Luxembourg compensation and benefits management is no easy task. You’ll have to pay employees the right salary on time while complying with all of Luxembourg’s compensation laws. Plus, if a collective bargaining agreement (CBA) covers your workers, you’ll need to adhere to an extra level of compliance.
That’s where Globalization Partners steps in. We’ll handle compensation and benefits for your employees while taking on the risk so that you can focus on expanding your company.
Luxembourg Compensation Laws
Luxembourg does not have a single guaranteed minimum wage (known as Salaire Social Minimum, or SSM) for workers. Instead, rates depend on the employee’s age and job classification. As of April 2022, the SSM is around 2,313 EUR a month for unskilled workers older than 18 years old and 2,776 EUR for skilled workers older than 18. Unskilled and skilled adult workers get 100% or 120% of the SSM respectively, while those under 18 years old get 80% or 75% depending on their age.
Luxembourg compensation laws also stipulate overtime rates based on the conditions of the extra hours worked. If it is not possible to compensate for overtime with time off, the employer must pay every hour of overtime with a minimum of 140 % of the hourly salary for all employees except upper management. Employers must provide one and a half hours of paid rest time per hour of overtime worked.
Guaranteed Benefits in Luxembourg
Your Luxembourg benefit management plan should include both required and supplemental benefits. In Luxembourg, guaranteed benefits cover time off during the country’s 11 public holidays and at least 26 working days of paid vacation each year. Time off also depends on any CBAs, which can mandate additional vacation days.
Guaranteed benefits also include health insurance under the state-funded healthcare plan — basic medical coverage that allows Luxembourg employees to choose a doctor, specialist, and hospital. Both employees and employers pay into the program.
Luxembourg Benefits Management
The other part of Luxembourg benefit management is providing any supplemental benefits that employees may expect. For example, while Luxembourg compensation laws do not mandate any 13th-month bonus, employers customarily offer one. Most employers will give this year-end bonus around Christmastime, and some will include half of a 14th-month’s pay.
Other common supplemental benefits include:
- Additional insurance through a non-profit health insurance agency or mutual association
- Longer vacation time
- Higher salary due to a CBA
You can either dole out these benefits yourself or choose Luxembourg benefit outsourcing services. Globalization Partners has connections throughout Luxembourg to help you figure out what other employers are offering and match or exceed their benefits. You can also outsource Luxembourg compensation needs with us. We’ll make sure your employees are paid while keeping your company fully compliant.
Restrictions for Benefits and Compensation
A CBA could have restrictions separate from Luxembourg’s compensation laws. You’ll need to check both before drafting an employment contract to ensure your agreement represents the correct amounts.
Luxembourg Competitive Benefits Planning
Employee benefits planning in Luxembourg calls for careful consideration. You need to balance your company’s resources with what your employees need and what the national labor laws require.
Luxembourg employee benefits plans
National labor laws include several requirements for employee benefits. You can also consider providing supplemental benefits to help employees cover significant life events, manage work responsibilities, and meet other needs. Some common fringe benefits include:
- Additional paid leave
- Death benefits to be delivered to a close family member of the employee
- Performance awards
Requirements for employee benefits in Luxembourg
To stay compliant, you must provide certain benefits for every employee. These include:
- Maternity and paternity leave
- Health insurance
- Annual leave with pay
- Sick leave with pay
- Holiday leave with pay
How to design your employee benefits program
Every company’s benefits program looks different, and you can adjust your plan to offer more benefits as your business grows and you have more resources available. That said, the following steps can be helpful as you begin planning.
1. Evaluate your company’s resources and objectives
Start by examining your current resources, factoring in employee contributions, outsourcing requirements, and operating expenses as part of your budget.
Setting goals for your company can help you make the most of your budget. If you want to start with a large team to support your growth, for example, you may need to keep supplemental benefits to a minimum so you can dedicate your resources to the requirements.
2. Complete a needs assessment
To create your most effective benefits plan, you need to know your employees’ expectations. You can learn about their needs by interviewing local workers, sending out questionnaires, and researching economic conditions in the area.
Complete a comparative benefits analysis to prioritize employee concerns. You’ll want to identify and select the most high-impact benefits for your employees.
During this phase, you may also consider researching your competitors. Your open positions will stand out more if you can meet or exceed the benefits offerings of other companies in your industry and area.
3. Develop your benefits plan
Use the information you’ve gathered to build your benefits program. It’s best practice to factor in the required benefits first and then add extras as your budget allows, prioritizing the benefits potential hires will find most attractive.
Average cost of benefits per employee
Each company has a unique budget, and employee expectations will vary across industries. Rather than basing your expenses on a national average, you can ensure you create a sustainable benefits program with good planning. Develop a program that prioritizes top employee needs and allocates resources at a rate your business can manage over time.
How to calculate employee benefits
Like your average cost, your calculations will vary depending on the benefits you offer. For any mandatory benefits, you can refer to national labor codes to determine appropriate compensation and contribution rates.
You can research local market standards for your industry to determine what rates to provide for additional benefits.
How are employee benefits taxed in Luxembourg?
Taxable income in the country includes regular wages, pensions, and annuities. Any benefits that fall under employee income categories and do not meet specific criteria for exemptions will need to be part of employee withholding taxes.
Several benefits have special tax exemptions, including legal severance payments, social security benefits, specific life insurance annuities, and gifts from seniority up to a €4,500 value. Employees may deduct €540 yearly from their professional expenses, which may exempt some benefits with a lesser monetary value from taxation.
International employees that meet qualifications for working in Luxembourg may receive special tax exemptions for benefits such as moving assistance, accommodation stipends, or home leave.
Employee health benefits plans
Standard employer contributions to the social services system in the country are 2.8 percent of gross income. This social system includes state-sponsored health care for your employees.
You may choose to offer supplemental benefits that enhance employees’ mental and physical well-being, such as gym memberships or access to mental health services.