Overview
Payroll Cycle
Employer Contributions
Employee Contributions
Minimum Wage
Hiring
Hiring Employees
Hiring Contractors
Hiring Expats
Background Checks
Employment Contracts
Onboarding
Employee Benefits
Social Security
Healthcare and Insurance
Leave Policy
Public Holidays
Work Permit and Work Visa
Probation Period
Notice Period
Termination and Severance
Personal Income Tax
An employer of record in Luxembourg takes on the responsibility of managing crucial elements of employment, including the payroll cycle, employer and employee contributions, compliance with minimum wage regulations, comprehensive hiring procedures for employees, contractors, and expatriates, thorough background checks, drafting and administering employment contracts, seamless onboarding processes, provision of employee benefits, adherence to social security regulations, facilitation of healthcare and insurance coverage, implementation of leave policies, observance of public holidays, navigation of work permit and work visa requirements, supervision of probation periods, adherence to notice period guidelines, execution of termination and severance procedures, and compliance with personal income tax obligations.
| Overview | |
| Continent | Europe |
| Country | Luxembourg |
| Capital | Luxembourg City |
| Time zone | UTC+01:00 (CET) |
| Total Time zones | 1 |
| Personal Tax filing deadline | 31st Mar |
| Financial Year | Jan 1st to 31st Dec |
| Currency | Euro (EUR) |
| Date Format | dd/mm/yyyy |
| Fiscal Year | 1 January- 31 December |
| Payroll | |
| Payroll Cycle | Monthly. salaries are paid over the end of the week or month |
| 13th Month Salary | Yes. paid at the end of the year. employers also pay an additional half month's salary along with one month's salary. |
Employer Payroll Contributions in Luxembourg
| Employers | % of Gross Salary |
| Employer Payroll Contributions | |
| Pension | 8% (capped at 11,284.77 EUR per month) |
| Health Insurance | 2.80% to 3.05% (capped at 11,284.77 EUR per month) |
| Accident at Work | 0.68% to 1.13% (capped at 11,284.77 EUR per month) |
| Mutual Health Benefit | 0.60% to 2.98% (capped at 11,284.77 EUR per month) |
| Health at Work | 0.14% (capped at 11,284.77 EUR per month) |
| Total Employment Cost | 12.22% to 15.30% |
Employee Payroll Contributions in Luxembourg
| Employees | % of Gross Salary |
| Employee Payroll Contributions | |
| Pension | 8% (capped at 11,284.77 EUR per month) |
| Health Insurance | 2.80% to 3.05% |
| Dependency Contribution | 0.014 |
| Total Employee Cost | 12.20% to 12.45% |
Personal Income Tax in Luxembourg - Class 1
| Single taxpayer (Class 1) | |
| Salary/Income | Taxes |
| up to 20,000.00 EUR | 921 EUR |
| 20,001 EUR to 38,700 EUR | 5,317 EUR |
| 38,701 EUR to 58,000 EUR | 13,081 EUR |
| 58,001 EUR to 77,400 EUR | 21,177 EUR |
| 77,401 EUR to 96,700 EUR | 29,231 EUR |
| 96,701 EUR to 116,000 EUR | 37,456 EUR |
| 116,001 EUR to 135,500 EUR | 45,802 EUR |
| 135,501 EUR to 155,000 EUR | 54,242 EUR |
| up to 205,000 EUR | 76,642 EUR |
Personal Income Tax in Luxembourg - Class 1a
| Single taxpayer (Class 1a) | |
| Salary/Income | Taxes |
| up to 20,000.00 EUR | 0 EUR |
| 20,001 EUR to 38,700 EUR | 4,271 EUR |
| 38,701 EUR to 58,000 EUR | 12,325 EUR |
| 58,001 EUR to 77,400 EUR | 20,420 EUR |
| 77,401 EUR to 96,700 EU | 28,474 EUR |
| 96,701 EUR to 116,000 EUR | 36,699 EUR |
| 116,001 EUR to 135,500 EUR | 45,045 EUR |
| 135,501 EUR to 155,000 EUR | 53,486 EUR |
| up to 205,000 EUR | 75,885 EUR |
Personal Income Tax in Luxembourg - Class 2
| Married taxpayer (Class 2) | |
| Salary/Income | Taxes |
| up to 20,000.00 EUR | 0 EUR |
| 20,001 EUR to 38,700 EUR | 1,675 EUR |
| 38,701 EUR to 58,000 EUR | 5,113 EUR |
| 58,001 EUR to 77,400 EUR | 10,635 EUR |
| 77,401 EUR to 96,700 EUR | 18,110 EUR |
| 96,701 EUR to 116,000 EUR | 26,164 EUR |
| 116,001 EUR to 135,500 EUR | 34,302 EUR |
| 135,501 EUR to 155,000 EUR | 42,439 EUR |
| up to 205,000 EUR | 63,357 EUR |
Minimum Wages in Luxembourg
| Minimum Wage | |
| Age | Minimum Wage |
| 18-year-old skilled employees | 2,776.05 EUR |
| 18-year-old unskilled employees | 2,313.38EUR |
Employee Benefits
Social Security
Luxembourg has a unified social security system governed by the law of 13 May 2008. The system comprises the Caisse Nationale de Santé (CNS) for healthcare and the Caisse Nationale d'Assurance Pension (CNAP) for pension insurance. The Centre Commun de la Sécurité Sociale (CCSS) is responsible for data processing, membership records, and contributions. The social security contributions apply to compensation and earnings up to five times the minimum reference social wage. Both employees and employers contribute to social security, with rates around 3.05% for sickness and maternity leave and 8% for retirement.
Healthcare and Insurance
The healthcare insurance system in Luxembourg covers the reimbursement of medical costs, compensation for sick leave, maternity leave, adoption leave, family-related leave, and dependence. The pension insurance provides statutory pensions to members and offers loans for construction or renovation. Invalidity pensions are also available under Luxembourg law. Employer contributions finance accident insurance.
Required Leave
Holidays and Annual Leave
Employees in Luxembourg are entitled to a minimum of 26 days of paid leave per year, as per the law of 25 April 2019 (which added one day). Some Collective Bargaining Agreements (CBAs), such as those in the banking and insurance sectors, may provide for additional holidays. To be eligible for paid leave, employees must have worked continuously with the same employer for at least three months. Paid leave should be taken within the calendar year it applies to but can be postponed until the following year in exceptional cases, with the condition that it must be taken before 31 March. When a public holiday falls on a non-working day, it is replaced by a compensatory day off within three months. The Labour Code also grants extraordinary leave for family reasons and specified events. Luxembourg has 11 statutory public holidays, including New Year's Day, Labour Day, and Christmas Day.
Maternity and Parental Leave
Maternity benefits are provided during antenatal and postnatal leave. The benefits amount to the highest salary received in the three months preceding maternity leave for employees or the contribution base in force at the time of maternity leave for self-employed workers. Maternity benefits must fall within 1 to 5 times the social minimum wage maximum. Parental leave is available to parents of children under six years old, allowing them to take a break from their professional career or reduce their work hours to focus on their child's education. Parental leave was reformed by a law in November 2016, introducing changes to its duration and the option of divisible parental leave for full-time workers. The reform also introduced a replacement income, providing a real salary compensation during parental leave, with a maximum limit of €3,200.
Sickness and Disability Leave
Employees in Luxembourg are entitled to statutory sickness pay if they are absent from work due to illness. The employee must notify the employer on the first day of absence and provide a medical certificate no later than the third day of absence. Statutory sickness pay is available for up to 78 weeks within a reference period of 104 weeks starting from January 1, 2019 . During sickness leave, the employer continues to pay the employee's salary and is reimbursed 80% of the costs by the Luxembourg Mutual Insurance Scheme. After 77 days of absence, the employee is paid directly by the Social Security authorities. Payment of Social Security premiums is mandatory to finance statutory sickness pay. Employees on sickness leave are protected against dismissal for the first 26 consecutive weeks of absence. If an employee remains unable to work after the statutory sickness pay period, they may apply for an invalidity pension. As of January 1, 2019, the employment contract ceases after 78 weeks of absence due to illness, compared to the previous 52-week period.
Pensions
The normal old age pension in Luxembourg is typically granted at the age of 65, provided the individual has completed a 120-month contributory period of compulsory, voluntary, or elective insurance or purchase periods. However, there are exceptions to the minimum retirement age, allowing workers to retire at the age of 57 or 60 under certain conditions.
Western Europe: EOR Belgium | EOR France | EOR Ireland | EOR Luxembourg | EOR Netherlands