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Hiring in Luxembourg? Read on to find out the employment norms (like taxes, payroll and benefits) and EOR (Employer on Record) norms in Luxembourg.
Employment norms in Luxembourg
Luxembourg is a northwestern European country. Despite its small size, this nation ranks among the wealthiest countries in Europe. According to IMF and World Bank calculations, Luxembourg has a developed economy and boasts one of the highest GDP (PPP) per capita worldwide. The country is also referred to as the 'green heart of Europe' because of its breathtaking landscape.
General Information:
- The Luxembourg currency is Euro (EUR).
- Luxembourg City is the capital of Luxembourg.
- Luxembourgish, German, and French are the official languages of Luxembourg. Documentation can be in any of the official languages. It can be translated into English or any other language if required.
- As of 2023, the GDP of Luxembourg was reported to be USD 86.54 Billion.
The labor laws in Luxembourg protect employees from discrimination and harassment in the workplace. The laws oversee wages, leaves, social and health benefits, etc.
Table of Contents
- Agreements
- Onboarding Process
- Visa
- Minimum Wage
- Payroll Cycle
- Annual Bonus
- Health Benefits
- Working Hours and Overtime
- Leaves
- Social Security
- Taxes for Employers
- Taxes for Employees
- Probation
- Termination
- Severance Pay
- Employees or Contractors
- Final Words
AgreementsOnboarding ProcessVisaMinimum WagePayroll CycleAnnual BonusHealth BenefitsWorking Hours and OvertimeLeavesSocial SecurityTaxes for EmployersTaxes for EmployeesProbationTerminationSeverance PayEmployees or ContractorsFinal Words
Agreements
The employment agreement must have all the terms and conditions related to the job. The language of the agreement can be in any of the official languages. A translation of the agreement must be provided if required. There are three types of employment agreements in Luxembourg
- Indefinite or Open-ended agreement: It is widely used for hiring permanent employees. It can be used for hiring part-time employees as well.
- Definite or fixed-term agreement: The definite agreement in Luxembourg must not exceed a term of 24 months. It can be renewed only twice within the 24 months duration. If the term exceeds 24 months it will be considered an indefinite agreement.
- Seasonal employment agreement: It is used when a business needs staff on an ongoing annual basis for its operations (such as harvesting or tourism). It must not be more than 10 months within any 12 months
Onboarding Process
The hiring process in Luxembourg is as follows:
- Job descriptions are created by HR departments. With the department that has an opening, they collaborate.
- The description is then published on the company's main website as well as other platforms, like LinkedIn.
- Applicants demonstrate their eligibility before submitting applications. They are further reduced after numerous screenings and interviews.
- The company then negotiates terms and conditions with the final contenders on the shortlist. An agreement is reached with the company, and the candidate is hired.
Visa
Luxembourg has three main types of Visas:
- Short-term stay or C visa: This type of visa is valid for 90 days in 180 days duration. It is granted for purposes such as tourism, business travel, medical treatments, etc.
- Long-term stay or D visa: This visa allows the holder to visit other Schengen countries as well. It is granted for work, study, family reunions, etc. It is valid for a 1-year duration. This visa can be extended for 5 years.
- Transit visa: This visa is granted for a shorter duration of 24 hours. It is granted for crossing the country.
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Minimum Wage
The minimum wage in Luxembourg is fixed at around 2,776.50 EUR per month.
Payroll Cycle
The payroll cycle in Luxembourg is monthly.
Annual Bonus
There is no legal provision for giving a 13th salary in Luxembourg. However, it is given as a custom at the end of the year.
Health Benefits
Health benefits in Luxembourg include health, sickness, accidental insurance, etc.
Working Hours and Overtime
- Work hours: Luxembourg's regular working hours are 8 hours per day or 40 hours per week. The standard working week is of 5 days starting from Monday to Friday.
- Break: Employees are given 30 minutes of break between continuous work hours. Employees working overtime get 1.5 hours of break.
- Overtime: The overtime must not exceed 2 hours per day or 8 hours per week. An employee gets 140% of the regular salary for working overtime.
Leaves
Sick Leaves
- An employee is entitled to 77 days of paid sick leave, paid by the employer.
Maternity Leaves
- Employees are entitled to 20 weeks of maternity leave paid by the social security fund.
- 8 weeks are given before childbirth and 12 weeks after childbirth.
Paternity leaves
- Employees are entitled to 10 days of leave paid by the employer for the first 3 days.
Annual Leaves
- Employees get 26 days of annual paid leaves.
Other leaves
- Bereavement leave: 3 days of paid leave for the first relative's death.
- Education leave: 80 days of paid leave by the employer.
Public Holidays (for the Calendar year 2023)
- New Year's Day (1st January)
- Easter Monday (10 April)
- Labour Day (1 May)
- Europe Day (9 May)
- Ascension Day (18 May)
- Whit Monday (29 May)
- National Day (23 June)
- Assumption Day (15 August)
- All Saints' Day (1 November)
- Christmas Day (25 December)
- 2nd Day of Christmas (26 December)
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Taxes for Employers
- Health insurance- 3.05%
- Pension Insurance- 8.0%
- Family benefits- 1.4%
- Occupational health- 0.25%
- Workplace accident- 0.675 - 1.125%
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Taxes for Employees
Employees have to pay these taxes in Luxembourg:
- Pension contribution- 8%
- Health insurance- 3.05%
- Dependence insurance- 1.4%
Income taxes in Luxembourg depends on marital status, number of children, etc.
- EUR 11,265- 13,173 - 8%
- EUR 13,173- 15,081 - 10%
- EUR 15,081- 16,989 - 12%
- EUR 16,989-18,897 - 14%
- EUR 18,897- 20,805 - 16%
- EUR 20,805- 22,713 - 18%
- EUR 22,713- 24,621 - 20%
- EUR 24,621- 26,529 - 22%
- EUR 26,529- 28,437 - 24%
- EUR 28,437- 30,345 - 26%
- EUR 30,345- 32,253 - 28%
- EUR 32,253- 34,161 - 30%
- EUR 34,161- 36,069 - 32%
- EUR 36,069- 37,977 - 34%
- EUR 37,977- 39,885 - 36%
- EUR 39,885 - 41,793 - 38%
- EUR 41,793- 100,000 - 39%
- EUR 100,002- 150,000 - 40%
- EUR 150,000- 200,004 - 41%
- EUR 200,004 and above - 42%
Probation
The probationary period in Luxembourg ranges from 2 weeks to 1 year.
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Termination
Any of the following situations could lead to the employment relationship termination:
- When an employee resigns
- the employee reaches retirement age,
- the employment contract expires or is not renewed,
- an employee can be fired for serious misconduct (such as theft, fraud, etc.),
- Employees who have worked less than 5 years get a notice of 2 months before termination. Employees with more than 5 years of service get a 4 to 6 months notice period.
Severance Pay
Severance pay is calculated based on the tenure:
- below 5 years — 1 month's salary
- 5-10 years — 2 months' salary
- 10-15 years — 3 months' salary
- 15-20 years — 4 months' salary
- 20-25 years — 6 months' salary
- 25-30 years — 9 months' salary
- more than 30 years — 12 months' salary
Employees or Contractors
- Misclassification of employees or contractors in Luxembourg is a punishable offense and a penalty is imposed.
- If found guilty, the employer is responsible for paying the overhead surcharges.
- The company is obligated to cover any related interests and penalties on behalf of a misclassified employee.
- The company may also need to pay taxes retrospectively.
Final Words
Luxembourg is a small country with one of the highest GDPs per capita. It allures investors with its rich economy and flexible labor laws. Luxembourg's history is closely linked to its neighbors, with many inhabitants trilingual in French, German, and Luxembourgish. It can be a great choice for businesses looking to grow their entity.
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