Employment law in the Baltics: one region, three distinct legal frameworks

Employment contracts and probationary periods

In all three Baltic States, an indefinite-term employment contract is regarded as the standard form of employment relationship, while a fixed-term contract may be used only where there are valid legal grounds for doing so.

In Latvia, the total duration of a fixed-term employment contract, including any extensions, may generally not exceed five years. In Lithuania, the total duration of successive fixed-term contracts concluded with the same employee for the same job function may generally not exceed two years, while contracts for different job functions may not exceed five years in total. In Estonia, the principal requirement is the existence of an objective reason consistent with the temporary nature of the work, such as replacing another employee or carrying out a specific project.

The permitted duration of probationary periods also differs. In Latvia and Lithuania, a probationary period generally may not exceed three months, while in Estonia it may be set for up to four months. In Latvia, the probationary period under a fixed-term contract must be proportionate to the duration of the contract. It may not exceed one month for a contract concluded for up to six months or two months for a contract concluded for up to one year.

Working time and overtime

Standard working time in all three countries is 40 hours per week. However, there are significant differences in the limitations imposed on overtime and the rules governing its compensation.

In Latvia, overtime work generally requires the employee’s written consent and may not exceed an average of eight hours within a seven-day period. Employees are entitled to an overtime premium of at least 100% or, by agreement between the parties, equivalent paid time off.

In Lithuania, overtime work also generally requires the employee’s written consent. An employee may work up to eight hours of overtime per week, or up to twelve hours with the employee’s consent. The overtime premium may not be less than 50% of the employee’s agreed remuneration.

In Estonia, overtime is permitted by agreement between the parties and should primarily be compensated with equivalent paid time off. If the parties agree on monetary compensation, overtime must be paid at no less than 1.5 times the employee’s regular rate of pay.

Annual leave and family-related entitlements

The minimum duration of paid annual leave is broadly similar across the Baltic States, although it is calculated differently. In Latvia, employees are entitled to at least four calendar weeks of annual leave, excluding public holidays. In Estonia, the statutory minimum is 28 calendar days, while in Lithuania it is 20 working days for employees working a five-day week or 24 working days for those working a six-day week.

Greater differences can be seen in paternity leave provisions. In Latvia, the father of a child is entitled to ten calendar days of leave, which must be taken within six months of the child’s birth. In Lithuania and Estonia, paternity leave amounts to 30 calendar days. The periods during which the leave may be taken and the level of state-funded benefits also vary.

Employment costs cannot be compared on the basis of a single rate

According to the guide, the statutory minimum monthly wage in 2026 is EUR 780 in Latvia, EUR 1,153 in Lithuania and EUR 946 in Estonia as of April 2026.

The structure of social security contributions also differs considerably. In Latvia, the employer’s share of mandatory state social insurance contributions is 23.59%. In Estonia, employers pay social tax at a rate of 33%, as well as an unemployment insurance contribution. In Lithuania, the employer’s direct contribution rate is substantially lower, although a greater share of the social insurance burden is borne by the employee. Employment costs can therefore only be compared accurately by considering both employer and employee contributions, as well as the overall structure of each country’s tax system.

Termination of employment requires a local approach

In Latvia, the statutory grounds on which an employer may terminate an employment contract are specifically defined by law. Where employment is terminated for reasons unrelated to the employee’s conduct, the employee is entitled to severance pay equivalent to between one and four months’ average earnings, depending on their length of service with the employer.

In Estonia, an employer must have valid legal grounds for extraordinary termination. The applicable notice period ranges from 15 to 90 calendar days, depending on the duration of the employment relationship. In the event of redundancy, the employer generally pays compensation equivalent to one month’s remuneration, while additional compensation may, in certain circumstances, be provided through the unemployment insurance system.

Lithuanian law provides for several forms of termination at the employer’s initiative. A particularly notable provision allows an employer, in certain circumstances, to terminate an employment relationship for reasons that do not fall within the standard statutory grounds for termination. In such cases, the employer must provide three working days’ notice and pay severance compensation amounting to at least six months’ average remuneration.

A common Baltic HR policy may serve as a useful foundation for an international employer. However, employment contract templates, working time records, leave procedures, remuneration systems and employment termination documents must be adapted to the legal requirements of each country. Timely assessment of local requirements is essential for reducing the risk of employment disputes, financial claims and reputational damage.

This article has been prepared based on the information provided in Grant Thornton’s Guide to European Employment Law concerning the general rules applicable in 2026. It is intended for informational purposes only and does not constitute individual legal advice.