Employment Law

Employment Contracts in Luxembourg

We strongly recommend that a formal employment contract be provided when hiring any employee in Luxembourg. English is widely spoken, but contracts should be in one of the official local languages ​​(Luxembourgish, German and French) and in the local currency, the euro. The contract should also include any relevant information about the agreement, such as salary/wages, working hours, sick leave entitlements, etc.

Working with our Luxembourg PEO, Remoly's team of local experts can provide assistance in drafting strong employment contracts that comply with local regulations.

Fixed Term

Indefinite

Working Hours in Luxembourg

The maximum normal working week in Luxembourg is 40 hours. In addition to this, workers’ overtime pay must be at least 140% of their regular wages. These restrictions do not apply to employees in certain positions, such as senior managers.

Holiday Policy

Vacation in Luxembourg

In Luxembourg, employees who have worked for the same employer for at least three months are entitled to at least 25 days of paid leave. If it cannot be used in the current year, it can be extended to the end of March of the following year.

Luxembourg Sick Leave

Employees who are unable to work due to illness must provide a medical certificate on the third day of absence. The employee will then not be laid off for the next 26 weeks. Workers are also entitled to full wages and benefits for three months after the month of illness. In addition to this, part of the employee's compensation is borne by the state and the employer must make up the difference to equal the normal wage. This condition can persist up to a year after the disease begins.

Parental Leave in Luxembourg

Female employees in Luxembourg are entitled to 16 to 20 weeks of paid maternity leave. The state pays compensation up to 5 times the minimum wage, with the remainder paid by the employer.

In certain circumstances, both the mother and the father are entitled to six months of parental leave (full-time) or one year of parental leave (part-time) until the child is five years old. This time can be compensated by the state.

Termination and Severance in Luxembourg

Employers in Luxembourg must provide two to six months' notice of termination when terminating an indefinite-term contract. If an employee has been with the employer for at least five years, he or she is legally entitled to severance pay, which can range from one to 12 months depending on seniority level.

Employees who resign must provide half the normal notice period and are not entitled to severance or unemployment benefits.

Different rules apply to employees on probation, which can vary in length from two weeks to a year, and the employee may not be entitled to any notice of termination during this period.

For companies expanding overseas for the first time, dealing with employee layoffs and dealing with severance packages can be complicated. Remoly's Luxembourg PEOs can reduce risks for foreign companies and provide guidance during the process.  

Taxation in Luxembourg

Both employers and employees in Luxembourg must contribute to the social security fund, which covers pensions, sick pay, maternity pay, accident insurance, etc. Employers generally need to contribute around 12.5-15.5% (with a maximum limit).

Employees in Luxembourg must pay a solidarity tax of 7% (9% for certain high earners), with progressive rates depending on income level.

Companies in Luxembourg must pay a variety of taxes, including solidarity tax, municipal tax and corporate profits tax. Overall, the total contribution rate for most businesses is 24.94% (as of 2019/20).

Health Insurance in Luxembourg

High-quality health care is funded through taxes (contributed by both employers and employees), so private insurance is not required. Some employers may choose to provide it, but this is not required or expected.

Salary and Benefits

Compensation Law in Luxembourg

The standard minimum wage in Luxembourg for employees over the age of 18 is €2,071.07 per month, but skilled workers are entitled to a minimum wage that is 20% higher.

Benefits Administration in Luxembourg

Many employees in Luxembourg expect benefits packages at work, so you may want to put a system in place when recruiting in the country. However, setting up a benefits system in Luxembourg can be a difficult process, especially if you are not familiar with the country's unique legal and administrative processes.

Remoly can help you significantly simplify this phase of your Luxembourg expansion by providing benefits administration outsourcing. Our team can advise you and handle the set-up of your benefits plan, allowing you to focus on expanding your organization in Luxembourg.