Ending employment by mutual agreement in Lithuania: what to put in it
Either party, the employee or the employer, may propose ending the employment contract by mutual agreement (Article 54(1) of the Labour Code of the Republic of Lithuania (DK)). The proposal is made in writing and sets out the terms: the end date, the amount of compensation, how unused leave is dealt with, how payment is settled, and other matters (Article 54(2) DK). The law does not fix the amount of compensation; the two of you do. However, laws regulating a particular activity may restrict the termination terms (Article 54(2) DK). Consent is given in writing. If the other party does not reply within five working days, the proposal is treated as rejected (Article 54(3) DK). A signed agreement ends the contract on the terms it states, so everything that matters must be written in from the start (Article 54(4) DK).
The order of documents, and when agreements count towards a collective redundancy, are covered in our article on documents and their order. Here we look at what to agree so that no dispute arises later. The article is written for both parties.
End date
Write in a specific last day of employment. Under the general rule, if the employee is ill or on leave on that day, the end date is postponed. But this rule does not apply when the contract is ended by mutual agreement (Article 65(6) DK). So choose the date knowing that it will not move.
A pregnant employee may agree to end the contract by mutual agreement, even though the other grounds available against her are limited (Article 61(1) DK).
Compensation
Article 54(2) DK requires the proposal to state the amount of compensation, but does not define it. The severance in Article 57(8) DK is set for an employee dismissed on the employer’s initiative without fault, not for termination by agreement. Its amount can be used as a reference point in negotiations. How much is paid under Article 57 DK is covered in a separate article.
State the amount, whether it is before tax, and the payment date. If no compensation has been agreed, say so too, so that no questions arise later.
Unused leave
Article 54(2) DK specifically mentions how unused leave is dealt with. There are two routes: the employee uses the leave before the end date, or receives payment in lieu. Annual leave may be replaced by money only when employment ends (Article 127(6) DK). From 1 November 2026 there is an exception: a collective agreement above employer level may provide payment for the part of leave exceeding two working years’ entitlement (Article 127(5) and (6) DK).
The right to leave, or to payment for it, is lost three years after the end of the calendar year in which the right to full annual leave was acquired, except where the employee was actually unable to use it (Article 127(5) DK). From 1 November 2026, a collective agreement above employer level may shorten this period to two years. Write in the number of unused leave days so that both parties can check it.
Settlement
Until 31 October 2026, all payments are due no later than the end of employment, unless the parties agree to settle within ten working days. The part not exceeding one month’s average pay must in all cases be paid no later than the last day, unless otherwise agreed at the time of dismissal (Article 146(2) DK).
From 1 November 2026, the parties may agree at the time of dismissal that the part exceeding one month’s average pay will be paid at another agreed time, but no later than three months from the dismissal date. The part not exceeding one month’s average pay is paid no later than the last day, unless it is agreed to pay it within ten working days. If the termination was started on or before 31 October 2026, the earlier rule applies (Article 39(9) of Law No. XV-1058 amending the Labour Code). The law does not say when a termination by agreement counts as started. If the proposal is made by 31 October and the agreement is signed later, write payment dates that satisfy both versions.
So write a payment date for each amount in the agreement. If the employer delays settlement for reasons not attributable to the employee, it pays a penalty: the employee’s average monthly pay multiplied by the number of months of delay (Article 147(2) DK). If the unpaid sum is less than one month’s average pay, or the delay is shorter than a month, the penalty is calculated under the lower formulas in the same paragraph.
Other terms
The list in Article 54(2) DK ends with “and other matters”, so the parties may agree on other points too, provided they do not conflict with the law. For example, the return of work equipment or the handover of work. At the employee’s request, the employer must issue within ten days a certificate of the job function, its start and end, and the pay received (Article 65(8) DK). This can be written into the agreement as a specific obligation.
Unemployment benefit
The Law on Unemployment Social Insurance of the Republic of Lithuania (NSDĮ) links the benefit to unemployed status and an insurance record. One of the conditions is an unemployment insurance record of at least 12 months in the last 24 months (Article 5(1) NSDĮ). The benefit is paid from the eighth day after unemployed status is acquired (Article 6(1) NSDĮ). The later start, 3 months after registering with the Employment Service (Užimtumo tarnyba), applies to those dismissed for the employee’s fault (Article 6(2) NSDĮ). Mutual agreement is a separate ground for the end of an employment contract (Article 53(1) DK), not a dismissal for fault.
Can the agreement be challenged
Termination of an employment contract is a subject of labour disputes (Article 213(3) DK). Civil law rules apply to employment relations only where there is a gap in the law and this does not conflict with the nature of employment relations (Article 4(2) DK). The Civil Code allows a court, on a claim by the injured or mistaken party, to declare a transaction invalid where it was made through fraud, violence, economic pressure or a real threat (Article 1.91(1) of the Civil Code of the Republic of Lithuania (CK)), or through a fundamental mistake (Article 1.90(1) CK). The party whose consent was defective relies on these rules: the employee or the employer.
The period to apply to the labour disputes commission (darbo ginčų komisija) is three months, and for unlawful dismissal one month from the day you learned, or should have learned, of the breach (Article 220(1) DK). The DK does not say directly which period applies to challenging an agreement, so it is safer to count one month.
To avoid a dispute, an employer should make a genuine proposal with time to decide, not announce a decision already taken. If an employee is being pressed to resign “of their own free will”, read this article (in Lithuanian).
How to start
Send us the proposal you received or plan to make, the employment contract, and tell us which terms are key for you. We will check that the agreement contains everything Article 54 DK requires and that the time limits are stated correctly.
Phone +370 5 212 1506, email info@linden.lt
More about this service: Dismissal from employment.
