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Employer of Record (EOR) services in Luxembourg enables an overseas company to employ staff within the country. The EOR acts as the primary employer on behalf of the client company and handles all local employment tasks such as payroll, taxes, and compliance with local labor laws, effectively removing the administrative burden from the client company. This is particularly useful for companies without a legal entity in Luxembourg or those looking to expand into the country without incurring the costs of setting up their own infrastructure. The EOR also manages employment contracts, benefits, and termination procedures, ensuring everything is compliant with Luxembourg's strict labor regulations. By collaborating with EOR services, companies can focus on their core operations while mitigating legal risks. 

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Establishing a successful team in Luxembourg involves hiring the right talent at the right time and ensuring compliance with local employment regulations. Navigating the complexities of labor laws, payroll, tax, and benefits management can be challenging for companies expanding into Luxembourg. However, with Gloroots' comprehensive global Employer of Record (EoR) service, you can streamline these processes and concentrate on nurturing your team and business growth. Gloroots takes care of payroll, tax compliance, benefits administration, and other administrative tasks, ensuring a smooth expansion into the Luxembourg market and supporting you in building a strong and thriving team in this strategic European hub. With Gloroots as your trusted partner, you can confidently navigate the intricacies of the Luxembourg business landscape, empowering your team to flourish and succeed in this dynamic and promising location.

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Misclassification of employees in Luxembourg can pose significant legal and financial risks for employers. Incorrectly categorizing workers as independent contractors or exempting them from certain employment regulations may lead to legal disputes, fines, and potential lawsuits. Such misclassification can result in the denial of essential rights and benefits to employees, including social security, paid leave, and protection under labor laws.

To mitigate these risks, companies can partner with a reputable PEO/EOR in Luxembourg. By leveraging the expertise of these professionals, employers can ensure accurate employee classification, proper payroll processing, and adherence to Luxembourg's labor laws and regulations. The PEO/EOR takes on the responsibility of managing employment-related tasks, enabling businesses to focus on their core objectives with confidence in their workforce's legal compliance and the safeguarding of employees' rights and benefits. Working with a trusted PEO/EOR in Luxembourg ensures a smooth and compliant employment experience, reducing the risks associated with misclassification.

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Employment Contract

In Luxembourg, employment contracts are typically established for an indefinite duration. Fixed-term contracts are allowed but subject to strict regulations under the Luxembourg Labor Code. Both fixed-term and indefinite contracts require a written form. The language of the contract is not specified, as long as it is comprehensible to both parties.

Contracts must include essential information about the employment relationship, covering:

•  Identification of both parties
•  Commencement date
•  Workplace
• Job description and responsibilities
• Basic salary and other compensation, payment terms
•  Working hours and schedule
•  Total holidays
•  Notice periods for termination
•  Probation period
•  Mention of additional agreed clauses
•  Reference to applicable collective bargaining agreements

This might sound overwhelming, but it doesn’t have to be. A solution like Gloroots eliminates the barriers for you. With Gloroots’ Employer of Record offering, hiring and managing employees globally is a piece of cake.

Working time

In Luxembourg, the regular working week comprises 8 hours per day, totaling 40 hours per week.

Overtime

Any working hours exceeding the standard weekly hours are classified as overtime and subject to regulations set forth in employment contracts or collective agreements. Before commencing any overtime work, mutual agreement between the employee and employer must be reached and reported to labor authorities.

In general, overtime is limited to a maximum of 2 hours per day and 8 hours per week. Overtime hours are compensated at 150% of the regular salary rate. Working on Sundays is generally prohibited, except for specific situations or particular sectors, in which case additional compensation is required to be paid.

Public Holidays

There are 11 public holidays. If a holiday falls on a weekend, employees must receive a replacement day off within three months.

Payroll cycle

In Luxembourg, payroll is typically processed on a monthly basis, although some companies may choose to pay their employees weekly. Wages for work performed between the first and last day of the month or week are usually disbursed on the last day of the respective period.

Minimum Wage

Sick Pay

The maximum duration of paid sick leave is 26 weeks. Employers provide full salary payment up to the 77th day of sickness leave within a 12-month consecutive period, whether the days are consecutive or not. The employers' mutual scheme insurance reimburses 80% of this pay. After the 77th day, Social Security covers the further sick leave expenses.

Maternity and paternity leave

Maternity leave starts 8 weeks before the anticipated birth date, verified by a recent medical note. Should the baby arrive earlier than this date, any unused pre-birth leave gets added to the post-birth leave period. Nonetheless, the combined leave cannot surpass 20 weeks. If the baby is born after the expected date, the pre-birth leave gets extended up to the birth date, but this won't shorten the 12-week post-birth leave, which still follows the actual birth date.

Annual leave

Employees receive 26 working days of annual leave each year, irrespective of their age. While this is the standard, both collective and individual agreements between the employer and employee can potentially increase the leave duration. Disabled war veterans, individuals affected by occupational accidents, and employees with disabilities are eligible for an extra 6 working days of leave per year, provided specific criteria are met.

Income tax

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Employer Payroll Contribution

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Employee Payroll Contribution

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‍Termination 

The termination process in Luxembourg varies depending on the type of employment agreement and collective agreement in place, as well as the reason for termination. For companies with more than 150 employees, a hearing must be conducted before dismissing an employee. Similarly, for companies with at least 15 employees, the employer is required to inform the economic committee about the dismissal. 

Severance

Collective agreements may include provisions regarding the amount and calculation of severance pay. If the severance pay process specified in the collective agreement differs, both the employer and the employee must adhere to the process outlined in the collective agreement. 

The amount of severance pay is determined based on the length of employment:

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Notice Period

Collective agreements may include provisions regarding notice periods. If the notice periods specified in the collective agreement differ from the statutory notice periods, both the employer and the employee must adhere to the notice periods outlined in the collective agreement.

According to labor laws, the length of the notice period depends on the employee's length of service:

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The notice period begins on the 15th of the month if the dismissal letter is given on or before the 1st of the month. If the dismissal letter is issued between the 15th and the last day of the month, the notice period begins on the 1st day of the following month.

Employers also have the option to make a payment in lieu of notice.

Probation Period

In Luxembourg, the probation period, which is the initial period of evaluation for new employees, has a minimum duration of two weeks. The length of the probation period is generally based on the employee's salary and qualification status:

•  For employees earning a monthly salary of at least 4,586.12 EUR, the maximum probation period is one year.
•  If the employee possesses a vocational skills certificate or an equivalent qualification, the maximum probation period is six months.
•  If the employee does not have a vocational skills certificate or equivalent, the maximum probation period is three months.