Expand your organization into Luxembourgeven if you don’t have an in-country entity
The tiny Western European nation of Luxembourg has a huge amount of history and culture packed into its compact territory of just over 250,000 square kilometers. It also has one of the highest GDP ratings in the world, and is an extremely popular place to do business.
However, if your organization is planning an expansion into Luxembourg, you should be prepared to tackle the country’s complex business and employment regulations, which are also influenced by the European Union. If you are unfamiliar with the local customs and procedures, you may encounter delays, which could cause costs to grow out of control.
At Horizons, we offer advice and support to businesses of all kinds expanding into Luxembourg. Our tailored professional employer organization (Luxembourg PEO), employer of record, and payroll services can provide you with all the support you need to efficiently expand your business into Luxembourg, whether or not you have already established a Luxembourgian entity.
Additionally, our dedicated in-house recruitment team can find, hire, and onboard your new employees in Luxembourg, as well as manage any ongoing HR and compliance administration. Our dedicated team will provide everything you need to expand into Luxembourg as efficiently as possible and could drastically cut your expansion costs.
Our Luxembourg PEO can simplify your expansion
Horizons enables your business to expand its operations into Luxembourg, without setting up a legal subsidiary.
Hiring in Luxembourg: Employment law overview
📝 Employment contracts in Luxembourg
We strongly recommend producing a formal employment contract when hiring any employees in Luxembourg. English is widely spoken, but contracts should be in one of the official local languages (Luxembourgish, German, and French), and use the local currency of the Euro. Contracts should also include any relevant information about the agreement, such as salary/wage, working hours, sick leave entitlement, and so on.
By partnering with our Luxembourg PEO, Horizons’ team of local experts can provide assistance for drafting strong employment contracts that are compliant with local regulations.
⏰ Working hours in Luxembourg
The normal maximum working week in Luxembourg is 40 hours. Beyond this, workers must be paid at an overtime rate of at least 140% of normal pay. These limits do not apply to employees in certain roles, such as senior management.
📅 Public holidays in Luxembourg
🏖 Luxembourg vacation leave
Employees in Luxembourg who have been working for the same employer for at least three months are entitled to a minimum of 25 days of paid vacation leave. If they are unable to use the leave in the same year, it can be carried over until the the end of March the following year.
😷 Luxembourg sick leave
Employees who cannot work due to sickness must provide a medical note on the third day of absence. Employees are then protected from dismissal for the following 26 weeks. Workers are also entitled to full pay and benefits for three months following the month that their sickness began. Beyond this, employees are compensated partially by the state and their employer must make up the difference to equal normal pay. This can continue for up to one year after the sickness began.
👶 Parental leave in Luxembourg
Female employees in Luxembourg can take paid maternity leave for 16 to 20 weeks. The compensation is covered by the state up to a maximum payment of 5X minimum wage, and the rest of the employee’s salary is paid by the employer.
In some cases, both the mother and father are entitled to six months of parental leave (full-time) or one year of parental leave (part-time) until their child is five years old. This time can be compensated by the state.
💰 Terminations and severance in Luxembourg
Employers in Luxembourg must provide notice of termination ranging from two to six months when terminating indefinite-term contracts. Employees are legally entitled to a severance payment if they have been with the employer for at least five years, and the payment can range from one to 12 months based on their level of seniority.
Employees who resign from a role must provide half of the normal notice period, and are not entitled to severance or unemployment benefits.
Different rules apply for employees in probationary periods, which can vary from two weeks up to one year in length, and employees may not be entitled to any notice of termination during this time.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. Horizons’ Luxembourg PEO can mitigate risk for foreign companies and provide guidance through this process.
🏦 Taxation in Luxembourg
Employers and employees in Luxembourg must both contribute towards social security funds, which cover things like pensions, sick pay, maternity pay, accident insurance, and so on. Employers generally need to contribute around 12.5-15.5% (with a maximum limit).
Employees in Luxembourg must pay a solidarity tax of 7% (9% for some higher earners), and are also taxed progressively at a rate that depends on income level.
Companies in Luxembourg must pay several taxes, including a solidarity tax, a municipal tax, and a corporate tax on profits. In total, the total contribution is 24.94% for most businesses (as of 2019/20).
🏥 Health coverage in Luxembourg
High-quality healthcare is funded through taxes (contributed by both employers and employees), so private insurance is not required. Some employers may choose to offer it, but it is not necessary or expected.
💳 Luxembourg compensations & benefits
Compensation laws in Luxembourg
The standard minimum wage in Luxembourg for employees over the age of 18 is 2071.07 euros per month, although skilled workers are entitled to a 20% higher minimum.
Benefit management in Luxembourg
Many employees in Luxembourg expect benefits packages with their jobs, so you may want to set up a system when hiring in the country. However, establishing a benefits system in Luxembourg can be a difficult process, particularly if you are unfamiliar with the country’s unique laws and administrative processes.
Horizons can help to significantly simplify this phase of your Luxembourg expansion by providing benefit management outsourcing. Our team can advise you and handle the setup of your benefit scheme, enabling you to focus on expanding your organization in Luxembourg.