The world is now more digitally connected than ever, allowing entrepreneurs to hire talent beyond national borders. With the increasing popularity of remote hiring, Eastern Europe, especially Lithuania, has become a sought-after destination for software developers due to its well-educated workforce, affordable costs and robust digital infrastructure.

While it's great to find the perfect developer in Lithuania, a big question that often arises for a startup is: "How can we legally employ and pay them?" It takes a lot of time, cost and effort to set up a local legal entity.

In similar scenarios, working with an Employer of Record (EoR) has proven to be a strategic option. More and more startups are bypassing the legal entity route and taking advantage of EoR services to gain access to the Lithuanian talent pool with unprecedented speed and efficiency.

Why Global Startups Are Hiring in Lithuania

Lithuania, located in the Baltic region, has quickly developed into a strong center for technological talent. The country is characterized by its remarkable supply of highly skilled software engineers, its strong digital infrastructure, which includes some of the fastest internet speeds in the world, and its dynamic and innovative startup ecosystem, which exceeds expectations for a country of its size.

The country is a top location for sourcing technical talent for remote work as it offers multinational companies an attractive combination of highly skilled technical specialists, significant cost savings and a favorable European time zone. This is the result of the fact that the strong emphasis on STEM education in the country has led to a continuous supply of well-trained developers. In addition, the widespread fluency in English has encouraged collaboration on a global scale.

Challenges Startups Face with Direct Hiring in Lithuania

The benefits of hiring in Lithuania are obvious, but there are a number of legal and administrative challenges associated with direct hiring, and this is especially true for start-ups with limited resources. Below we have highlighted some major challenges start- ups may face.

Setting up a Local Legal Entity
In Lithuania, setting up a local company is a difficult, time-consuming and expensive process that can take months to complete. Startups that choose this route have to deal with many ongoing administrative tasks, such as complicated local labor laws, tax regulations and performance requirements. The parent company is also responsible for any compliance failures, which is a major legal and financial risk.

Managing Payroll and Compliance

If payroll is handled internally, a high level of competence in Lithuanian social security contributions and tax regulations is required, as any miscalculation can lead to penalties. It is an ongoing administrative burden to ensure that a company is compliant with local employment standards, which are constantly changing.
Ongoing Administration

Managing a business means you need to keep a close eye on things like annual filings, local HR and regulatory changes. This complicates operations and diverts attention from the main goals of the business.

Why Startups Prefer EOR Over Local Entities in Lithuania

Below we have listed some important reasons why startups prefer an EOR over setting up a local entity when hiring in Lithuania.

Speed to Hire

The EOR model in Lithuania is the clear favorite among start-ups, who appreciate the exceptional speed with which the recruitment process can be completed. It allows them to hire key employees within a few days instead of taking months to set up a local organization.

Cost Efficiency

By working with an Employer of Record (EOR), Start-ups founders can reduce your overhead costs and simplify compliance when hiring remote developers in Lithuania. This allows you to spend less time and money on administrative matters and focus more on growing your team where it really matters.

Flexibility 

Startups need flexibility if, for example, they want to hire developers quickly, experiment with new markets or expand and downsize teams. With an EOR, you can easily expand or downsize the team without the long-term commitments that come with running a local organization.

Risk Management

Labor laws and tax regulations in Lithuania can be somewhat complicated. By ensuring that employment contracts, payroll taxes and social security contributions are compliant, an EOR protects startups from financial penalties or legal threats.

Focus on Core Operations

Instead of dealing with matters such as Lithuanian labor law or HR compliance, founders can focus on other important aspects of their business, such as customer service, product/service enhancements and financing, while the EoR takes care of all administrative matters related to the recruitment process.

Final Thoughts

Startups looking to hire developers remotely will find that Lithuania offers access to dedicated and skilled workforce that is also cost-effective. However, navigating the local legal and administrative environment can be a challenge, especially for small and fast-moving companies.

By working with an Employer of Record (EOR) such as Swapp Agency, startups can bypass the red tape of setting up a local entity, quickly hire top Lithuanian talent and comply with all local regulations. This model allows founders to focus on other key aspects of growing and scaling their business.