IT Outsourcing Markets Review: Lithuania vs. Ukraine
This week we are comparing Ukraine with another popular IT outsourcing destination of Eastern Europe – Lithuania.
Lithuanian IT Market Overview
Lithuania is not a big country with the population almost 2.9 million people. Since 2015, Lithuania has become a new popular destination for IT business. The government there provides an enormous assistance to the IT sector: it helps to build new offices to attract foreign companies, establish technological community, which will focus in two biggest cities - Vilnius and Kaunas. Moreover, there are two governmental companies assisting the entrepreneurs - Enterprise Lithuania and Invest Lithuania. Lithuania is ranked 16th in the list of countries with the highest economic freedom index. Due to this local IT market is really attractive for foreign customers and companies. There is the fastest public Wi-Fi network in the world. As to the IT employees, there are almost 27K who work in this industry. Amidst the largest companies are Charlie Oscar, Game Insight, WIX, Devbridge Group, Intermedix, Revel Systems. Also, such famous companies as Uber, Google, NASDAQ have their departments in Lithuania. However, a small number of Lithuania's IT market, thanks to that you can more closely work and cooperate with another company. Lithuania supports the spirit of entrepreneurship and conducts more than 100 events per year, including those aimed at the developers. Lithuania's government responds to the needs of the population. Most of the government's services are provided online, and 99% percent of entrepreneurs use them.
There are 23 universities, however, not so many offer tech education. Many classes are conducted in Lithuanian, Russian, or English. However, education fee in Lithuania is much lower than in other European countries. However, the diplomas of these universities are valid in all European countries. Therefore many foreign students find Lithuania attractive and come there to get high education. In Lithuania, almost 8K tech specialists graduate from local universities annually.
The main institutions of Lithuania providing IT education:
- Kaunas University of Technology
- Vilnius Gediminas Technical University
- Klaipeda State University of Applied Sciences
The salary level in Lithuania is higher than in Ukraine, Latvia, Czech Republic, Belarus or Bulgaria. The average gross salary in Lithuania amounts to $770 which is quite low. For IT industry specialists, this index is much higher, reaching up to $3250 per month. The salary is as usually defined by the experience a specialist has in a certain area of the IT business:
- Junior Developer - $750
- Middle Developer - $2000+
- Senior Developer - $3500+
- Lead/HM - $4700+
Benefits and Taxes
The modern Lithuanian tax system is based on the Constitution. Since 1990s Lithuania has made a lot of effort to make the country's economy attractive for foreign investment and to support the labor market. An interesting fact is that Lithuania has the lowest total tax revenue in all European Union - it amounts only to 27.5%. As to the Income Tax, it amounts to 15%, in Ukraine, it's 5% and 18% for employers. Personal Social Tax for employees is 3% if an employee has chosen to make supplementary contributions to the pension system this number will be 4% added to employer’s social tax which fluctuates from 27.98% to 29.6% depending on the type of employer. In Ukraine, Social Tax is not paid by the employees working as private entrepreneurs and the same for employers signing agreements with private entrepreneurs, and 22% of staff hired upon Labor Agreements.
There is also a very interesting thing in Lithuanian IT sector "free-trade zone". There are two zones: one in Klaipeda which is about 200 hectares and one in Kaunas which is about 500 hectares. The main principle of this free zone lies in non-payment of taxes upon the employment of not less than 20 Lithuanians or people who have the right to permanent residence. If you have company in these zones and you comply with conditions you do not pay taxes at all for 6 years.
Talking about benefits, most of the Lithuanian companies offer medical care, assistance in relocating not only within the country but from abroad as well. Also, some companies assist their employees to visit different conferences and meetings which will be useful and helpful for them. Also, all companies offer paid vacation of 14 calendar days on average.
Cost of Living, Travel Expenses, and Office Rent
Cost of living in Lithuania is much higher if compare with Ukraine. For example cost of living index (measurement of differences in the price of goods and services) in Lithuania is 53, while in Ukraine this index is about 26 in Kyiv and about 11 in Lviv.
For instance, a family of 4 needs about $2180 and about $626 will be enough for 1 person per month. Of course, this number is average and all the expenses depend on one’s needs. One bedroom flat which will be enough for 1 person will cost $565 per a month in the city center and about $350 per a month outside the city center. A monthly public transport pass will amount up to $34. Also, you can rent a car, 1 liter of gasoline costs $1.5, that's some higher than in Ukraine. Average monthly subscription to the fitness club expenses will reach about $50 for 1 adult. Average utilities per months are $167.The average cost of a meal is $30-40 for 2 people in a mid-range restaurant. In a market, you will pay $50 and much for a packet of products for a week. The average price for accommodation and food is higher than in Ukraine.
Office rent in the Vilnius varies between $10-20 per square meter. In Kaunas, the second largest city of Lithuania, this number varies between $7-15. It depends on a class of office and furniture available.
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