Creating a work schedule is not always as simple as "from 8:00 AM to 5:00 PM, Monday through Friday." There are many industries where employees work on weekends and public holidays, or have fluctuating schedules (the number of hours worked is not the same each week).
In such cases, companies often choose to apply aggregated working time accounting. According to the VDI (Lithuania’s State Labour Inspectorate), almost a third of all Lithuanian companies use this practice. So, what is this aggregated accounting and how does it work?
What is aggregated working time accounting?
Aggregated working time accounting is a working time arrangement used in Lithuania, where an employee's hours worked are calculated not on a monthly basis, but over a longer, so-called reference period (which typically lasts 2 to 3 months). In certain cases, as stipulated by law, the reference period can be extended up to 12 months.
This method of accounting allows for a more flexible management of timetables and payroll, when it is not possible to adhere to a standard 40-hour working week. Instead, the employee's standard working hours are calculated over the entire reference period.
How is it different from standard payroll accounting?
The main difference between aggregated and standard working time accounting is that, under the aggregated method, working hours are balanced over a longer period. This means that an employee may work more hours one week and fewer in another. As such, it will not be considered overtime, provided the agreed working hours for the entire reference period are not exceeded. In standard payroll accounting, overtime is calculated whenever the prescribed daily or weekly working hours are exceeded.
Therefore, aggregated working time provides greater flexibility for businesses whose operations are seasonal, project-based, or require shift work, including night shifts, as well as work on weekends and public holidays. Examples of such businesses include shops and retail chains, catering establishments, hotels, clinics and hospitals, manufacturing facilities, and other organisations.
Aggregated working time accounting rules
The application of aggregated working time accounting in Lithuania is regulated by the Labour Code (Articles 114, 115, and 122). Here are the main rules and requirements:
- Basis for implementation: Aggregated working time accounting may be introduced only where necessary, following the completion of information and consultation procedures with the council or a trade union.
- Reference period: The duration of the reference period cannot exceed three months (except in specified cases).
- Maximum working time: Working time, including overtime, cannot exceed 52 hours per week. The duration of a working day (shift) cannot exceed 12 hours.
- Rest periods: Employees must be guaranteed an uninterrupted daily rest period of at least 11 hours between shifts and an uninterrupted rest period of at least 35 hours within a 7-day week.
- Work schedules: Work schedules must be drawn up and communicated to employees no later than 7 days before they take effect. If changes are necessary, employees must be notified at least 2 working days in advance.
Schedules must be arranged to distribute the employees' working time as evenly and fairly as possible over the reference period. It is forbidden to assign an employee to work two consecutive shifts (e.g.: a morning and an evening shift straight after) or for more than 6 consecutive days without a rest period. - Work on public holidays: On the day before a public holiday, working time is reduced by 1 hour, except for employees already working reduced standard hours. If, for any reason, this is not possible, that 1 hour is paid at the overtime rate.
- Payment for overtime: If, during the reference period, an employee works more hours than the established standard, the excess time is paid as overtime - at a rate of 1.5 times the normal rate. Alternatively, at the employee's request, this time can be added to their annual leave.
- Payment for time not worked: If an employee has not worked the established standard number of hours for reasons attributable to the employer, they must be paid half of their due wages for the time not worked.
Calculating holiday pay under aggregated working time accounting
Annual leave under aggregated working time accounting also has its own specific features. As the number of employee's working days and hours per week may vary, holidays are usually granted in weeks or in calendar days. There are several methods for calculating holiday pay under aggregated working time accounting:
- According to the employee's work schedule: Holiday pay is calculated for the number of working days (or hours) that the employee would have been required to work according to their schedule during the holiday period.
- According to a standard 5-day working week schedule: Holidays are calculated based on a normal 5-day working week, regardless of the employee's actual schedule. In this case, one week of holiday corresponds to 5 working days.
- Using the average length of a working day: The average length of an employee's working day over a certain period (for example, the last 3 months) is calculated, and holiday pay is determined based on this figure. This method is used the least often; it is most suitable when the employment contract is based on an hourly rate and the number of working hours per day is variable.
The Labour Code and other legal acts do not specify which method to use. Companies must establish their own procedure for calculating holiday pay and clearly define it in their internal policies. However, the correct calculation of working time and rest periods is strictly regulated.
Lithuanian accounting in Odoo with Via laurea solutions
The calculation of wages and holiday pay under the Lithuanian aggregated working time accounting rules is complex, and errors can occur even under the supervision of experienced accountants. The good news is that a large part of this process can be automated using modern accounting software!
The Odoo business management system, together with Via laurea’s "LT DU" Payroll module, will significantly simplify your Lithuanian accounting management. The system automatically creates work schedules by applying pre-made templates; calculates working time according to specified rules (including overtime or a shortfall of hours within the aggregated period); identifies hours worked at night and on public holidays; and calculates wages according to the work schedules assigned to employees and based on the company's accounting policy.
To provide utmost convenience and broader applicability, our module allows wages to be calculated not only in the methods defined by law, but also using additional options based on the most common practices amongst Lithuanian companies.
The aggregated working time accounting and payroll solutions enable companies to choose:
- To calculate either hourly or fixed wages;
- To opt for payment based on time worked, or to pay a contractual salary, with its recalculation performed in the final month of the aggregated period;
- To pay half or the full wage for hours not worked during the aggregated period;
- To calculate holidays and other benefits using a chosen method: according to the standard working hours as specified in the Labour Code, according to the employee's individual schedule, or according to an assigned general schedule.
Odoo accounting DEMO
Would you like to see how Via laurea's Lithuanian accounting solutions work in the Odoo system? Get in touch and we will organise a DEMO with our accounting experts!
