Hire employees in Luxembourg

A strong, well-developed economy and a highly skilled, multilingual workforce are just some of the characteristics that make Luxembourg a popular hiring destination for international organizations. Boasting the world’s largest GDP per capita rate, Luxembourg is a wealthy country, which shows in the country’s high wage levels.

Employment contracts in Luxembourg are generally concluded for an indefinite term. Fixed-term contracts are possible, but are heavily regulated by the Luxembourg Labor Code. For fixed-term contracts, a written form is required. Indefinite contracts should also be concluded in writing. There are no specific requirements as to what language the contract must be in, as long as the information provided is understood by both parties.

Contracts must generally provide the employee with the basic information about the employment relationship, including:

• Identification of both parties

• Date of commencement

• Workplace

• Job description, duties and responsibilities

• Basic salary as well as other compensation or benefits, and terms of payment

• Working hours and schedule

• Total number of holidays

• Notice periods for employment termination

• Probation period

• Reference to additional clauses as agreed by the two parties

• Reference to applying collective bargaining agreements

Probation Period

Probation periods are permitted, but must be included in the individual employment contract. Trial periods generally last between 2 weeks and 6 months. However, certain limits apply depending on skill and salary level. For instance, probationary periods for unskilled workers can only last for 3 months. For employees earning more than 5 times the minimum wage, on the other hand, trial periods can be as long as 12 months.

Working Hours and Breaks

A standard workweek in Luxembourg is 40 hours, divided into 5 workdays with 8 hours each. Employees must have a weekly rest period of at least 44 hours, and a daily rest period of not less than 11 hours. Sundays are normally rest days.

Overtime

Overtime is limited to 2 hours per day and 8 hours per week and must be declared to the labor authorities. Employees who work overtime must be paid at a rate of 150% of their normal wages. Work on public holidays must be paid at triple rates.

It is common to pay employees once a month. Payments are usually made at the end of the month.

Minimum Wage

Luxembourg’s national minimum wage currently (February 2023) stands at EUR 2,387.40 gross per month for unskilled workers over 18 and at EUR 2,864.88 gross per month for skilled workers over 18.

Sick Pay

Employees who are sick and unable to work are required to inform their employer about their condition from the very first day of absence. During the first 77 days of absence, sick pay is covered by the employer, who is then reimbursed for 80% by Social Security. Any additional sick days are directly and entirely paid by Social Security.

Statutory sick pay is provided for up to 78 weeks (within a 104-week period). During the first 26 weeks of sick leave, employees are protected from dismissal.

If the sickness-related absence lasts for more than 2 days, employees must provide a medical certificate no later than on the 3rd day of absence.

Bonuses

It is customary, although not legally required, to pay employees a 13th month salary. This annual bonus is usually paid out at the end of the year and should equal at least one month’s salary.

Employees and employers in Luxembourg are subject to the following tax and social security contribution rates (last review February 2023):

Taxes

Employers

17%

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• 17% corporate tax rate (plus unemployment fund contribution and municipal business tax)

• 17% VAT (reduced rate of 16% applies throughout FY 2023)

Employees

up to 42%

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Individual income tax rates on employment income range from 0% to 42%.*

Social security

Employers

up to 15% **

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• 3.05% health insurance

• 8% pension insurance

• around 0.75 accident insurance

• 0.14% health at work contribution

• 0.6% - 2.98% "mutualité" insurance

Employees

12.45% **

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• 3.05% health insurance

• 8% pension insurance

• 1.4% dependency contribution

In addition, employees pay a 7% unemployment fund contribution (9% for employees with high income).

Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).

Annual Leave

Employees in Luxembourg are entitled to at least 26 paid days off per year. An employee’s annual leave entitlement may be higher due to a collective bargaining agreement. Luxembourg observes 11 public holidays.

Maternity Leave and Paternity Leave

Pregnant employees can take 20 weeks of maternity leave, starting up to 8 weeks before the expected due date. Maternity leave is paid by Social Security. However, payments are capped at 5 times the minimum wage.

Fathers have the right to take 10 days of paternity leave, which can be used freely during the first 2 months after the child’s birth. Employees must request this leave from their employer 2 months before the expected date of birth. Paternity leave is fully paid by the employer.

Parental Leave

Parental leave in Luxembourg is quite flexible. Parents can either go on full-time leave or reduce their working hours for the parental leave period while benefiting from a substitute income in the form of an allowance paid by the Children’s Future Fund.

The length of the parental leave depends on the chosen leave model. Employees can either take between 4 and 6 months of full-time leave, or go on part-time leave for 8 to 12 months. Parental leave for full-time employees can also be split into 4 leave periods of 1 month each, spread over the course of 20 months. A reduction of working hours by 20% during a 20-month period is also possible.

Both parents are allowed to go on parental leave at the same time if they wish. Parental leave can be taken until the child is 6 years old. To be eligible for parental leave, parents must work at least 10 hours per week.

Additional Leave and Benefits

In addition to the leave entitlements described above, special leave must be granted in case of marriage, death or birth, as well as for other family reasons. Employees are further entitled to a total of 80 days of career development leave.

2022 further saw the introduction of so-called cultural leave which can be granted to employees under certain conditions. Its duration is dependent on the position and category the employee falls under.

Additional leave for relatives includes:

• 1 day per year in the event of force majeure linked to urgent family reasons

• 5 days per year to provide personal care or assistance to a family member

Fixed-term contracts end automatically at the end of the agreed term. Open-ended contracts can be terminated by both parties individually or in mutual agreement. However, employers who want to terminate an employee must give a valid reason, such as the employee’s aptitude or conduct, or business needs (i.e. redundancy, closure of business etc.).

The length of the notice period depends on the employee’s seniority:

• Less than 5 years of service: 2 months’ notice

• Between 5 and 10 years of service: 4 months’ notice

• More than 10 years of service: 6 months’ notice

It should be noted that notice can only be given on the 1st or the 15th of the month. Shorter notice periods apply during the employee’s probation period. Employees on a probation period cannot be terminated during the first two weeks of employment, except for gross misconduct. In case of gross misconduct, an employer can dismiss an employee with immediate effect.

Unless the employment is terminated due to gross misconduct, employees are entitled to severance pay. The amount of severance pay depends on the employee’s length of service.

• Less than 5 years of service: no severance pay

• Less than 10 years of service: 1 month’s salary

• Less than 15 years of service: 2 months’ salary

• Less than 20 years of service: 3 months’ salary

• Less than 25 years of service: 6 months’ salary

• Less than 30 years of service: 9 months’ salary

• More than 30 years of service: 12 months’ salary

Employers with less than 20 employees can decide to extend the employee’s notice period instead of paying severance pay.

There are certain groups of employees that are protected from dismissal. These groups include pregnant employees, employees on special leave (e.g. maternity leave) and employees on sick leave.