Luxembourg is a small landlocked country that punches well above its weight. With the highest GDP per capita in the European Union, it offers a diverse yet stable economy and access to a multilingual workforce. However, complex employment regulations can slow you down. 

A Luxembourg employer of record makes everything easier. As a global EOR, G-P manages talent on your behalf, including drafting compliant contracts, processing payroll, and more. With us, you can harness the talent of the brightest people in 180+ countries, including Luxembourg, quickly and compliantly.

Simplify hiring in Luxembourg with an employer of record

Employment is mostly governed by the Luxembourg Labor Code (Code du Travail). This covers workplace regulations, including employment contracts, working hours, and termination procedures. 

Collective bargaining agreements (CBAs), negotiated between trade unions and employers, also govern employment. The labor code sets minimum standards, but CBAs may have extra or better terms. The more favorable term must be followed when there are conflicts.

A Luxembourg EOR acts as the legal employer, so you don’t need to set up a local entity. We make sure your business follows the labor code and any applicable CBAs. 

The EOR hiring process in Luxembourg:

  1. Partner with a global employment expert. Choose an EOR with deep expertise in Luxembourg as they’ll guide you through the local legal landscape.

  2. Source your ideal candidate. You find the best talent, and the EOR handles the rest.

  3. Generate a compliant employment contract. Your EOR drafts a locally compliant contract in line with Luxembourg’s labor code and relevant CBAs, including salary, working hours, and notice periods.

  4. Onboard and manage your team. The EOR manages the entire employment lifecycle. This includes managing your team members’ payroll and administering benefits. 

Employment contracts in Luxembourg

Verbal agreements are legal, but we recommend a written employment contract. If a written contract isn’t provided, the employment relationship is still valid and is presumed to be a permanent contract, unless there’s clear evidence to the contrary.

The contract must be in a language that the employer and employee understand. French and German are common, but English is also accepted if both parties understand it. The contract must state any compensation in euros (EUR). 

There are two main contract types:

  • Permanent contracts (contrat à durée indéterminée, or CDI): The standard for ongoing roles, with no end date.

  • Fixed-term contracts (contrat à durée déterminée, or CDD): Used for temporary roles. They can be renewed twice, with a maximum duration of 24 months, including renewals.

Employers in Luxembourg have to give employees a written statement of the essential terms of employment within one month of starting work. 

A Luxembourg EOR, like G-P drafts compliant employment contracts aligned to the labor code and CBAs. This minimizes complexity and risk for your business. 

Leave entitlements in Luxembourg

Working hours in Luxembourg

Luxembourg has a standard workday of eight hours and a 40-hour workweek. A workday can be nine hours as long as the weekly total doesn’t exceed 40 hours. These hours don’t usually apply to senior executives or managers.

Overtime is typically limited to two hours per day. It must be authorized by the employer, or in some cases, the labor inspectorate. For each hour of overtime, employees get either 1.5 hours of paid time off or a payment that’s 140% of their regular hourly rate.

Public holidays in Luxembourg

Employees in Luxembourg get 11 paid public holidays:

  • New Year's Day

  • Easter Monday

  • Labor Day

  • Europe Day

  • Ascension Day

  • Whit Monday

  • National Day

  • Assumption Day

  • All Saints' Day

  • Christmas Day

  • St. Stephen's Day

Vacation days in Luxembourg

Employees get at least 26 working days’ paid annual leave. Leave accrues from the start of employment, but employers can ask for a short, qualifying period before employees can take leave. Unused leave can be carried over, but it should be taken by March 31 the following year.

Sick leave in Luxembourg

Employees must notify their employer on the first day of sick leave. They must also give them a medical certificate within three days. An employee is protected from dismissal for up to 26 weeks while on approved sick leave. 

Employers pay employee salaries during sick leave until the end of the month in which the employee takes their 77th day of sick leave within a rolling 18-month period. 

  • These 77 days don’t have to be consecutive. They’re counted cumulatively over any 18-month timeframe.

  • Once the employee reaches this 77-day threshold, the employer’s obligation to pay ends at the close of that month. 

  • The national health fund (caisse nationale de santé, or CNS) pays sickness benefits after this period. 

Maternity and parental leave in Luxembourg

Pregnant employees get 20 weeks’ paid maternity leave. This is made up of eight weeks before the due date and 12 weeks after, and is paid by social security. The second parent gets 10 days’ paid leave, which must be taken within two months of the child’s birth or adoption. 

The employer pays the employee's salary for this leave and is reimbursed by the government. 

Each parent can take up to six months’ paid parental leave per child. The employer doesn’t pay the employee’s salary during this time. Instead, the employee gets an allowance from the fund for the future of children (caisse pour l’avenir des enfants, or CAE). Part-time or split arrangements are also allowed under certain conditions.  

How an employer of record in Luxembourg helps manage leave entitlements

A Luxembourg EOR manages employee leave for you, while making sure you comply with local leave laws. This means you can focus on your team and business goals, without worrying about admin. processes. 

Health insurance and supplementary benefits in Luxembourg

Luxembourg has universal healthcare with comprehensive coverage. It’s funded by social security contributions from employers and employees. Employers pay around 3.05% of employees’ total wages to this state-funded health insurance. 

Many employers offer private health insurance (mutuelle) as a supplementary benefit. This covers costs not paid by the state system, such as dental, vision, and enhanced hospital coverage.

We recommend budgeting an extra 15% on top of the gross salary to cover total employer costs, including all social security payments and any supplementary benefits.

Bonuses in Luxembourg

A 13th-month bonus, typically paid at the end of the year, is common but not legally required. A bonus must be set out in the employment contract or relevant CBA to be enforceable. 

How an employer of record helps with benefits in Luxembourg

A Luxembourg employer of record handles mandatory and supplementary benefits so you don’t have to. A Luxembourg EOR helps you offer competitive benefits while complying with labor laws and CBAs. 

Termination and severance in Luxembourg

Probation can last two weeks to six months. The period must be stated in the employment contract. During this time, either party can end the contract with shorter notice, usually between 1–2 weeks, depending on the probation length. No reason needs to be given.

To end a permanent contract, an employer must have a “real and serious cause” (“motif réel et sérieux”), such as gross misconduct. 

There are strict dismissal procedures in Luxembourg. Companies with more than 150 employees must arrange an initial meeting with the employee. They must also notify them of the dismissal by registered letter. Legal notice periods range from 2–6 months, based on the employee's length of service. 

Employees with five or more years’ service get a severance payment as follows:

  • 5–10 years of service: 1 month’s salary

  • 10–15 years of service: 2 months’ salary

  • 15–20 years of service: 3 months’ salary

  • 20–25 years of service: 6 months’ salary

  • 25–30 years of service: 9 months’ salary

  • 30 years or more of service: 12 months’ salary

A Luxembourg EOR makes employee offboarding stress-free. We ensure you comply with legal notice periods, severance, and more.  

Payroll and taxes in Luxembourg

Luxembourg has a progressive personal income tax system. The employer withholds employee income tax.

Employees and employers contribute to social security. Employers pay around 12.07–14.62% of the employee’s gross salary. Contributions are capped at an annual gross salary of EUR 152,000, which changes each year. Employer contributions include:

  • Pension: 8% 

  • Health insurance contributions: 3.05%

  • Accident insurance: 0.67–2.92%. The rate depends on the company’s risk class and claims history. 

  • Mutual health insurance: 0.42–2.08%. This is often called mutuelle, but is separate from supplementary private health insurance. This helps employers cover salaries if employees have extended sick leave.

  • Occupational health service: A small annual fee per employee for job-related health services.

A Luxembourg employer of record manages employer taxes and social security contributions. EORs handle all aspects of payroll management, including mandatory employee withholdings.

Choosing the right EOR in Luxembourg

When choosing an employer of record Luxembourg, consider the following:

  • Compliance expertise: The right EOR has in-depth knowledge of Luxembourg’s labor laws, like the labor code, as well as CBAs and tax regulations. 

  • Comprehensive EOR solutions: Choose an EOR that manages all aspects of employment, including payroll processing, tax remittances, benefits administration, leave management, and offboarding.

  • Scalability and flexibility: The EOR should accommodate your needs, whether you're hiring a single employee or a global team, and grow with your business.

  • Technology and integration: An AI-powered EOR simplifies onboarding, management, and employee payment. Look for an EOR that integrates with existing HCM, PEO, or payroll systems to streamline operations.

  • Transparency and communication: Choose an EOR that offers clear communication channels, transparent pricing, and regular updates on compliance changes.

  • Reputation and references: Research the EOR's reputation, customer testimonials, and industry recognition to ensure they have a track record of reliability and success. As the #1 EOR according to all industry analyst reports, G-P has a solid reputation and extensive global employment experience.

  • Data security and compliance. Ensure your EOR follows strict data security protocols like GDPR. This is critical for protecting sensitive employee information and maintaining compliance.

Use G-P EOR for global hiring in Luxembourg

G-P EOR is the award-winning, AI-enabled global hiring solution that empowers startups, SMBs, and enterprise businesses to build global teams with ease. Onboard, manage, and pay top talent in over 180 countries in minutes, without the complexity of entity setup. 

G-P EOR is the preferred partner for leading HCM, PEO, and payroll platforms. Bring your workforce data together in one place to maintain existing workflows while keeping consistent and accurate data across your integrated systems.

Request a proposal to start hiring in Luxembourg today.