Dismissal at the employer’s initiative without employee fault: how much notice and how much to pay

Notice must be given one month in advance or, if the employment relationship has lasted less than one year, two weeks in advance. Severance pay equals two months’ average pay or, if the employment relationship has lasted less than one year, half of one month’s average pay. This is laid down in Article 57(7) and (8) of the Labour Code (DK). For some employees the notice periods are doubled or tripled. Final settlement must be made by the end of the employment relationship. Below — what in these figures most often comes as a surprise.

The ground must be real, and you have to prove it

The most common ground is a redundant work function. Article 57(1)(1) DK allows the contract to be terminated where the work function performed by the employee becomes redundant as a result of changes in the organisation of work or for other reasons related to the employer’s activities.

Article 57(2) DK adds two conditions that carry the most weight in court. The changes must be real and must make the particular employee’s function unnecessary. And from the notice until five working days before the end of the notice period, there must be no vacant position at the workplace to which the employee could be transferred with their consent. If such a position existed and was not offered, that is the first thing the employee will point to in the statement of claim.

Where the redundant function is performed by several employees and only some of them are dismissed, Article 57(3) DK requires the selection criteria to be agreed with the works council or, where there is none, with the trade union. The same part establishes a priority right to remain in employment: among others, for employees raising three or more children under fourteen, and for employees with at least ten years of continuous service with that employer.

A reorganisation does not in itself create a ground. Article 51(1) DK states directly that the restructuring, merger or division of the employer, or its merger into another undertaking, cannot be a lawful reason for terminating employment relationships.

Time limits and amounts

The notice periods are set out in Article 57(7) DK. One month or two weeks. These periods are doubled for employees who have less than five years left until the old-age pension age. They are tripled for employees raising a child under fourteen or a child with a disability under eighteen, for pregnant employees, for employees with a disability, for employees who have submitted a medical extract concerning an illness included in the list of serious illnesses, and for those who have less than two years left until pension age.

Severance pay is set out in Article 57(8) DK: two months’ average pay or half of one month’s average pay.

Notice is given in writing and delivered without delay. Article 64(3) DK lays down something worth bearing in mind before sending it: if the employee disputes the lawfulness of the dismissal, the burden of proving that the notice was served lies with the employer. It is not for the employee to prove that they did not receive it. The employer has to prove that it served it.

One case: a company in liquidation and a pregnant employee

The question we hear most often goes like this: the company is closing down, but one employee is pregnant and another is on childcare leave. Can they be dismissed?

Yes. Article 61(1) DK lists the cases in which the employment contract with a pregnant employee may be terminated during her pregnancy and until her baby is four months old. Among them is the case where a court or a body of the employer adopts a decision as a result of which the employer ceases to exist. That is liquidation.

Article 61(3) DK prohibits terminating the contract with employees raising a child under three on the grounds set out in the first three points of Article 57(1) DK (Article 57(1)(1), Article 57(1)(2) and Article 57(1)(3) DK). Liquidation does not fall within those three points.

A practical note, which is not a rule of law: in such a case, what matters most is the date of the decision as a result of which the employer ceases to exist, and how that decision is formalised. If there is no decision yet but the notices have already been sent, there is no ground yet either.

One case: severance pay in instalments

Clients ask whether they can agree to pay severance in instalments, and whether this will raise questions with the State Social Insurance Fund (Sodra). In practice, such an agreement works, and it raises no questions with Sodra, because the end of the employment relationship has already been recorded by notification.

We say this plainly: this is a practical note, not a rule of law. The Labour Code does not regulate payment in instalments, and Article 146(2) DK provides that the part of wages or related payments not exceeding one month’s average pay must in all cases be paid no later than the day the employment relationship ends, unless otherwise agreed at the time of dismissal. However, a later settlement may be agreed for no more than ten working days (Article 146(2) DK). If the employer, through no fault of the employee, settles later, it must pay a penalty under Article 147(2) DK: the employee’s average monthly pay multiplied by the number of months of delay. From 1 November 2026, Article 146(2) DK changes: at the time of dismissal the parties may agree that the part exceeding one month’s average pay is paid no later than three months after the day of dismissal, and the part not exceeding one month’s average pay no later than ten working days after the day of dismissal. Where termination of the employment contract was started by 31 October 2026, the earlier rule applies to the settlement. The agreement must be in writing and specific: what amounts, on what dates.

Final settlement is late more often than anything else

This is the step that is late most often. Article 146(2) DK provides that, when the employment contract ends, all payments related to the employment relationship are paid no later than by the end of the employment relationship, unless the parties agree that settlement will be made within ten working days. From 1 November 2026 this rule changes, as described in the previous section.

The delay costs more than the payment itself. That is why the settlement amount must be calculated before the last working day, not after it.

When dismissal is not the only route

Before choosing dismissal without fault on the employee’s part, it is worth considering two cheaper alternatives. Article 54(2) DK allows either party to propose in writing that the contract be terminated by agreement of the parties, setting out the terms in the proposal — when the relationship ends, the amount of compensation and the settlement procedure. Article 55(1) DK provides that an employee may terminate the contract at their own request, giving twenty calendar days’ notice.

If what changes is not the number of posts but the working conditions, a different procedure applies: Article 45(1) DK requires the employee’s written consent to change the essential or additional terms of the employment contract.

How to start

Send us the employment contract, the job description and a description of the planned changes. We will give you a first assessment — whether the ground will withstand a dispute, and what time limits and amounts arise — free of charge.

Tel. +370 5 212 1506, email info@linden.lt

More about this service: dismissal from employment.