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How to hire and pay employees in Luxembourg
Slasify
Jun 21, 2025
| Key Takeaways |
|---|
| 1 Luxembourg offers a stable economy, favorable tax policies, and a multicultural workforce, making it ideal for international business expansion. |
| 2 Personal income tax is progressive, up to 42%, with additional surcharges based on tax class and income thresholds. |
| 3 Employers and employees contribute to social security, health, pension, and long-term care, with employer contributions ranging from 3.05–8%. |
| 4 Monthly payroll is standard, and salaries must be paid at least once per month. |
| 5 The national minimum wage is EUR 2,570.93 per month, adjusted based on age and skill level. Bonuses such as the 13th month are customary but not mandatory. |
| 6 Termination rules depend on employee length of service, with notice periods from 1 to 6 months and severance pay for employees with at least 5 years of service. |
| 7 Standard working hours are 40 hours per week with overtime capped at 48 hours per week and compensated at 140% if time off cannot be granted. |
| 8 Employees are entitled to 26 days of paid annual leave plus 11 public holidays, with additional rules for leave deferment and compensation for work on holidays. |
| 9 Luxembourg provides structured family leave: maternity (pre- and post-natal), paternity (10 days), parental, and adoption leave, with pay coverage conditions. |
| 10 Probationary periods range from 2 weeks to 12 months depending on qualifications and salary, during which termination can occur with notice but without severance. |
| 11 For seamless hiring, payroll, compliance, and EOR support in Luxembourg, Slasify provides end-to-end HR solutions across 150+ countries, ensuring regulatory accuracy and operational efficiency. |
Discover the global hiring and employment landscape in Luxembourg – serving as a financial powerhouse in Europe, Luxembourg boasts a stable economy and favorable tax policies. With its multicultural workforce and strategic location, Luxembourg offers an ideal environment for businesses aiming for international expansion.
Personal Income Tax
Personal income taxes in Luxembourg are determined based on the individual's tax class. This classification is usually stipulated in the employee's tax card issued by the tax authority, and generally goes as follows:
| Status | Tax Class for Residents | Tax Class for Non-Residents |
|---|---|---|
| Single persons | Class 1 | Class 1 |
| Single persons with children | Class 1a | Class 1a |
| Single persons who are at least 65 years old on January 1 of the tax year | ||
| Married persons or those under civil partnerships that are jointly taxed | Class 2 | Class 1, but can apply to be classified as Class 2 if certain conditions are met |
Taxpayers in Luxembourg are required to pay their income taxes in accordance with the relevant progressive income tax rates and the employment fund surcharge that applies.
| Taxable Income (EUR) | Progressive Tax Rate (%) |
|---|---|
| Up to 12,438 | - |
| 12,439–14,508 | 8 |
| 14,509–16,578 | 9 |
| 16,579–18,648 | 10 |
| 18,649–20,718 | 11 |
| 20,719–22,788 | 12 |
| 22,789–24,939 | 14 |
| 24,940–27,090 | 16 |
| 27,091–29,241 | 18 |
| 29,242–31,392 | 20 |
| 31,393–33,543 | 22 |
| 33,544–35,694 | 24 |
| 35,695–37,845 | 26 |
| 37,846–39,996 | 28 |
| 39,997–42,147 | 30 |
| 42,148–44,298 | 32 |
| 44,299–46,449 | 34 |
| 46,450–48,600 | 36 |
| 48,601–50,751 | 38 |
| 50,752–110,403 | 39 |
| 110,404–165,600 | 40 |
| 165,601–220,788 | 41 |
| Over 220,788 | 42 |
| Surcharge Rate | |
|---|---|
| Surcharge for Tax Class 1 and 1a | 7% of taxes, or 9% if income earned is more than EUR 150,000 |
| Surcharge for Tax Class 2 | 7% of taxes, or 9% if income earned is more than EUR 300,000 |
Local Taxes
There are no local taxes on employment income in Luxembourg.
Statutory Contributions
This section provides a rough breakdown of the contributions required from both the employer and employee. Actual amount due shall be billed by the Joint Social Security Centre (CCSS) before the 15th of the month.
In any case, the following contributions apply to everyone who works in Luxembourg regardless of nationality and shall be calculated based on the employee's monthly wages of up to a maximum of 5 times the monthly social minimum wage unless otherwise stated.
Employer Contributions
| Contribution Rates | Note | |
|---|---|---|
| Health Insurance | 3.05% | - |
| Pension Insurance | 8% | - |
| Accident Insurance | 0.70% | This single contribution rate shall be multiplied by a bonus-malus factor determined by the Accident Insurance Association |
| Occupational Health (STM) | 0.14% | - |
| Mutual Insurance Scheme | 0.01%–1.36% | The exact rate of contribution varies depending on the employer's contribution class |
Employee Contributions
| Contribution Rates | Note | |
|---|---|---|
| Health Insurance | 3.05% | - |
| Pension Insurance | 8% | - |
| Long-Term Care Insurance | 1.40% | The salary used to calculate this contribution shall not be capped. |
Payment of Wages
Salaries must be paid to the employee monthly.
Minimum Wage
The social minimum wage in Luxembourg is set at EUR 2,570.93 per month, with employees being granted different minimums depending on their age and qualification.
The applicable monthly minimum wage for the various groups are determined as follows:
| Age and Qualification | % of the social minimum wage |
|---|---|
| 15 years old and older | 75% |
| 17 years old and older | 80% |
| 18 years old and older, unskilled | 100% |
| 18 years old and older, skilled | 120% |
Note: Hourly minimum wage is calculated by dividing the monthly rate by 173.
Statutory Bonus
It is customary for employers to give 13th month pay or other bonuses to their employees, though they are not mandatory.
Termination
Either party is allowed to unilaterally terminate an employment contract as long as the required notice period is observed and the proper procedure is followed.
| Establishments with more than 15 employees | The Economic Committee must be notified of an employee's dismissal if they are dismissed for reasons not related to the employee's person |
|---|---|
| Establishments with more than 150 employees | All terminated employees must be summoned to a pre-dismissal interview before being handed their notice of termination |
An employer unilaterally dismissing their employees must have a valid reason for doing so. This can either be a reason of a personal nature or a reason connected to the business' operational requirements.
| Reason of a personal nature | Reasons connected to the business' operational requirements |
|---|---|
| Employee being unsuitable for the job they are employed to do, as indicated by their sub-standard performance or frequent and/or prolonged absences | Economic reasons and reasons connected to the employer's wish to restructure their business and shed certain jobs, provided that the regulations surrounding redundancy terminations and collective redundancy are observed. |
| Employee's misconduct, including, but not limited to, misbehavior towards their employers, colleagues or customers, persistent tardiness, and other actions affecting their work due to events in the employee's private life |
The dismissal of employees due to a reason of a personal nature must take place within a reasonable time frame after establishing the facts held against the employee, lest the action be deemed unfair.
In any case, all terminated employees must be given written notices of termination stating the reasons for their dismissal, the applicable notice period and exemption from work, if any.
Notice Period
Notice period in Luxembourg is determined by the employee's length of service and shall begin on the earlier of the 15th day of the month or the 1st day of the following month.
| Length of Service | Notice Period for Dismissal | Notice Period for Resignation |
|---|---|---|
| Less than 5 years | 2 months | 1 month |
| Between 5 and less than 10 years | 4 months | 2 months |
| 10 years or more | 6 months | 3 months |
During the notice period, the employee shall be entitled to up to 6 days of fully paid job-search leave. This leave can only be taken to conduct job interviews by the hour, half-day or by the day, and it cannot be taken all at once. To be eligible, the employee must be registered as a job seeker with the National Employment Agency and provide proof that they are expected at a job interview.
Employers who wish to dismiss their employees immediately without any notice period can choose to pay their employees in lieu. In any case, no notice period or payment in lieu is required if the termination is due to a reason that renders the working relationship definitively and immediately impossible to continue.
Severance Pay
Employees who have worked for at least 5 years are entitled to severance upon termination unless they voluntarily resign. The amount of severance pay varies depending on the employee's length of service on the last day of their notice period, as follows:
| Length of Service | Severance Pay |
|---|---|
| Less than 5 years | - |
| 5–10 years | 1 month's pay |
| 10–15 years | 2 months' pay |
| 15–20 years | 3 months' pay |
| 20–25 years | 6 months' pay |
| 25–30 years | 9 months' pay |
| 30 years or more | 12 months' pay |
Establishments with less than 20 employees can choose to either pay severance or extend the terminated employee's notice period as follows:
| Length of Service | Additional Notice Period |
|---|---|
| Less than 5 years | - |
| 5–10 years | 1 month |
| 10–15 years | 2 months |
| 15–20 years | 3 months |
| 20–25 years | 6 months |
| 25–30 years | 9 months |
| 30 years or more | 12 months |
Note: An employee who has committed an offence rendering the working relationship definitively and immediately impossible shall not be entitled to receive any severance.
Probationary Period
Probationary period, also known as trial period, is allowed for no less than 2 weeks, provided that they are written into the employment contract or is a part of the relevant collective labor agreement. Generally, probationary period is not renewable.
| Employee's Qualification | Maximum Probation Period |
|---|---|
| Employee does not have a vocational skills certificate (CATP), vocational aptitude diploma (DAP) or its equivalent; | 3 months |
| Employee has a vocational skills certificate (CATP), vocational aptitude diploma (DAP) or its equivalent; | 6 months |
| Employee receives a gross monthly salary of EUR 4,938.75 or more at the current index value | 12 months |
In the event that the contract is suspended during the probationary period due to illness, maternity etc., the probation shall be extended by a duration equal to that of the suspension, up to a maximum of a month.
Employees under a permanent contract who got pregnant during their probationary period shall have their probation suspended from the day the employee submits a medical certificate confirming their pregnancy, and it shall resume at the end of the period of protection against dismissal.
Termination during the probationary period can be done with a written notice, without reason and without severance. Proper justification will be needed to waive notice period obligations.
| Notice Period | Example | |
|---|---|---|
| Probation period is expressed in terms of weeks | Notice period (in calendar days) equivalent to probationary period (in weeks) | For a probationary period of 3 weeks, notice period will be set at 3 days |
| Probation period is expressed in terms of months | 4 calendar days per month, subject to a minimum of 15 days and a maximum of 1 month. | - |
In any case, employees cannot be dismissed in the first 2 weeks and they cannot resign in the first 15 days of probation. The only exception is when there is serious misconduct.
Note: Probationary period not exceeding a month must be expressed in whole weeks, while those exceeding a month must be expressed in whole months.
Work Time Rules
Standard Working Hours
Standard working hours in Luxembourg are subject to a maximum of 8 hours per day or 40 hours per week.
Employers can set a reference period of up to 4 months during which their employees can work beyond the standard limits by either having a flextime arrangement or a work organization plan. Working hours under these arrangements are subject to a maximum of 10 hours per day or 48 hours per week.
Break Period
Employees are entitled to a period of unpaid break if their work for the day exceeds 6 hours.
Moreover, female employees who are breastfeeding their child shall also be entitled to two 45-minute breastfeeding breaks per workday that is counted as part of their ordinary working hours upon request.
Breastfeeding breaks can be combined into a single period of 90 minutes, provided that the working day is interrupted only by a one-hour break or the employee cannot breastfeed in the workplace.
Overtime
Before engaging in overtime, employers must consult the works council or, in the absence of one, the employee affected by the overtime, and notify the Trade and Mines Inspectorate.
Overtime work is only justified if it is performed to carry out special or additional/preparatory work, to prevent the loss of perishable materials or the proceeds of a particular work, or to respond to a case of force majeure in which there is a public interest or which poses a threat to public security and order.
In any case, total working hours, including overtime, must not exceed 10 hours per day or 48 hours per week, and employees working overtime must be compensated with a paid time off equivalent to 1.5 hours of rest per overtime hour worked.
If compensatory time off is not possible, or if the employee is terminated before enjoying their compensatory time off, they must be paid at a rate of 140% of their hourly wage.
Note: Hourly wage can be calculated by dividing the monthly payment by the 173 hours.
Weekly Rest Days
Employees are entitled to 11 consecutive hours of rest in between working days and 44 consecutive hours of rest in any 7-day period.
Employers are usually not allowed to make their employees work Sundays. To do so, specific procedures concerning the works council and the Trade and Mines Inspectorate need to be followed.
In the event that the employee has been permitted to work Sundays, they must be compensated as follows:
| Sunday Pay | Note | |
|---|---|---|
| Option 1 | Normal hourly wage + a tax-free 70% hourly wage supplement for hours worked | - |
| Option 2 | A tax-free 70% hourly wage for hours worked + compensatory day off. |
If the Sunday work is more than 4 hours, compensatory day off is for a full day. Otherwise, it will be for a half day, granted before or after 1 p.m. of a working day, where the employee is not allowed to work more than 5 hours. |
Holiday and Leave Entitlements
Public Holidays
There are 11 days of public holidays in Luxembourg for 2024.
| Holiday | Date |
|---|---|
| New Year's Day | January 1 |
| Easter Monday | April 1 |
| Mayday | May 1 |
| Europe Day | May 9 |
| Ascension Day | May 9 |
| Whit Monday | May 20 |
| National Day | June 23 |
| Assumption | August 15 |
| All Saints' Day | November 1 |
| Christmas Day | December 25 |
| Boxing Day | December 26 |
Any overlap between public holidays and other days off will entitle the employee to a compensatory day off, and for public holidays that falls on the same date, another day off must be granted within 3 months from the day following the public holiday in question.
Public holidays are generally paid as follows:
| Public holiday pay | Note | |
|---|---|---|
| Public holiday falling on a normal workday | 100% salary for the day | - |
| Public holiday falling on a non-working workday | 100% salary for the day + Compensatory day off to be taken within 3 months | After consultation with the members of the works council, the employer can determine one day's holiday as compensation for all employees . |
| Public holiday falling on a Sunday | 100% salary for the day + Compensatory day off to be taken within 3 months | This compensatory leave can be taken individually by each employee . |
If the employee is required to work during public holidays, they must be paid an extra pay and compensatory time off as follows:
| Compensation for work on public holiday | |
|---|---|
| Public holiday falling on a normal workday | 100% normal remuneration + 200% average hourly pay for the hours actually worked |
| Public holiday falling on a non-working workday | 200% average hourly pay for the hours actually worked + Compensatory day off to be taken within 3 months |
| Public holiday falling on a Sunday | 270% average hourly pay for the hours actually worked + Compensatory day off to be taken within 3 months |
Annual Leave
Employees with at least 3 months of continuous service may be entitled to up to 26 days of paid annual leave.
The date of the leave shall be set by the employee, with full consideration of the employer's needs, a month in advance. They can be taken all at once or divided into shorter periods. If the annual leave is split into multiple periods, one of the periods must be for a duration of at least 2 weeks.
Annual leave days can generally be deferred until March 31 of the following year on an exceptional basis, and shall be forfeited if still unused by then unless further extension is permitted.
| Deferment until March 31 of the following year | Deferment beyond March 31 of the following year |
|---|---|
| Reasons related to company operations and the justified wishes of other employees | Due to the employer's operational needs, or if the employer refuses to allow the leave for other justified reasons |
| Due to illness | If the employee has not been able to schedule their leave due to illness |
| Due to maternity leave | If the employer and employee have entered into a specific agreement allowing employee to take the leave during the following year |
| Due to an exemption from work for pregnant women | |
| Due to parental leave |
During the first and last year of employment, paid leave accrues at a rate of one-twelfth per full month of work. Only those fractions of a month exceeding 15 days are deemed a full month's work.
Sick Leave
Employees are entitled to take paid sick leave until the end of the month during which the 77th day of sick leave occurs, during a reference period of 18 successive months. Afterwards, any additional leave will be covered by the CNS. Moreover, eligible employees can also take leave for family reasons in the event of their child's illness.
There are no maximum sick leave duration, but employees on leave are expected to adhere to certain rules for their leave to remain valid. Employers can choose to terminate the employment contract after a period of 26 weeks of incapacity.
Note: The employer can claim partial reimbursements for the amount they continue to pay to their employees on sick leave under the Mutual Insurance Scheme.
Maternity Leave
Pregnant employees are entitled to an exemption from work without loss of pay to attend pre-natal exams when they inevitably take place during work hours.
Employees who have been registered for mandatory sickness and maternity insurance for at least 6 months in the 12 months preceding the start of their intended leave shall be entitled to 8 weeks of pre-natal leave and 12 weeks of post-natal leave, the pay of which shall be covered by the CNS.
Employees intending to take maternity leave must inform their employers and the National Health Fund of their pregnancy by means of a medical certificate, stating the estimated due date within the last 12 weeks of their pregnancy.
Paternity Leave
Employees are entitled to 10 days of paternity leave in the event of childbirth or the adoption of a child under 16 years of age, which shall be taken within 2 months of the childbirth or adoption.
Those wishing to take paternity leave must notify their employers in writing 2 months in advance and submit either a medical certificate or a probative document proving childbirth or adoption before taking their leave.
The employee's pay during their leave shall be covered by the State from their 3rd day of absence, provided that the employer has filed such a request with the Ministry of Labour. Salaries paid in advance by the employer can be refunded by filing the required refund application with the Ministry within 5 months of childbirth or adoption.
Parental Leave
Employees who have been registered with CCSS for at least 12 consecutive months prior to the start of the parental leave can request either of the following parental leave options:
| Option 1 | Leave to be taken immediately following the maternity or adoption leave |
|---|---|
| Option 2 | Leave to be taken before the child's 6th birthday (or 12th birthday for adopted children) |
The employee taking the leave must inform their employers, in writing, of their intentions either 2 months before their maternity or adoption leave, or 4 months before the intended date of parental leave, whichever is applicable. The employer must then inform the employee of their decision by registered letter with acknowledgement of receipt within no more than 4 weeks of receiving the employee's application.
The duration of parental leave depends on whether the employee is taking this leave on a full-time, part-time, or split basis. More information on the distribution of leave between parents can be found here.
Note: This leave is granted only once per child, during which the parent may be entitled to a monthly allowance payable by the CAE as replacement income.
Other Leave
Employees who are adopting a child under 12 years old are entitled to 12 weeks of adoption leave, payable by the CNS, provided that they met all the conditions required for this entitlement. This leave is only valid for one of the adopting partners.
Furthermore, regardless of an employee's length of service, they shall be entitled to fully paid personal leaves, also known as extraordinary leave, in the following events:
| Event | Duration of Leave |
|---|---|
| Marriage | 3 days |
| Declaration of civil partnership | 1 day |
| Moving | 2 days, granted only once per 3-year period |
| Adoption of a child under 16 years old, unless the employee has taken the 12-week adoption leave | 10 days |
| Death of a minor child | 5 days |
| Marriage of a child | 1 day |
| Death of a spouse or partner | 3 days |
| Death of the employee's or their spouse's/partner's first-degree relatives | 3 days |
| Death of the employee's or their spouse's/partner's second-degree relatives | 1 day |
In addition to the above, Luxembourg also guarantees other leaves depending on the specific circumstances, including leaves for personal reasons, training leave, leave for those holding elected office, leave for extra-professional activities and leave for reasons of force majeure.
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