Luxembourg
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See how hiring works in Luxembourg
Learn about local payroll, taxes, and employment laws in Luxembourg
Minimum Wage Standards
Luxembourg applies differentiated minimum wage rates based on employee qualifications. As of 2025, non-qualified workers receive a minimum of €2,837.79 monthly, while qualified workers earn €3,165.35 per month minimum.
These rates apply to standard full-time employment (40 hours weekly). Part-time employees receive proportional compensation based on their working hours.
Income Tax Structure
Luxembourg's personal income tax follows a progressive structure with rates spanning from 8% to 42%. Tax calculations incorporate multiple factors including marital status, number of dependents, and total annual income.
| Tax Characteristics | Details |
|---|---|
| Minimum Rate | 8% |
| Maximum Rate | 42% |
| Rate Structure | Progressive scale |
| Calculation Factors | Income level, family situation, dependents |
Employer Contributions
Employer social charges in Luxembourg amount to approximately 11.94% of gross salary, covering various mandatory insurance schemes and benefits.
Mandatory Employer Charges:
- Pension Fund Contribution (Caisse de pension): 8%
- Health Insurance - Medical Care (Caisse de maladie soins): 2.8%
- Sickness & Maternity Fund (Caisse de maladie soins): 0.25%
- Workplace Accident Insurance: 0.75%
- Pre-employment Medical Assessment: 0.14%
- Professional Fitness Monitoring: included
Additional Employment Costs:
- Communication Allowance: €15 monthly
Important Note: These percentages represent standard rates for general guidance. Actual employer costs may vary depending on industry sector, collective bargaining agreements, and specific employment conditions. Contact our team for precise calculations based on your specific situation.
Overtime & Working Hours
Overtime compensation in Luxembourg is mandatory for all employees except senior management positions. Overtime premiums vary based on when the additional hours are worked.
Standard working schedule: 40 hours per week, typically 8 hours per day, Monday through Friday.
| Work Period | Compensation Rate |
|---|---|
| Regular Overtime Hours | 140% of standard hourly rate |
| Public Holiday Work | 200% of standard hourly rate |
| Sunday Work | 170% of standard hourly rate |
| Night Hours (22:00-06:00) | 115% of standard hourly rate |
Alternative arrangement: Employees may opt for compensatory time off instead of monetary payment. In this case, 1 hour of overtime equals 1.5 hours of compensatory rest.
Maternity Leave
Female employees in Luxembourg are entitled to 20 weeks of fully paid maternity leave, divided into prenatal and postnatal periods. Eight weeks must be taken before the expected delivery date (prenatal period), with the remaining 12 weeks following birth (postnatal period).
During this entire period, employees receive 100% of their average gross salary calculated from the three months preceding leave commencement. Social Security (Caisse de maladie) finances this compensation rather than the employer.
Medical appointments related to pregnancy are employer-paid and do not reduce maternity leave entitlement. No minimum service period is required to qualify for maternity benefits.
Paternity Leave
Partners of employees who give birth receive 10 calendar days of paid paternity leave. This leave must be utilized within two months following the child's birth.
The leave may be taken as a single continuous period or split into two separate periods of five days each, offering flexibility to new fathers.
Compensation structure: The employer funds the first two days at 100% of salary, while Social Security covers the remaining eight days at 100% of average salary.
Parental Leave
Following maternity or adoption leave, parents may access parental leave lasting up to six months. The duration varies based on employment status and contractual working hours.
Both parents can utilize parental leave for the same child, but the periods cannot overlap. Parents choose how to distribute the available leave time between them.
Social Security calculates compensation based on the employee's average gross salary from the previous 12-month period. Either parent may take this leave, and it may be accessed until the child reaches age six.
Sick Leave
Employees experiencing illness receive unlimited sick leave days provided they submit appropriate medical certification.
The employer maintains salary payments at 100% for the initial 77 calendar days of illness. If day 77 falls mid-month (for example, March 18th), the employer continues full payment through the end of that calendar month.
From the first day of the month following the 77-day period, Social Security assumes payment responsibility at 100% of regular salary, subject to a ceiling of five times the minimum social wage. Direct medical certification to Social Security becomes mandatory at this stage.
Termination Framework
Employment termination in Luxembourg requires strict adherence to established legal procedures and employee home country regulations. The employer coordinates all separation processes with relevant stakeholders, which may involve administrative costs and specific procedural requirements.
Luxembourg labor law prohibits at-will termination. Employers must demonstrate just cause when ending employment relationships.
Legally recognized termination methods include:
- Employee voluntary resignation
- Mutual agreement between parties
- Employer-initiated termination during probation period
- Termination based on objective grounds (restructuring, redundancy)
- Disciplinary dismissal for serious misconduct
- Performance-based termination due to role unsuitability
- Contract expiration (fixed-term agreements)
Notice Period Requirements
Notice period duration in Luxembourg depends on employment length and which party initiates termination. Minimum notice is 30 days, with extended periods for longer service.
When employer terminates employment:
- Service under 5 years: 60 days notice
- Service 5-10 years: 120 days notice
- Service exceeding 10 years: 180 days notice
When employee resigns:
- Service under 5 years: 30 days notice
- Service 5-10 years: 60 days notice
- Service exceeding 10 years: 90 days notice
Severance Compensation
Severance obligations apply when employees with five or more years of service are terminated without proper notice or due to company initiatives. Compensation equals 30 days of salary per year of service, with a maximum cap of 25 months total compensation.
| Years of Service | Severance Entitlement |
|---|---|
| 5-10 years | 4 months salary |
| 10-15 years | 2 months salary |
| 15-20 years | 3 months salary |
| 20-25 years | 6 months salary |
| 25-30 years | 9 months salary |
| 30+ years | 12 months salary |
Risk Management: Our employer of record solution incorporates a Severance Reserve mechanism for all employment agreements to prevent unexpected financial exposure. This feature applies automatically where Luxembourg law mandates severance, with amounts determined by our specialists based on statutory requirements, market practices, and litigation risk assessment. Any unused reserve funds return to you if the employee departs voluntarily or doesn't qualify for severance benefits.
Paid Annual Leave
Luxembourg law guarantees all full-time employees 26 working days of paid vacation annually. This entitlement accrues monthly at a rate of 2.17 days per month.
Employees become eligible for vacation time after completing three continuous months of employment. Part-time workers receive proportional vacation days based on their contractual working hours.
Public Holidays
Luxembourg recognizes 11 official national holidays annually. These dates are fully paid non-working days for all employees.
Official public holidays include:
- New Year's Day (January 1)
- Easter Monday
- Labour Day (May 1)
- Europe Day (May 9)
- Ascension Day
- Whit Monday
- National Day (June 23)
- Assumption Day (August 15)
- All Saints' Day (November 1)
- Christmas Day (December 25)
- St. Stephen's Day (December 26)
How it works
Your Global Hiring Process
We take care of employing your team, so you can focus on growing
You choose the talent
You select the candidate you want to hire, anywhere in the world.
We employ them for you
MB Remote becomes the legal employer and handles contracts, payroll, and local labor laws.
Your team starts working
Your employee works directly with you, just like an in-house team member.
We manage compliance
We ensure ongoing payroll, taxes, and legal compliance in the employee’s country.
Frequently Asked Questions
These are the most commonly asked questions about the Employer of Record
Can’t find what you’re looking for? Get in touch with an expert
Is it free to contact MB Remote?
Yes. Contacting us is completely free and without obligation. We’ll discuss your needs and explain how our EOR solution works before anything else.
How long does it take to hire an employee?
Hiring can usually be completed within a few days, depending on the country and local requirements.
What is an Employer of Record (EOR)?
An Employer of Record is a legal entity that employs workers on your behalf. MB Remote handles contracts, payroll, taxes, and local labor law compliance, while you manage the day-to-day work.
Who is the legal employer of the employee?
MB Remote is the legal employer, but the employee works exclusively for you as part of your team.
In which countries can you hire employees?
We support hiring in multiple countries. Contact us to check availability for a specific location.
How does payroll work?
We manage payroll, taxes, and social contributions in compliance with local regulations. You receive one simple monthly invoice.
Is my company still in control of the employee?
Yes. You manage tasks, schedules, and performance. We handle the legal and administrative side.