Hire in Luxembourg
Luxembourg PEO &
Employer of Record
Hire & manage teams remotely in Luxembourg without a local entity. We handle HR compliance, payroll & taxes so you can focus on your business.
Business Language
English, Luxembourgish
Salary Currency
Euro (EUR)
Payroll tax
12.22% - 15.33%
Payroll Cycle
Monthly
Time zone
UTC +2
Capital city
Luxembourg
Hire Employees in Luxembourg
The NNRoad Advantage ☺
Pay as you go
Global account manager
Compliance
Fast Onboarding
Foreigner Visas
Platform
Employer of Record in Luxembourg
01.
Candidate Selection
02.
Employee Onboarding
03.
Compliance & Payroll
04.
Payroll Reporting
Recruiting process outsourcing – including but not limited to resume screening, shortlisting candidates, coordination for interviews, and assistance for salary negotiation.
Hiring and termination of employees/local labor contracts (contract administration – engagement, extension termination and conversion to permanent hire).
On-boarding and off-boarding employees following labor law practice.
Complete payroll solution and benefit administration
Employee management – employee record retaining, time keeping, bonus and allowance management, expense and claims, and leave employee database management accordingly to the local law.
Mandatory insurance compliance (i.e. pension, labor and health insurance) according to the local labor laws.
Payment management (Invoicing customers/clients and vendor payments).
Work VISA application assistance, if needed.
Local individual income tax reporting.
Payroll & PEO in Luxembourg
01.
Compliance & Payroll
02.
Payroll Reporting
Registering the necessary company and personnel information for payroll calculation in the payroll software and system
Monthly Payroll Processing
Year-End Adjustment and Annual Declaration
Taxes & Payroll in Luxembourg
Employee Income Taxes:
Individual income taxes in Luxembourg are progressive, with rates ranging from 0% to 42%. Taxable income includes wages, salaries, pensions, and other sources of income. Certain deductions and allowances, such as for social security contributions and dependent children, can reduce taxable income.
Non-residents are taxed only on income earned in Luxembourg. Tax returns must be filed annually by March 31st of the following year, with payment due by July 31st. The tax administration in Luxembourg is known for being efficient and taxpayer-friendly, and there are various online tools and resources available to help individuals understand and comply with their tax obligations.
Income tax in Luxembourg is also based on the individual’s personal situation i.e. the family status and a tax class is granted for this purpose as follows:
Class 1- for single person.
Class 1a- for single parent with dependent children and person of age of at least 65 on 1st of January.
Class 2- for married person, widowed taxpayer (for first three years after the death of spouse) civil partners.
Tax Brackets
Sample Calculation
Employer Costs in Luxembourg
Employer Contribution
In Luxembourg, employer contributions play a crucial role in the country’s social security system and support the overall welfare of its workforce. Employers in Luxembourg are required to make contributions towards various social security programs, including health insurance, pension, disability, and unemployment benefits. These contributions are calculated based on a percentage of an employee’s gross salary and are shared between the employer and the employee. The employer’s contributions are an essential component of ensuring comprehensive coverage for employees, providing them with access to high-quality healthcare, retirement benefits, and financial protection in case of illness, disability, or unemployment. By actively participating in the social security system, employers contribute to the well-being and social cohesion of Luxembourg’s labor force, fostering a stable and supportive work environment.
Employee Contribution
Employees also play a significant role in supporting the country’s social security system through their contributions. Employees are required to make regular contributions towards various social security programs, such as health insurance, pension, disability, and unemployment benefits. These contributions are deducted from their gross salary and are typically calculated as a percentage. By making these contributions, employees gain access to a wide range of social benefits and protections, ensuring their well-being and financial security. Employee contributions not only enable individuals to receive high-quality healthcare, retirement benefits, and assistance in times of need but also contribute to the overall sustainability of the social security system. Through their active participation, employees in Luxembourg demonstrate a commitment to collective welfare and the maintenance of a fair and supportive society.
Benefits & Insurance in Luxembourg
Pension Fund
The pension fund, also known as the “Fonds de Pension,” operates as a collective investment scheme where contributions from both employees and employers are accumulated and invested to generate returns over time. These contributions are typically based on a percentage of an employee’s salary and are managed by professional fund managers. The pension fund system in Luxembourg offers a range of investment options, allowing individuals to choose the level of risk and return that aligns with their retirement goals. Upon reaching the eligible retirement age, individuals can access their accumulated pension funds to provide them with a stable income stream during their retirement years. The pension fund system in Luxembourg aims to ensure that individuals can maintain their standard of living and enjoy financial independence in their golden years, contributing to the overall well-being and welfare of the country’s aging population.
Healthcare Insurance
The healthcare insurance system in Luxembourg is based on a mandatory health insurance scheme, known as the “Caisse Nationale de Santé” (CNS). Under this system, individuals are required to contribute a percentage of their income towards healthcare insurance, which is shared between the employee and the employer. The contributions are used to fund a comprehensive range of healthcare services, including doctor visits, hospital stays, medications, and specialized treatments. Luxembourg residents are entitled to choose their own healthcare provider, and the CNS reimburses a significant portion of the healthcare expenses. Additionally, supplementary healthcare insurance can be obtained to cover additional medical expenses not fully reimbursed by the CNS.
Working Hours in Luxembourg
Working Hours Per Week
Working hours and overtime in Luxembourg are governed by legislation, with a standard workweek set at 40 hours. However, various collective labor agreements establish shorter working hours in certain industries, and specific regulations may apply to different sectors. Overtime work is generally limited to a maximum of 10 hours per week or 48 hours per month, and employees are entitled to receive additional compensation for such work.
According to the Labor Code of Luxembourg, the rate of overtime pay varies based on the day and time of the work, with higher rates applicable for work performed on Sundays and public holidays. Employers are obliged to maintain records of employees’ working hours and overtime, and employees have the right to access and review these records through the Luxembourg Collective Agreement Database (CCTs). Additionally, employers must ensure that employees receive adequate rest periods and breaks during the workday, and individuals may be eligible for extra time off for work conducted outside normal working hours.
In Luxembourg, an employee is legally permitted to work up to 8 hours per day for a full-time job and a maximum of 40 hours per week according to the European Commission – Employment, Social Affairs & Inclusion. The law stipulates that the daily working time must not exceed 10 hours, nor should the weekly working time surpass 48 hours. These regulations aim to safeguard employee well-being and promote a healthy work-life balance.
Overtime
Overtime regulations in Luxembourg are governed by labor laws and collective agreements, which aim to protect the rights and well-being of employees. The maximum number of overtime hours allowed per week is generally limited to 10 hours, with a maximum of 48 hours in any given week, including regular working hours. Overtime hours are typically compensated at a higher rate, often as a percentage above the regular hourly wage. However, it’s important to note that certain categories of employees may be exempted from these limitations due to the nature of their job or specific industry requirements. The regulations around overtime in Luxembourg are designed to ensure that employees are fairly compensated for their additional work and to promote a healthy work-life balance. Employers are encouraged to manage overtime effectively and consider the well-being of their employees while meeting business demands.
Termination Laws in Luxembourg
Severance
Severance refers to the compensation provided to employees upon termination of their employment contracts, either due to redundancy, mutual agreement, or other reasons stipulated by labor laws. Severance payments in Luxembourg are intended to mitigate the financial impact on employees and help them transition to new employment opportunities. The specific rules governing severance payments vary depending on factors such as the length of service, the reason for termination, and the terms of the employment contract. Generally, employees with longer service periods are entitled to higher severance payments. Additionally, severance payments may be subject to tax and social security contributions. The purpose of severance in Luxembourg is to provide financial support and security for employees during their job search or period of unemployment, ensuring a level of protection and assistance during times of employment termination.
Notice Period
Notice periods are set by law and may vary depending on the duration of the employment and the specific circumstances of termination. For employees, the notice period generally ranges from one to three months, depending on their length of service. Likewise, employers are required to provide notice to employees before terminating their contracts, with the length of notice depending on the employee’s length of service. The purpose of the notice period in Luxembourg is to provide a reasonable transition period for both parties involved in the employment relationship. It allows employees to seek new job opportunities and make necessary arrangements, while also giving employers time to prepare for the departure of the employee. The notice period helps ensure a fair and orderly termination process, promoting transparency and stability in the labor market.
Employment Contract in Luxembourg
Employment Contract
Employment contracts in Luxembourg can be either written or verbal, although a written contract is strongly recommended to ensure clarity and legal protection for both parties. The contract typically includes important details such as job title, duties and responsibilities, working hours, duration of employment, compensation, leave entitlements, and termination procedures. Luxembourg’s labor laws provide certain rights and protections to employees, such as minimum wage, maximum working hours, and annual leave. The terms and conditions of employment contracts must comply with these legal requirements. Additionally, specific regulations may apply to different sectors or categories of employees.
Probation Period
In Luxembourg, probation periods, known as “période d’essai,” are commonly included in employment contracts to allow employers to assess an employee’s suitability for a position during the initial stages of employment. The duration of a probation period in Luxembourg varies depending on the type of employment and is typically agreed upon between the employer and the employee. For indefinite-term contracts, the probation period can range from one to six months. During this period, both the employer and the employee have the right to terminate the employment contract with shorter notice periods or no notice at all. However, it is important to note that termination during the probation period must not be based on discriminatory grounds or in violation of labor laws.
Types of Leaves in Luxembourg
Annual Leave
In Luxembourg, annual leave, also known as “congé annuel,” is an important benefit provided to employees to ensure a healthy work-life balance and rest and recreation. The annual leave entitlement in Luxembourg is governed by labor laws, and it varies depending on the length of service and the employee’s age. Generally, employees are entitled to a minimum of 25 working days of annual leave per year. However, this entitlement increases with the employee’s age and length of service, reaching a maximum of 26 or 27 working days. It is important to note that public holidays that fall on working days are not counted as part of the annual leave entitlement. Employees are encouraged to take their annual leave within the calendar year, although carry-over of a limited number of unused days may be allowed under certain circumstances.
Sick Leave
In Luxembourg, sick leave, referred to as “congé pour maladie,” is an important provision that supports employees during periods of illness or incapacity to work due to medical reasons. When an employee falls ill, they are required to notify their employer as soon as possible, providing a medical certificate from a doctor to substantiate the need for sick leave. The duration of sick leave entitlement in Luxembourg depends on the length of service and is typically as follows: for the first three months of employment, there is no sick leave entitlement; from the fourth to the 77th month of employment, an employee is entitled to 77 days of full pay followed by 9 days at 80% of the salary; and beyond the 77th month, an employee is entitled to 154 days of full pay and 18 days at 80% of the salary. Sick leave is designed to provide financial support and job protection to employees during their recovery period. Employers are required to respect the privacy and confidentiality of an employee’s medical information, and employees are expected to provide regular updates on their condition during their sick leave.
Maternity Leave
In Luxembourg, maternity leave, known as “congé de maternité,” is a crucial benefit provided to female employees to support them during pregnancy, childbirth, and the early stages of motherhood. Maternity leave in Luxembourg is regulated by labor laws and provides female employees with the right to take time off from work before and after giving birth. The duration of maternity leave varies based on the number of children being born and whether it is a single birth or a multiple birth. Generally, women are entitled to 16 weeks of maternity leave for a single birth and 20 weeks for multiple births. Maternity leave can commence up to 8 weeks before the expected due date. During this period, female employees are eligible for a maternity allowance, which is paid by the National Health Fund (Caisse Nationale de Santé).
Paternity Leave
In Luxembourg, paternity leave, also known as “congé de paternité,” is an important benefit provided to fathers to support their involvement and bonding with their newborn child. Paternity leave in Luxembourg is regulated by labor laws and allows fathers to take time off from work following the birth or adoption of a child. The duration of paternity leave in Luxembourg is typically two weeks, during which fathers can be by their partner’s side, assist with the care of the newborn, and adjust to their new family dynamic. Paternity leave can be taken immediately after the birth or adoption or within a certain period agreed upon by the employer and the employee. During paternity leave, fathers may be entitled to receive a paternity allowance, which is paid by the National Health Fund (Caisse Nationale de Santé).
Public Holidays in Luxembourg
Public Holidays
Luxembourg celebrates a number of public holidays throughout the year, which hold cultural, historical, or religious significance. Some of the main public holidays in Luxembourg include: