EOR Service in Luxembourg

Shraddha Saxena

Hire, Onboard and Pay Employees in Luxembourg Quickly and Efficiently

Hiring in Luxembourg at a glance

CURRENCY
Euro (EUR)
working hours
40 hours per week
public/bank holidays
10 Days
capital
Luxembourg City
language
Luxembourgish, French, German
date format
DD/MM/YYYY
remote workers
1.2M
tax year
Jan 1st to Dec 31st
minimum hourly salary
No minimum wage
CURRENCY
Euro (EUR)
public/bank holidays
10 Days
capital
Luxembourg City
language
Luxembourgish, French, German
date format
DD/MM/YYYY
tax year
Jan 1st to Dec 31st
payroll frequency
Monthly
GDP
US $ 86.79 billion (est. 2021)
working hours
40 hours per week

Employer of Record in Luxembourg

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. 

Why use Luxembourg EOR?

A Luxembourg Employer of Record (EOR) allows foreign businesses to simplify the hiring process and navigate the country's stringent employment laws and regulations efficiently. 

Luxembourg has a comprehensive set of laws regarding employment. The Luxembourg employment law is based on the Labour Code, EU regulations, case law, collective bargaining agreements, Grand-Ducal regulations and certain employers’ practices. Hence, one must be familiar with the laws to ensure 100% compliance. 

Gloroots’ Luxembourg EOR can help you with the legal compliance. The legal expert team can navigate through the local laws and generate employment contracts and collective bargaining agreements aligning with the Grand-Ducal regulations. Further, EORs can also handle the employee benefits regulations. For instance, under the Labor Code amendment in 2019, employees have the right to claim their benefits for 78 weeks of sickness. Thus, the employment contract will expire automatically by law after 78 weeks of sickness.

EORs can take the responsibility for compliance with these regulations, reducing risk for foreign employers. It can handle payroll, tax, benefits administration, and regulatory paperwork. This allows businesses to focus on their core operations, accelerate market entry, and rapidly onboard local talent in Luxembourg.

EOR Costs in Luxembourg

Most Luxembourg EOR providers charge a percentage of the employee's gross salary, typically ranging from 5% to 20%. This fee generally covers services such as payroll, tax administration, and compliance with local labor laws. 

The EOR pricing in Luxembourg can vary depending on the number of employees, the complexity of the employment arrangements, and the specific services required. Moreover, additional services, like benefits administration, recruitment, or HR support, may be charged separately. However, note that while EOR fees might seem like an added expense, they can often save companies money in the long run.

Gloroots’ has a fairly transparent pricing model that’s easy-to-understand and provides optimum investment value. We manage admin tasks and legal compliances associated with employment. Also, we offer a live dashboard that helps you track your Luxembourg workforce expenses in real time. It also offers HR support and benefits management to the employees hired through EOR.

Key Metrics For Foreign Employers 

Luxembourg ranks 11th in INSEAD’s Global Talent Competitiveness Report. Bagging top places for ICT infrastructure (ranks 8th globally), people with digital skills (12th) and workforce with tertiary education (ranks 6th), the country proves to be an unignorable talent market for foreign employers. 

The table below depicts key indicators from the Global Talent Competitiveness Report for employers wishing to hire from Luxembourg.

Factors Global Ranking Interpretation
Rule of law 10 Indicates effectiveness of law enforcement
Labour-employer cooperation 8 Indicates positive labor-employee relationships
Reading Maths, and Science 34 Indicates average scores in OECD's survey of 15-year old students
University Ranking 76 Indicates average QS rankings
Labour productivity per employee 2 Indicates total output by the total labor input used to produce that output
Ease of finding skilled employees 118 Indicates findability of skilled talent
Workforce with tertiary education 6 Indicates % of workforce with PG degrees
Digital Skills 12 Indicates prevalence of advanced digital skills in the population

Source: The Global Talent Competitiveness Index 2022

Through the Gloroots’ Recrew platform, you can discover amazing talent in Luxembourg.

Why work in Luxembourg?

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Risks of misclassification

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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Employing in Luxembourg

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

Tax

Income tax

Single taxpayer 

Income Range Tax Rate
Up to 20,000.00 921
20,001 - 38,700 5,317
38,701 - 58,000 13,081
58,001 - 77,400 21,177
77,401 - 96,700 29,231
96,701 - 116,000 37,456
116,001 - 135,500 45,802
135,501 - 155,000 54,242
Over 155,000 76,642

Single taxpayer (Class 1a)

Tax due Salary/Income
0 EUR up to up to 20,000.00 EUR
4,271 EUR between 20,001 EUR and 38,700 EUR
12,325 EUR between 38,701 EUR and 58,000 EUR
20,420 EUR between 58,001 EUR and 77,400 EUR
28,474 EUR between 77,401 EUR and 96,700 EUR
36,699 EUR between 96,701 EUR and 116,000 EUR
45,045 EUR between 116,001 EUR and 135,500 EUR
53,486 EUR between 135,501 EUR and 155,000 EUR
75,885 EUR up to 205,000 EUR

Employee Income Tax (Class 2) for a married taxpayer in Luxembourg

Salary/Income Range (EUR) Tax Due (EUR)
Up to 20,000.00 0
20,001 - 38,700 1,675
38,701 - 58,000 5,113
58,001 - 77,400 10,635
77,401 - 96,700 18,110
96,701 - 116,000 26,164
116,001 - 135,500 34,302
135,501 - 155,000 42,439
Over 155,000 63,357

EMPLOYER PAYROLL CONTRIBUTION

Contribution Category Rate (%) Maximum Monthly Salary (EUR)
Pension 8.00% 11,284.77
Health Insurance 2.80% - 3.05% 11,284.77
Accident at Work 0.68% - 1.13% 11,284.77
Mutual Health Benefit 0.60% - 2.98% 11,284.77
Health at Work 0.14% 11,284.77
Total Employment Cost 12.22% - 15.30% N/A

EMPLOYEE PAYROLL CONTRIBUTION

Contribution Category Rate (%) Maximum Monthly Salary (EUR)
Pension 8.00% 11,284.77
Health Insurance 2.80% - 3.05% 11,284.77
Dependency Contribution 1.40% N/A
Total Employee Cost 12.20% - 12.45% N/A

Separation

Employment Termination and Severance

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:

Period of service Severance pay
< 5 years No pay
5 - 10 years 1 month's severance pay, or the notice period can be extended by five months for employers with less than 20 employees.
10 - 15 years 2 months' severance pay, or the notice period can be extended by eight months for employers with less than 20 employees.
15 - 20 years 3 months' severance pay, or the notice period can be extended by nine months for employers with less than 20 employees.
20-25 years 6 months' severance pay, or the notice period can be extended by 12 months for employers with less than 20 employees.
25 - 30 years 9 months' severance pay or the notice period can be extended by 15 months.
30+ years 12 months' severance pay, or the notice period can be extended by 18 months.

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:

Period of service Notice period
< 5 years 2 months
5 - 10 years 4 months
>10 years 6 months

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.

Start Hiring in Luxembourg today

When hiring globally, ensuring compliance comes with its own set of battles. Employers must ensure all hiring and onboarding activities adhere to employment laws, payroll procedures, DE&I compliance, GDPR and similar data protection, etc. If you think it is hard to set up local entities and start hiring, keeping up with a dynamic compliance landscape is far harder. 

Gloroots helps you minimize all these efforts by providing a single window to manage all these tasks. Our in-house experts fully shield you from cross-border employment and payroll compliance risks. We do this by helping you with generating employment contracts, on-time payments, compliant benefits, while you focus only on screening talent. 

Our promise is a stress-free global employment experience for both you and your employee.

Contact our experts today to kickstart your global hiring campaign.

Grow your team in Luxembourg

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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