for Official Travel».

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