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Mercans CountryIntel ® Luxembourg Payroll And HR Insights

Mercans offers complete payroll, PEO and HR services in Luxembourg

Recognised for its politically stable environment and the gateway to Europe, Luxembourg is one of the most open economies globally. It continues to remain attractive for its pro-business economic climate, a large and skilled multilingual workforce, advanced digital infrastructure, an international logistics hub and much more.

Doing Business in Luxembourg

Businesses, new and mature, are supported by attractive incentives and a range of support programs. Business is easy to set up as easing entrepreneurship activity is a top priority. Detailed business information and guides are found on Luxembourg’s business portal Guichet.lu.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Luxembourg is straightforward. Choose how your company operates from a range of entity types that suit your individual circumstance.

Banking

Banking Hours: 8.30 am to 4:30 pm from Monday to Friday.

Working Week

The standard working week is from Monday to Friday from 9:00 am - 5:00 pm.

Labor Law

Particularly unique to the country is the fact that there are significant cross-border workers who form over half of the workforce. The main sources of labor law are international treaties, European law, Luxembourg employment laws and regulations including the Luxembourg Labor Code. Collective bargaining agreements may also apply.

Main Industries

Banking and financial services, construction, real estate services, iron, metals, and steel

GDP Growth

1.2%

Dates & Numbers

dd/mm/yyyy

Official State Name

The Grand Duchy of Luxembourg

Population

0.63 million

Capital

Luxembourg City

Major Languages

Luxembourgish, German, French

Currency

Euro

Internet Domain

.lu

International Dialing Code

+352

Luxembourg
Luxembourg Province, BE
11:06 am, December 2, 2022
1°C
overcast clouds

Payroll

Wages are determined by the employment agreement that is signed between employer and employee or based on the collective bargaining agreement negotiated at the company or sector level.

It is acceptable to provide employees with online payslips

Payslip

Payroll reports must be kept for 10 years

Reports

Employees receive paid annual leave of 26 days

Annual Leave

Employees receive paid sick leave of 3 days

Sick Leave

Employees are entitled to 20 weeks of unpaid maternity leave and 10 days of unpaid paternity leave.

Maternity & Paternity Leave

Termination of an employee requires up to 6 months’ notice

Employee Termination

There are no provisions mandated by law regarding the 13th month salary

13th month salary

2257 Euro per month

Minimum Wage

1.5x the employee's ordinary rate of pay

Overtime

Employees paid monthly are entitled to 1 - 12 months’ pay for each year of employment for at least five years of service

Severance Pay

Tax and Social Security

Individual income tax is levied on an individual’s worldwide income if they reside in Luxembourg. Non-residents are taxed on Luxembourg-source income. The Luxembourg social security applies to all employees and provides benefits for illness, workplace accidents as well as occupational diseases.

Tax

Income tax liability is based on an individual’s personal situation and there are three tax classes – Class 1 for single people, Class 2 for married couples and partners and Class 1a for single people with children.

24.9%

Corporate Income Tax

45.7%

Personal Income Tax

17%

Sales Tax

17%

VAT

Social Security

Financed by the contributions of the insured and by public authorities, social security is managed by public institutions wherein it is supervised by the Ministry of Social Security and the Inspectorate General of the Social Security.

27.6%

Social Security Rate

15.1%

Social Security Rate for Employers

12.4%

Social Security Rate for Employees

Employment Law

In general, Luxembourg labor law applies to all work performed locally unless parties choose to abide by another law. Any labor disputes are first handled by the Labor Court.

Employment Agreement

In general, the rule is to have agreements for an indefinite duration and fixed term employment contracts are not the norm and typically may not exceed 24 months. There are three official languages, namely Luxembourgish, French and German. There are no rules about the use of language in contracts but it is recommended that the language used is understood by the employee.

Working condition

There are exceptions to the general 40 hour work week but flexible working arrangements are however, possible. Work on Sunday is generally prohibited.

Leaves

Outside of the 11 public holidays, employees are entitled to additional holidays as agreed to in collective bargaining agreements or any internal regulations.

Employment termination

An employer may terminate an employment agreement if two conditions are met: the termination is based on serious reasons and the employer has given the applicable notice period. Any resignation by the employee must be with notice. In the case of gross misconduct, either employer or employee may terminate the agreement without notice.

2 weeks

Minimum notice period for terminating an employee

11 days

Total number of public holidays

40

Working hours per week

5 days

Total number of days for Compassionate & Bereavement Leave

Immigration

Any individual who is a third-country national (an individual who is not an EEA national) who intends to stay in Luxembourg for a period exceeding 90 days must apply for a residence permit prior to entry.

Residency permits

Stays that do not exceed 90 days do not allow third-country nationals to carry out any activity as an employee or a self-employed person unless express permission has been received.

Work Permit Validity

1 year

Required Documents

Declaration submitted at the local administration offices to confirm that the individual wants to live in that region

Medical check has been completed

Formal application forms on Luxembourg’s government website are downloaded

Where the applicant intends to stay beyond the visa expiry, a reapplication for the visa must be done

Compliant, reliable, error-free and touchless payroll in Luxembourg

Build the best team and hire top talent compliantly in Luxembourg. Get in touch with Luxembourg payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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