Significant employment law changes from 1 October and 1 November: what should employers know?

Autumn 2026 will bring significant changes in employment law for employers. Already in October, the rules on the payment of daily allowances and other business travel expenses will change significantly, while from November, amendments to the Labour Code will enter into force, affecting employment contract terms, work organisation, termination procedures, settlement with employees, collective agreements and other matters of practical importance.

In this overview, we highlight the most important changes and their practical implications for employers: what employers should know, which processes should be reviewed and what should be prepared for in advance.

Changes to the payment of daily allowances and other business travel expenses effective from 1 October

1. Permitted limits for reducing daily allowances will change

If the employer does not have a collective agreement, from 1 October the possibility of setting daily allowances below the maximum rates approved by the Government will depend on the duration of the business trip:

• where a business trip lasts less than 7 days, daily allowances may not be reduced, meaning that 100% of the maximum daily allowance must be paid;
• where a business trip lasts 7 days or longer, the employer’s internal documents may provide for lower daily allowances, but they may not be lower than 65% of the maximum daily allowance.

If the company has a collective agreement, it will continue to be possible to agree on lower daily allowances, but not lower than 50% of the maximum daily allowance, irrespective of the duration of the business trip.

At the same time, the requirement to differentiate reduced daily allowance rates on the basis of objective criteria will be removed. However, employers may still introduce such differentiation to ensure transparency.

2. Employees will have to be informed of the applicable daily allowance before each business trip begins

If a daily allowance below the maximum rate applies to a particular business trip, the employee will have to be informed in writing of the applicable amount before the start of the business trip. The amount determined will apply until the end of that particular business trip and may not be changed during the trip, except where the business trip route changes.

3. New rule for first and last days of a business trip

If the first and/or last day of a business trip, including travel time, lasts less than 4 hours, 20% of the applicable daily allowance will have to be paid for that day.

4. Clarity on one-day business trips in Lithuania

The legislative changes expressly provide that daily allowances for business trips within Lithuania will only be paid where the business trip lasts longer than one business trip day. Therefore, no daily allowance will be paid for a one-day business trip in Lithuania. As before, this rule will not apply to business trips abroad.

What does this mean for employers?

Before the changes enter into force on 1 October, we recommend that employers:

• Review internal documents governing business travel and the payment of daily allowances and ensure that the daily allowance rates and reduction rules currently provided for in these documents comply with the new requirements. Although employers are not required to determine the circumstances in which daily allowances may be reduced in advance, for clarity and transparency they may specify such circumstances in their internal documents or retain the existing ones if they comply with the new rules.
• Review employment contract templates and existing employment contracts which, in practice, have often included provisions allowing, for example, payment of 50% of the maximum daily allowance set by the Government.
• Review business travel order templates and other business travel administration processes or systems to ensure that, where a reduced daily allowance is paid, the employee is duly informed of the specific amount before the business trip begins and the employer retains evidence confirming that this information was provided.

Changes effective from 1 November 2026

1. Possibility to agree on a longer probationary period for higher-paid employees

From 1 November, employees whose monthly salary under their employment contract is at least two times the latest average monthly gross salary for the national economy will be able to have a probationary period of up to 6 months.

As before, periods during which the employee was absent from work due to temporary incapacity for work, leave or other important reasons will not be included in the probationary period.

2. Periods of temporary incapacity for work and annual leave will not be included when calculating the time limits applicable to procedures concerning breaches of employment duties

When applying the procedure concerning a breach of employment duties, periods during which the employee was absent from work due to temporary incapacity for work or was on leave will no longer be included when calculating the applicable time limits.

Therefore, an employee’s temporary incapacity for work or leave will no longer reduce the time available to the employer to properly complete an ongoing procedure for assessing a breach of employment duties.

3. New ground for termination where an employee does not meet the requirements of impeccable reputation

From 1 November, the list of circumstances in which an employment contract may be terminated in the absence of the parties’ will is expanded. An employment contract may also be terminated where an employee does not meet the statutory requirements of impeccable reputation applicable to them.

This change is particularly relevant to employers in regulated sectors where legislation imposes specific reputation requirements for certain positions.

4. No severance payment where an employment contract is terminated in the absence of the parties’ will because its non-compliance with statutory requirements arose due to the employee’s fault

The rules on severance payments will change where an employment contract is terminated because it is contrary to statutory requirements and such non-compliance cannot be remedied.

The amendments provide that if the employment contract became contrary to statutory requirements due to the employee’s own fault, the employer will not be required to pay the employee a severance payment. However, the Labour Code does not specify which particular circumstances would constitute the employee’s fault in this context. Therefore, in practice, this exception should be applied with caution and the individual circumstances of each case should be assessed.

5. Rules on termination at the employer’s will are changing

The prohibition on terminating an employment contract at the employer’s will for reasons specified in Article 57(1) of the Labour Code, such as unsatisfactory work performance or the employee’s job function becoming redundant, will be removed. At the same time, it is established that an employment contract may be terminated at the employer’s will for a justified reason.

The new rules will apply to employment termination procedures initiated after 1 November 2026.

Although this change provides employers with greater flexibility, the other restrictions on termination at the employer’s will established in the Labour Code will remain. For example, an employment contract may not be terminated on this ground for discriminatory reasons, because of the employee’s participation in proceedings against the employer or on other grounds prohibited by the Labour Code. Therefore, when relying on this ground for termination, it will remain important to properly assess and substantiate the specific reasons for termination.

6. Possibility to settle with a departing employee no later than within 3 months

Currently, when an employment contract is terminated, all amounts due to the employee must be paid no later than on the last day of employment, unless the parties agree otherwise, but in any event no later than within 10 working days.

From 1 November 2026, there will be greater flexibility in agreeing on settlement deadlines. If the amounts due to an employee exceed one month’s average salary, the parties will be able to agree at the time of termination that the portion exceeding one month’s average salary will be paid later, but no later than within 3 months after the end of the employment relationship.

For the portion of the payments not exceeding one month’s average salary, the possibility to agree on settlement no later than within 10 working days will remain

7. New rules for calculating late payment interest

The rules governing late payment interest where, during the employment relationship, an employer delays the payment of salary or other amounts due to an employee will change.

From 1 November, it will be expressly stipulated that late payment interest is calculated for each calendar day of delay, starting from the date on which the relevant payment was due.

The method for determining the rate of late payment interest will also change. It will be linked to the consumer price index for the previous calendar year, multiplied by 5. Therefore, late payment of salary or other amounts due to an employee may result in greater financial consequences for employers.

8. Greater scope to regulate certain employment matters through collective agreements

Certain changes will be relevant to employers whose companies have collective agreements in place.

For example, as a general rule, when investigating a potential breach of employment duties, an employer may suspend an employee from work for up to 30 calendar days while continuing to pay the employee’s average salary. From 1 November 2026, a collective agreement may provide for a different remuneration arrangement during the employee’s suspension.

Additional possibilities are introduced for collective agreements concluded at a level higher than that of the employer. Such agreements will be able to reduce from 3 to 2 years the period within which employees must use their annual leave. They may also provide for monetary compensation for the portion of annual leave exceeding the annual leave entitlement for two years of work and establish rules for calculating and paying such compensation.

The amendments also introduce other changes relevant to collective agreements. Therefore, employers whose companies are covered by collective agreements are advised to separately assess the provisions of their existing collective agreements and the additional possibilities provided by the new rules.

What does this mean for employers?

Before the changes enter into force on 1 November, we recommend that employers:

• review the employment contract templates they use and, where relevant, existing employment contracts, and incorporate the relevant provisions and possibilities introduced by the new rules;
• review the employer’s internal documents and processes and, where necessary, update them to ensure compliance with the amended legal requirements;
• educate managers and other employees responsible for HR matters on the relevant legislative changes and their practical implications for employee management.

Have any questions? Our Employment team is ready to help!

Contact our counsels Agnietė Venckienė and Aurelija Daubaraitė.