When do you graduate from an EOR to your own Lithuania entity?

The table below uses EUR 540 as an illustrative euro equivalent of the Teamed fee. This is illustrative. The actual euro amount depends on the exchange rate at the time of invoice. Teamed charges from $599 USD with zero FX mark-up.

Watch the entity overhead, not just the per-head fee. At a handful of staff the EUR 1,500 to 2,800 fixed cost has too few people to spread across. These entity figures are typical ranges. They cover outsourced payroll, bookkeeping, statutory filings, and HR admin for a small UAB. They are illustrative, not law figures. Actual costs move with your outsourcing model and benefits programme.

Lithuania splits the social bill unevenly. The employer pays only 1.77% on an open-ended contract through Sodra. A fixed-term contract costs the employer 2.49%. The employee carries 19.5%, which includes a 6.98% health insurance slice. These rates apply whether you use EOR or your own entity, so they do not move the crossover. The low employer rate is why the crossover sits higher here than in higher-employer-cost markets.

Run the Crossover Calculator with your own headcount and salary band.

1. Calculate the EOR cost

   Multiply the Teamed fee (from $599 USD) by your planned Lithuania headcount. This is the fixed variable cost. It grows in a straight line as you hire.

2. Estimate the entity fixed overhead

   Typically EUR 1,500 to 2,800 per month for a small UAB. This covers payroll, bookkeeping, VMI and Sodra filings, and first-point HR. It barely moves until headcount passes fourteen.

3. Find the crossover headcount

   The crossover is where EOR monthly cost equals entity monthly overhead. On most Vilnius salary bands this lands around nine to thirteen employees, later than most of Europe because the employer social rate is low. Use the Crossover Calculator for your own numbers.

4. Factor in non-financial triggers

   The maths gives you a headcount threshold. Local substance, owner profit distribution, and market-validation reversibility are separate questions that can override the cost crossover in either direction.

5. Plan the graduation date

   Allow two to four weeks for UAB formation before the first payroll on your own entity. Add two to five weeks for the bank account. Start the GEMO process while EOR keeps running.

These are typical ranges, not law figures. No law sets what a UAB costs to form. The range reflects real professional services market rates in Lithuania. It moves with share structure and how much you outsource.

Why the bank account matters for payroll

Most Lithuanian banks want a registered company with a VMI tax code and a Sodra employer number before opening a business account. So the registration order matters. Expect 2 to 5 weeks from incorporation to an opened account, longer if the directors are not in Lithuania for identity checks. That can turn a 2 to 4 week incorporation into a 4 to 9 week wait before first payroll if the sequence is not run tightly. Fintech accounts can be faster, but many payroll and Sodra mandates still expect a domestic bank.

These figures are typical market ranges for a small UAB with 1 to 14 employees. They are illustrative, not law figures. Actual costs depend on whether you outsource or hire in-house, and on how involved your payroll and benefits get.

Above 14 employees, dedicated in-house HR and finance capacity usually becomes worthwhile and the band widens. Private health and other voluntary benefits, which are common in competitive Vilnius and Kaunas tech hiring, sit on top of this and are not included above.

Most cost comparisons skip director liability because it is hard to put a number on. It is worth naming before you decide.

Personal director duties under Lithuanian law

A UAB director (vadovas) owes duties of loyalty and care to the company under the Civil Code and the Law on Companies. The director must act in the company's interest, avoid conflicts, keep proper accounts, and file on time. Breach can bring personal civil liability for losses caused. These are personal duties. They cannot be outsourced to a bookkeeper or an adviser.

The compliance rhythm

• GPM (personal income tax) withholding: the employer withholds and remits employee income tax to the State Tax Inspectorate (VMI). The first income band is taxed at 20%.
• Sodra contributions: employer and employee social insurance is declared and paid to Sodra every month. Late payment attracts interest and penalties.
• Pay timing: wages must be paid in line with the Labour Code rules on pay frequency. Missing the statutory window is an employer breach.
• Annual financial statements: filed with the Registry of Legal Entities each year. Late filing carries penalties.
• Payroll reporting: monthly declarations to VMI and Sodra must reconcile.

Each filing is manageable on its own. Stacked across a year they take real management attention and carry personal director risk on every missed deadline. An EOR carries all of these on its own entity.

• Under 4 Lithuania employees at typical Vilnius salaries: EOR is cheaper every month. The entity overhead has too few people to spread across.
• Market validation phase: you are hiring 1 or 2 people to test commercial fit. Entity setup commits capital and attention before you know whether Lithuania will deliver.
• Project-based hires: 6 to 12 month engagements where the formation cost will not pay back before the project ends.
• Uncertain headcount path: Lithuania is a priority market but you have not committed to long-term growth. EOR keeps the option open.
• High wind-down risk: pilot programmes or holding patterns where a local company adds exit work later.

• Sustained headcount above 13 Lithuania employees at typical salaries: the entity overhead spreads across enough people that per-head cost falls below the EOR fee. The low employer Sodra rate pushes this threshold higher than in most of Europe.
• Local substance requirements: regulated sectors and some public contracts need a registered Lithuanian entity with real presence. EOR employment does not provide that substance.
• Owner profit distribution: once the entity is profitable, distributed profit and dividends are taxed at a flat 15%, separate from the salary income bands. That matters for founder-led structures.
• Employee equity and incentives: senior hires expecting share options at a Lithuanian-registered company need a local entity to structure those plans cleanly.
• Multi-year growth plan: you have line of sight to 14 or more Lithuania employees over 24 months. Start formation early so the entity is ready before the crossover, not after it.

The technical mechanic is contract novation. The employment contract transfers from Teamed's partner entity to your new UAB on a set date. All terms carry across. Salary, Sodra contributions, the 20 days of annual leave, and the continuous service date all stay the same. The employee sees a different employer name on the payslip. Nothing else changes.

What we do operationally:

• Stand up your Lithuania UAB through GEMO, typically around 2 to 4 weeks, while EOR keeps running in parallel.
• Register the new entity with VMI for tax and with Sodra as an employer.
• Open the entity bank account and the payroll mandate.
• Novate every active employment contract on a single effective date.
• Carry ongoing benefits across without any lapse.
• File final EOR-period declarations and open new filings on the entity from the novation date.
• Keep the same People Ops contact as your primary point after graduation.

The Graduation Model exists because every other EOR makes this hard. We plan for the move from the day you hire your first employee through us. We help you graduate when the maths says so.

Real HR and legal experts handle your Lithuania hires from the first offer letter through every Sodra declaration and annual filing. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the employer Sodra line at 1.77% on permanent contracts, the GPM band at 20%, and the annual leave accrual for 20 days. Nothing is hidden inside the management fee.

EOR is the right answer until it isn't. We tell you when the model no longer fits and help you graduate to your own UAB. EOR payroll, contractor onboarding, and entity setup all live on one platform. Run the Crossover Calculator to see the month the model flips. Start from the Lithuania hiring overview. Key sources: VMI personal income tax and Sodra contribution rates.