Establishing and managing a payroll in Luxembourg
The small European county of Luxembourg is a business hub and has one of the highest levels of GDP per capita in the world. Many organizations choose to expand their operations to the country, a process that generally involves establishing an in-country entity and hiring employees locally.
However, the process of hiring and setting up a payroll in Luxembourg can be difficult for foreign companies, with complex administrative processes, different languages, and potential delays
At Horizons, we provide tailored system for Luxembourg payroll outsourcing to help organizations expand their operations into Luxembourg. We can take care of your organization’s payroll setup and ongoing management, giving your organization the flexibility to focus on your expansion operation, even if you don’t have a registered entity in Luxembourg.
If you have an entity
If your organization already has an entity in Luxembourg, Horizons can set up your Luxembourg payroll outsourcing and manage all associated HR, administration, and compliance work.
This service is an ideal option for larger businesses interested in committing long-term to their Luxembourg expansion.
If you don’t have an entity
If your organization does not have an entity in Luxembourg, we can provide comprehensive support to set up and manage a payroll and hire your local workforce. Through our Luxembourgian subsidiary, you can hire and pay your staff, giving you greater flexibility and a low-risk route of entry into the Luxembourg market.
Expanding your business in Luxembourg with Horizons
Luxembourg payroll guide
Taxation and withholdings in Luxembourg
Employers and employees in Luxembourg are required to pay a percentage of salaries into social security schemes, which cover various social benefits such as pensions, disability insurance, parental leave, workplace accidents, and so on. Employers generally need to contribute around 12.5-15.5%.
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).
Entitlements and terminations rules in Luxembourg
Employers in Luxembourg must give 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 pay 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.
How to establish Luxembourg payroll outsourcing
To establish and run a payroll yourself, your organization will need to follow Luxembourg’s unique regulations, which are also influenced by EU laws. You may need to travel to the country in person, and you will likely need to open bank accounts and register with multiple authorities.
Alternatively, you can outsource everything to Horizons. Our experts can manage the entire Luxembourg payroll outsourcing process for you, from setup to management, HR, and hiring, even if your business does not already have a registered entity in Luxembourg. You can be up and running in a matter of days, not weeks or months.