Luxembourg
Luxembourg has had a fascinating history since its establishment in 963 AD. It has changed hands at least four times, produced four Holy Roman Emperors, and ruled over a large portion of what is now Germany.
Today, Luxembourg has a mature economy with the greatest GDP per capita in the world, the 23rd highest human development index, extremely low levels of inequality, and broad press and civil liberties.
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Why work in
Luxembourg
?
The fact that Luxembourg possesses a robust, well-developed economy as well as a workforce that is highly qualified and bilingual are only two of the features that contribute to the country's status as a favoured employment destination for international organisations. The high pay levels in Luxembourg are a reflection of the nation's overall affluence, which is shown in the fact that Luxembourg has the highest GDP per capita rate in the world.
Through the Gloroots’ Recrew platform, you can discover amazing talent in Luxembourg.
Grow your team in
Luxembourg
Growing a team means hiring the right employees at the right time and for the appropriate positions. Employers in the United States must have a local legal organization and use local resources to handle compliance, payroll, tax, and benefits management. The complexity of employment regulations in the United States makes compliance with employment laws demanding.
With Gloroots’s global Employer of Record (EoR) service, you can let Gloroots do the heavy lifting of payroll, tax, benefits, and compliance and concentrate on what matters to you most: your employees and company growth.
Risks of misclassification
Luxembourg treats contractors, sole proprietors, self-employed individuals, and full-time workers differently, with significant risks associated with misclassification.
Employing in
Luxembourg
The Labor Code of 2006 and a number of other European and international treaties to which Luxembourg is a party govern labour relations in Luxembourg.
Over 487,000 employees in Luxembourg are protected from discrimination on the grounds of age, religion, sexual orientation, gender identity, and race.
In Luxembourg, employment agreements are typically made for an extended period of time. Although allowed, fixed-term contracts are subject to strict regulation under the Luxembourg Labor Code. A formal form is necessary for contracts with fixed terms. Contracts that last indefinitely should also be made in writing. No particular language must be used in the contract, as long as both parties can understand the information presented. In principle, contracts must give employees the fundamental details of their job relationship.
It’s important for employers to understand the intricacies of these programs before making a hire.
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.
Get an overview of what you need to know when hiring in Luxembourg.
Legal aspects of employing in
Luxembourg
Working hours
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Payroll
Payroll Cycle:
It is usual practise to pay employees monthly. Typically, payments are made at the end of the month.
Minimum Wage:
- As of June 2022, the national minimum wage in Luxembourg is EUR 2,256.95 per month for unskilled workers over the age of 18 and EUR 2,735 per month for skilled workers over the age of 18.
Sick Pay:
Employees who are sick and unable to work are expected to notify their employer on the very first day of their absence. During the first 77 days of absence, the employer pays for sick pay and is reimbursed 80% by Social Security. Social Security pays directly and in full for any additional sick days.
Statutory sick pay is available for a maximum of 78 weeks (within a 104-week period). During the initial 26 weeks of sick leave, an employee is protected from termination.
If an employee is absent due to illness for more than two days, they must present a medical certificate no later than the third day of absence.
Tax
Tax and Social security contribution:
Employer Tax :
- 17% corporate tax rate (15% on income below EUR 175,000)
- 17% VAT (standard rate)
Social Security :
Employer contributions to social security can go up to 15%, comprising:
- 3.05% health insurance
- 8% pension insurance
- around 0.9% accident insurance
- 0.14% health at work contribution
- 0.46% to 2.95% mutual insurance scheme
Employee Tax :
Individual income is taxed progressively based on the following tax brackets:
- Up to EUR 11,265: 0%
– EUR 11,265 – EUR 13,137: 8%
– EUR 13,137 – EUR 15,009: 9%
– EUR 15,009 – EUR 16,881: 10%
– EUR 16,881 – EUR 18,753: 11%
– EUR 18,753 – EUR 20,652: 12%
– EUR 20,652 – EUR 22,569: 14%
– EUR 22,569 – EUR 24,513: 16%
– EUR 24,513 – EUR 26,457: 18%
– EUR 26,457 – EUR 28,401: 20%
– EUR 28,401 – EUR 30,345: 22%
– EUR 30,345 – EUR 32,289: 24%
– EUR 32,289 – EUR 34,233: 26%
– EUR 34,233 – EUR 36,177: 28%
– EUR 36,177 – EUR 38,121: 30%
– EUR 38,121 – EUR 40,065: 32%
– EUR 40,065 – EUR 42,009: 34%
– EUR 42,009 – EUR 43,953: 36%
– EUR 43,953 – EUR 45,897: 38%
– EUR 45,897 – EUR 100,002: 39%
– EUR 100,002 – EUR 150,000: 40%
– EUR 150,000 – EUR 200,004: 41%
– Above EUR 200,004: 42%
Luxembourg has three different tax classes (Class 1 for single taxpayers, Class 2 for married taxpayers and Class 1a for single taxpayers with children).
Social Security :
Employee contributions to social security amount to 12.45%, comprising:
- 3.05% health insurance
- 8% pension insurance
- 1.4% dependency contribution
- In addition, employees pay a 7% unemployment fund contribution (9% for employees earning more than EUR 150,000 in Class 1 or more than EUR 300,000 in Class 2).
Separation
Notice Period:
In Luxembourg, the obligatory notice period also varies on the term of employment:
- Less than five years on the job: two months' notice
- 5-10 years of service: four months' notice
- Ten or more years: six months' notice
Probation period:
Probationary periods are acceptable, but they need to be included in the specific job contract. Typically, trials last between two weeks and six months. However, there are restrictions based on level of expertise and pay. For instance, unskilled workers are only permitted to serve a three-month probationary period. On the other hand, trial periods for workers making more than 5 times the minimum wage can last up to 12 months.
Employment Termination and Severance:
Fixed-term contracts expire at the end of the agreed-upon duration. Open-ended contracts can be dissolved by either party alone or by mutual consent. Employers who want to fire an employee, on the other hand, must provide a valid reason, such as the person's ability or conduct, or business reasons (i.e. redundancy, closure of business etc.).
Employees are entitled to severance pay unless their job is terminated due to gross misconduct. The amount of severance pay is determined by the length of service of the employee.
There will be no severance pay if you have less than 5 years of service.
1 month's salary for less than 10 years of service
2 months' salary for less than 15 years of service
3 months' salary for less than 20 years of service
6 months' salary for less than 25 years of service
9 months' salary for less than 30 years of service
More than 30 years of service: one year's pay
Employers with fewer than 20 employees may choose to prolong an employee's notice period rather than pay severance pay.
Certain categories of employees are exempt from firing. Pregnant employees, employees on special leave (such as maternity leave), and employees on sick leave are among these groups.
