Employer of Record in Luxembourg

Businesses can only operate smoothly in Luxembourg if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Luxembourg below, to avoid any compliance issues.

Employment Contract Requirements

In Luxembourg, employment contracts are typically indefinite, but for fixed-term contracts, strict regulations apply under the Labor Code. Both types necessitate written form and mutual understanding, with no language requirements. Contracts should encompass essential employment details, including:

• Identification of both parties
• Commencement date
• Workplace(s)
• Job description, duties and responsibilities
• The employee's salary as well as other compensation or benefits, and terms of payment
• Working hours and schedule
• Notice periods for employment termination
• Probation period
• Reference to additional clauses as agreed by the two parties

Onboarding Process

We can help you get a new employee started in Luxembourg quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Luxembourg

The regular working hours are 40 hours per week in Luxembourg, employees can work 8 hours a day.

Overtime in Luxembourg

Overtime in Luxembourg is capped at 2 hours per day and 8 hours per week, compensated at 150% of the regular salary or compensated with paid time off. Sunday work is restricted unless otherwise specified, with specific compensation arrangements.

Probation Period in Luxembourg

Probation periods generally last between 2 weeks and 6 months, with varying limits based on skills and salary. Unskilled workers have a maximum trial period of 3 months, while those earning over 5 times the minimum wage can trial for up to 12 months.

Fiscal Year in Luxembourg

1 January - 31 December is the 12-month accounting period that businesses in Luxembourg use for financial and tax reporting purposes.

Payroll Cycle in Luxembourg

The payroll cycle in Luxembourg is usually Monthly, with employees being paid by the last day of the month.

Minimum Wage in Luxembourg

The minimum wage for employees in Luxembourg is typically 14.86 EUR per hour, amounting to ~2 570.90 EUR per month for a typical 40 hour work week.

Bonus Payments in Luxembourg

In Luxembourg, it's common to receive a 13th salary. This payment is equal to one month's salary usually given at the end of the year.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 11.88% - 13.68% on top of the employee salary in Luxembourg.

Employee Payroll Tax Contributions

In Luxembourg , the typical estimation for employee payroll contributions cost is around 12.45%.

Individual Income Tax Contributions

Luxembourg's income tax system is intricate. Individual income tax rates range from 8% to 42%, calculated based on progressive rates, marital status, and the number of children an employee has.

Pension in Luxembourg

Employers, employees, and the State contribute 8% each to the general pension insurance scheme. The fund covers old-age pensions, disability pensions, and survivors' pensions. The retirement age is 65.

Mandatory Leave Entitlement in Luxembourg

The annual leave entitlement in Luxembourg is 26 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Luxembourg

Luxembourg has 11 mandatory national holidays in a year.

Paid Time Off in Luxembourg

In Luxembourg, full-time employees receive 26 days of annual leave per year. Eligibility for annual leave starts after three consecutive months of employment, while part-time employees receive a proportionate allocation of vacation days.

Maternity Leave In Luxembourg

Employees are entitled to 20 weeks of paid leave, divided into 8 weeks pre-natal and 12 weeks post-natal periods. During the final three months preceding leave, employees receive 100% of their highest salary, covered by Social Security.

Paternity Leave In Luxembourg

Employees are granted 10 days of paid paternity leave, to be used within 2 months of birth and paid at 100% of salary. The employer pays the paternity leave and is responsible for covering the initial 2 days, but can be reimbursed by Social Security for the subsequent 8 days.

Sick Leave In Luxembourg

Employees in Luxembourg are entitled to unlimited paid sick leave under the following terms:

• Employers provide full salary for the first 77 days of illness.
• If the 77th day falls into the next month, the employer continues payment until the end of the month.
• Beyond 77 days, sick leave is compensated at 100% of the regular salary, up to five times the minimum social salary, paid by Social Security.

Parental Leave In Luxembourg

After maternity or adoption leave, employees can opt for up to 6 months of parental leave. Social Security calculates pay based on the employee's average salary from the last 12 months, with a maximum of 4,284.88 EUR and a minimum of 2,570.93 EUR per month.

Termination Process in Luxembourg

Termination procedures vary based on employment and collective agreements, contract type, and reasons for termination. Employers with over 150 employees must conduct a hearing before dismissal, and those with at least 15 employees must inform the economic committee about dismissals. Valid reasons for termination include:

• Employees aptitude or conduct
• Redundancy
• Closure of business

Notice Period in Luxembourg

If a collective agreement specifies notice periods that differ from statutory ones, both employer and employee must follow the collective agreement's notice periods. The notice duration depends on the length of service.

• Two months' notice for employees with less than five years of service
• Four months' notice for employees five to ten years of service.
• Six months' notice for employees with more than ten years of service.

Severance in Luxembourg

In Luxembourg, employees terminated without proper notice or with over 5 years of service are entitled to severance pay. It equals 30 days of salary per year, capped at 25 months of base compensation.

• No severance pay for employees with less than 5 years of service.
• 1 months salary for employees with less than 10 years of service
• 2 months salary for employees with less than 15 years of service
• 3 months salary for employees with less than 20 years of service
• 6 months salary for employees with less than 25 years of service
• 9 months salary for employees with less than 30 years of service
• 12 months salary for employees with more than 30 years of service.