Table of Contents
Key Country Facts
Luxembourg, officially the Grand Duchy of Luxembourg, is a country in Northwestern Europe. It is one of the world’s smallest countries and has the third-highest GDP per capita in the world (after Qatar and Macau). The Grand Duchy is a constitutional monarchy, a parliamentary democracy and a prominent financial center.
Luxembourg is bordered by Belgium to the west and north, France to the south and Germany to the northeast and east. The country has an area of 2,586 square kilometers and is divided into two principal regions: the hilly and forested region of Oesling in the north and the urbanized Gutland in the south.
Luxembourg has a mild climate marked by considerable precipitation, with mild summers and moderate snowfall in the winter.
Luxembourg has been passed back and forth between various European powers throughout history – the French, Spanish, Austrians and back again to the French. Because of this, the country’s motto is ‘mir wëllebleiwewatmirsinn,’ which means ‘we want to remain what we are.
Christianity is the dominant religion in Luxembourg and over 87% of the population ire Roman Catholic. The remaining 13% are Protestants, Jews and Muslims.
There are three official languages in the Grand Duchy of Luxembourg: Luxembourgish, French and German.
It is important for employers in Luxembourg to understand and comply with the country's employment laws and regulations regarding maternity leave, paternity leave, parental leave, annual leave, sick leave, and other types of leave. By providing these benefits and complying with the relevant laws and regulations, employers can maintain a positive employment relationship with their employees and attract and retain talent in the competitive labor market.
In Luxembourg, the standard payroll cycle is monthly. Salaries are typically paid on the last working day of the month. Some companies may also choose to pay their employees on a weekly or bi-weekly basis.
Employment law in Luxembourg is governed by the Labour Code. This law sets out the basic rules and regulations for the employment relationship, including working hours, minimum wage, and termination of employment. Employers must comply with these regulations in order to avoid legal action or penalties.
In Luxembourg, all employees are entitled to a written employment contract. The contract must include details such as the employee's job title, start date, working hours, salary, and any other benefits or entitlements. The contract must be signed by both the employer and employee before the start of employment.
The employment contract can be for a fixed-term or indefinite duration. If the contract is for a fixed-term, it must include the duration of the contract and the reason for the fixed-term arrangement. It is also possible to have a trial period, which is usually no longer than three months.
In addition to the written employment contract, employers must also provide employees with a copy of the company's work regulations. These regulations outline the specific rules and policies of the company, such as holiday entitlements, sick leave, and disciplinary procedures.
In Luxembourg, employees are entitled to a minimum notice period before termination of their employment contract. The notice period varies depending on the length of service, with longer notice periods for employees with longer service. Employers must provide written notice of termination, which must include the reasons for the termination and the date of termination.
Probation Period / Trial Period
In Luxembourg, a probationary period is allowed at the start of employment. The duration of the probationary period is usually three months but may be extended to a maximum of six months for certain jobs. During this period, the employer can terminate the employment contract with shorter notice and without having to provide a specific reason.
The standard working week in Luxembourg is 40 hours, with a maximum of 8 hours per day. Overtime is permitted, but it must be paid at a higher rate than regular hours. The maximum amount of overtime that an employee can work is 10 hours per week. Employers are required to keep accurate records of the hours worked by their employees.
In Luxembourg, overtime is paid at a higher rate than regular hours. The overtime rate varies depending on the day and time worked. Overtime worked on weekdays is paid at 140% of the regular rate, while overtime worked on weekends and public holidays is paid at 175% of the regular rate.
Employers in Luxembourg are not legally required to pay bonuses to their employees, but many companies offer them as a way to incentivize and reward performance. Bonus payments are typically made at the end of the year, and the amount can vary depending on the employee's performance and the company's financial performance.
In Luxembourg, an employment contract can be terminated by either the employer or the employee. The reasons for termination must be justified and must comply with the terms of the employment contract and the relevant employment laws. Employers must provide written notice of termination, which must include the reasons for the termination and the date of termination. The notice period varies depending on the length of service, with longer notice periods for employees with longer service.
The notice period in Luxembourg varies depending on the length of service. For example, an employee with less than 5 years of service is entitled to a notice period of 2 months, while an employee with more than 20 years of service is entitled to a notice period of 6 months.
Redundancy / Severance Pay
In Luxembourg, redundancy is possible if the employer can demonstrate a valid economic reason for the termination. The employer must follow a strict procedure, which includes providing written notice, holding consultations with the employee, and offering alternatives to termination, such as reassignment to a different position. If an employee is made redundant, they are entitled to receive severance pay.
In Luxembourg, female employees are entitled to 16 weeks of maternity leave. This period can start up to 8 weeks before the expected due date and must be taken in one continuous block. During this period, the employee is entitled to receive a maternity allowance from the national social security system. The amount of the allowance is based on the employee's salary and is paid for the entire period of maternity leave.
In Luxembourg, male employees are entitled to 10 days of paternity leave. This leave must be taken within 6 months of the birth of the child and can be taken in one continuous block or in separate periods. During this period, the employee is entitled to receive a paternity allowance from the national social security system. The amount of the allowance is based on the employee's salary and is paid for the entire period of paternity leave.
In Luxembourg, both male and female employees are entitled to parental leave. This leave can be taken until the child's 12th birthday and must be taken in one continuous block. The duration of the parental leave depends on the employee's length of service and can range from 6 months to 6 years. During this period, the employee is not entitled to receive a salary from the employer but may be entitled to receive a parental allowance from the national social security system.
Vacation and Annual Leave(paid time off)
In Luxembourg, employees are entitled to a minimum of 25 days of annual leave per year. This entitlement is based on a standard work week of 5 days. Employees who work more than 5 days per week are entitled to additional days of annual leave. Annual leave must be taken within the calendar year in which it is accrued and cannot be carried over to the following year.
In Luxembourg, employees are entitled to paid sick leave. The length of sick leave entitlement varies depending on the employee's length of service, with longer service resulting in longer entitlement. Employees must provide a medical certificate to their employer in order to claim sick leave.
In Luxembourg, employees are entitled to several other types of leave, including bereavement leave, family support leave, and time off for training or education. The duration of this leave and the entitlement to pay during this period depends on the circumstances of the leave and the specific terms of the employment contract.
Employers in Luxembourg may offer additional benefits to their employees, such as health insurance, pension plans, and other types of insurance. The specific benefits offered depend on the employer and the specific terms of the employment contract.
In addition to the entitlement to annual leave, employees in Luxembourg are entitled to several public holidays each year. There are 11 public holidays in Luxembourg, including New Year's Day, Easter Monday, Labour Day, National Day, All Saints' Day, and Christmas Day.
Understanding the taxation system in Luxembourg is important for both employees and employers. Employers must ensure that they are withholding the correct amount of income tax and social security contributions from their employees' salaries, while employees must ensure that they are aware of their tax obligations and filing their tax returns correctly. Seeking advice from a tax professional can be helpful to ensure compliance with the relevant regulations and laws.
Personal Income Tax
In Luxembourg, personal income tax is levied on residents on their worldwide income and on non-residents on their Luxembourg-sourced income. The tax rates are progressive and range from 0% to 43% depending on the level of income.
The tax brackets for personal income tax are:
- Up to €11,265: 0%
- €11,265 - €13,000: 8%
- €13,000 - €15,000: 10%
- €15,000 - €17,000: 12%
- €17,000 - €20,000: 14%
- €20,000 - €25,000: 16%
- €25,000 - €30,000: 18%
- €30,000 - €36,000: 20%
- €36,000 - €45,000: 23%
- €45,000 - €60,000: 28%
- €60,000 - €100,000: 35%
- Over €100,000: 43%
In Luxembourg, social security contributions are mandatory for employees and employers. The contributions are based on a percentage of the employee's gross salary and are used to fund the social security system, which provides various benefits and services to residents of Luxembourg.
The social security contributions rates are:
- Pension: 8.00% for employees, 8.00% for employers
- Health insurance: 3.05% for employees, 3.05% for employers
- Disability insurance: 1.40% for employees, 1.40% for employers
- Unemployment insurance: 1.20% for employees, 1.20% for employers
- Maternity insurance: 0.25% for employees, 0.25% for employers
In addition to the above, there are also contributions for other funds, such as the Employment Fund, which provides assistance to job seekers, and the National Solidarity Fund, which provides social benefits to residents in need. These contributions vary depending on the employee's salary and employment status.
It is worth noting that Luxembourg also has a wealth tax, which is levied on individuals who have a net worth of over €1.5 million. The wealth tax rate is 0.5% for net wealth between €1.5 million and €3 million, and 0.7% for net wealth over €3 million.
Visas and Foreign Workers
In order to work in Luxembourg as a foreign national, you will generally need to obtain a work visa. Here is some general information about the work visa process in Luxembourg:
- Work Permit: Before applying for a work visa, your employer will need to obtain a work permit from the Luxembourg Ministry of Foreign and European Affairs. This permit confirms that there are no Luxembourg nationals available for the position and that the conditions of employment are in accordance with Luxembourg law.
- Visa Application: Once the work permit has been obtained, you can apply for a work visa at the Luxembourg embassy or consulate in your home country. You will need to provide the following documents:
- A valid passport
- A copy of the work permit
- A recent passport-sized photo
- Evidence of your qualifications and work experience
- A criminal background check
- Proof of health insurance
- Processing Time: The processing time for a work visa can vary depending on the embassy or consulate and the complexity of your application. Generally, it takes around 1-3 months to process a work visa application.
- Duration of Stay: Once you are issued a work visa, you can enter Luxembourg and work for the employer who sponsored your application. The duration of stay on a work visa can vary, but it is usually valid for one year and can be extended if necessary.
- Renewal: If you wish to continue working in Luxembourg after your work visa expires, you will need to renew your work permit and work visa. You will need to provide updated information and evidence that the conditions of your employment are still in compliance with Luxembourg law.
It is important to note that the work visa process in Luxembourg can be complex, and it is recommended that you seek the assistance of a professional immigration lawyer or consultant to guide you through the process. They can help you prepare your application, provide guidance on the required documents and procedures, and increase your chances of success.