How to hire and pay employees in Luxembourg
With Instahirin, your business can easily hire employees in Luxembourg. No more worrying about local laws, complex tax systems, or managing international payroll.
Before hiring
EMPLOYEES IN The Luxembourg
Before hiring employees in Luxembourg, one key thing employers should be aware of is the country’s strict adherence to the EU General Data Protection Regulation (GDPR). Employers must handle employee personal data lawfully, with explicit consent, clear purposes, and appropriate safeguards especially when transferring data outside the EU.
Another crucial consideration is Luxembourg’s employee benefits and labor regulations. Employers are required to contribute to the country’s social security system, which covers health insurance, pensions, family benefits, unemployment insurance, and accident coverage. Employees are entitled to at least 26 days of paid annual leave, paid sick leave, maternity/paternity leave, and public holidays. Employment contracts must comply with Luxembourg’s Labour Code and should clearly outline working conditions, compensation, and termination procedures. Collective bargaining agreements may also influence conditions depending on the sector.
At a glance
CURRENCY
Euro
OFFICIAL LANGUAGE
French, German & Luxembourgish
PAYROLL FREQUENCY
Monthly
EMPLOYER TAXES
12.66% - 14.78%
of gross salary
13th / 14th SALARY
N/A
Good to know
Luxembourg provides universal public healthcare, funded through mandatory social security contributions from both employers and employees. The system covers doctor visits, hospital care, and prescriptions, with partial reimbursements. Many employers offer complementary private insurance to cover additional costs not fully reimbursed by the state.
The standard workweek is 40 hours, usually 8 hours per day over 5 days. Overtime is allowed with limits and must be compensated with time off or extra pay (typically 150% of the regular rate). Employees are entitled to at least 26 days of paid annual leave, plus 11 public holidays per year.
Labor laws in Luxembourg
Working hours and overtime
In Luxembourg, the standard workweek is 40 hours. Any hours worked beyond this are considered overtime and must be compensated. Overtime pay is typically 150% of the regular hourly rate or compensated with equivalent time off. Employers must comply with labor laws limiting maximum weekly hours and ensuring worker protection.
Employment contracts
Contracts can be in English. They must be in writing and signed by both parties.
A contract must include:
- Name
- Start date
- Length of the employment
- Job description
- Termination conditions
- Monthly salary
Probationary period
The minimum probation period is 180 days. The maximum probation period is 180 days for employees and 365 days for executives
Calculate costs to hire internationally
Benefits and leave in Luxembourg
Annual leave in Luxembourg
In Luxembourg, employees are entitled to a minimum of 26 days of paid annual leave per year. Additional leave may be granted based on collective agreements or seniority. Public holidays are separate from annual leave entitlements.
Sick leave
Employees are entitled to an unlimited number of paid sick days. The employee will receive 100% of their salary from the employer for the first 77 days. If the 77th day falls after the 1st day of the month, for example, March 18, the employer is required to continue paying the employee for the remaining days of that month, if the employee stays on sick leave. From the 1st day of the month following the 77th day of sickness, sick leave is paid at 100% of the employee’s regular salary, up to a ceiling of the minimum social salary x5, directly by Social Security.
Parental leave
Employees are entitled to one of two parental leave options following completion of maternity and/or adoption leave. Parental leave can last up to 6 months depending on the number of hours shown in the parent's employment contract and their employment status. Both parents can decide how to distribute the time off. Either parent can take parental leave. Social security will calculate the employee's pay based on their average salary from the previous 12 months.
Holidays
Luxembourg has 11 official public holidays each year, including New Year’s Day, Easter Monday, and National Day. If a public holiday falls on a weekend, it is not usually moved to a weekday.
Employer tax
In Luxembourg, employers typically contribute between 12.7% and 14.9% of an employee’s gross salary to mandatory social security schemes, covering pensions, health insurance, accident insurance, and other welfare benefits, with exact rates depending on factors such as the employer's risk classification and applicable ceilings.
Individual tax
In Luxembourg, individuals pay progressive income tax rates ranging from 0% to 42%, with an additional employment fund surcharge of 7% or 9% on the tax amount, resulting in a maximum effective rate of approximately 45.78%; employees also contribute around 12.45% of their gross salary to social security, covering pensions, health, and long-term care insurance.
Termination in The Luxembourg
There is no at-will termination in Luxembourg for employers and termination must be done for just cause.
Compliant terminations include:
- Voluntarily by the employee
- By mutual agreement
- By the expiration of the contract
Notice period
The minimum notice period is 30 days and will be increased according to the length of the employment and the type of termination.
Notice upon termination by the Employer:
- 60 days if the length of service is less than 5 years
- 120 days if the length of service is more than 5 years but less than 10 years
- 180 days if the length of service is more than 10 years
Notice upon resignation by the Employee:
- 30 days if the length of service is less than 5 years
- 60 days if the length of service is more than 5 years but less than 10 years
- 90 days if the length of service is more than 10 years
Start hiring employees in
Luxembourg
Setting up a business entity in every country where you want to hire isn’t scalable it’s time-consuming, expensive, and legally complex. In Luxembourg, navigating employment laws, social security contributions, tax obligations, and multilingual employment contracts can be challenging. Managing payroll, compliance, and documentation manually through emails and spreadsheets increases the risk of errors and inefficiencies.
With InstaHirin, you can easily manage HR, payroll, and automate compliance in Luxembourg and 180+ countries all from one user-friendly platform so you can hire quickly and confidently without setting up a local entity.
Disclaimer: The information provided in this resource is for general educational purposes only and shall not be construed as legal advice. While InstaHirin yster strives to provide current and accurate information, InstaHirin makes no warranties or representations as to the correctness of the content provided and accepts no liability or responsibility for any errors or omissions in the content provided. By using this resource you acknowledge and agree that you do so at your own risk. The content of this resource is subject to change without notice.
