Looking for a PEO and EOR service provider in Luxembourg? You've knocked on the right door! Our European PEO and EOR solutions help companies hire employees in Luxembourg without establishing a legal entity. Hiring and employment in Luxembourg can be complex as a foreign employer. We're here to guide you. EuroDev is the leading provider of EOR & PEO solutions in Europe. We partner with North American businesses that want to expand their business into Europe, including Luxembourg. What should be taken into account when employing or hiring in Luxembourg?

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How it works - PEO in Luxembourg & EOR in Luxembourg

An Employer of Record (EOR) or Professional Employer Organization (PEO) is a company or organization that is legally responsible for paying employees, including dealing with employee taxes, benefits & insurances. As the EOR/PEO of your employees in Europe or Luxembourg, we provide you with tailored payroll, HR, and compliance services. Through this construction, we decrease all the complications such as compliance issues, setting up a foreign establishment, and setting up employment contracts in a different language. 

Benefits of a PEO in Luxembourg & EOR in Luxembourg

  • Expand without an entity 
  • Flexible and cost-effective solution to outsource payroll and HR functions for international expansion 
  • In compliance with foreign local laws & regulations 
  • Minimizes employment liabilities and risks 
  • Reduced risk, as the risks of being an employer fall almost completely on the employer of record 
  • Saves you time to focus on your core business 
  • You manage your employees 
  • EOR and /or PEO takes care of registration and contact with local authorities

Employment Contracts Luxembourg

An employee can be hired through a contract of employment for an indefinite period of time or for a fixed period of time, which can be full-time or part-time. The most common contract in Luxembourg is for an indefinite period, which means that no term has been agreed upon by the parties.

The fixed-term contract can only be used in exceptional circumstances for the performance of a specific and temporary task - for example;

  • replacement of an absent employee due to sick leave, maternity leave, etc.
  • specific and temporary work due to a temporary and exceptional increase in the company's activity or in the event of the creation or expansion of a company
  • occasional and punctual tasks that are outside the company's ordinary activities, etc.

Employment contracts must be drawn up in writing and must stipulate the essential elements of the contract, such as the employee's remuneration, benefits, and the weekly working hours provided. A probationary period can be agreed upon and signed, which can range from 2 weeks to 12 months. Longer probationary periods may be reserved for those with more advanced qualifications or higher salaries. Both parties may terminate the contract promptly and without compensation during the probationary period.

PEO and EOR service providers in Luxembourg will support you with the set-up of a local employment contract.

Employment Termination Luxembourg - Notice Period Luxembourg

In order to terminate an employment contract in Luxembourg, in particular in the case of an open-ended contract, the Labor Code requires written notification to the other party prior to termination, except in the case of gross misconduct.

Employment contracts may be terminated for the following reasons.

  • The work for a specific project is complete
  • For gross misconduct
  • At the end of a fixed-term contract
  • By mutual consent of the employee and the employer
  • Personal reasons
  • Business needs

Dismissal is prohibited under certain circumstances, such as pregnancy, maternity leave, or illness of the employee.

The notice period, which is not applicable in the case of dismissal for gross misconduct, depends on the length of service:

  • Less than 5 years: 2 months notice period
  • Between 5 and 10 years: 4 months notice period
  • More than 10 years: 6 months notice period

In the event that collective agreements contain provisions on notice periods, the employer and the employee must observe the notice periods stipulated in the collective agreement.

Social Security for Employers in Luxembourg

In Luxembourg, both the employer and the employee pay social security contributions. On average, employers are required to pay between 12.22% and 14.82% of employees' gross income.  

Employer Payroll (Social Security) Contributions %
Pension 8.00%
Health Insurance 2.80% to 3.05%

Accident at Work

0.68% - 1.13%
Mutual Health Benefit 0.60% - 2.98%
Health at Work 0.14%
Total Additional Employment Costs 12.22% to 15.30%

 

Average Salary Luxembourg & Average Employer Costs Luxembourg

In 2020, the average salary in Luxembourg was 66,569 EUR, which is equivalent to 75,529.85 USD. This is higher than the average annual salary in the United States, which is $65,835.58 USD. As an employer, the average cost of employment is between 12.22% and 14.82% higher than the gross annual salary in Luxembourg. Based on an annual salary of 75,529.85 USD, the average labor costs are between USD 84,759.60 and USD 86,723.37. 

To learn more about the average salaries in Europe and the actual employment costs in Europe, we invite you to read this article on the Costs of hiring European employees.

Working Hours Luxembourg

The normal working week in Luxembourg is 8 hours per day and 40 hours per week. All working hours exceeding the standard number of working hours per week are paid as overtime and are regulated by the employment contract/collective agreements. The employee and the employer must also agree and inform the labor authorities before starting to work overtime. In general, the maximum limits for overtime should not exceed 2 hours per day and 8 hours per week.

Overtime is compensated at a rate of 150% of the regular wage rate.

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Paid Vacation Leave Luxembourg

Employees receive a minimum of 26 working days of paid vacation per year. In addition, certain employees automatically receive additional leave:

  • Persons with disabilities or victims of an industrial accident - 6 extra days of leave
  • Mining employees - 3 additional days of leave
  • An employee or apprentice who has not had a continuous rest period of 44 hours per week - 1 additional day for every 8 weeks during which the employee does not have a continuous rest period.
  • Additional paid vacations may be granted by collective agreements or employers.

To learn more about the average paid vacation days in Europe and how Luxembourg compares to the rest of Europe, we invite you to read our blog on paid vacation days in Europe.

Public Holidays Luxembourg

In addition to the usual national holidays, certain days may be observed depending on where the employee lives. The main public holidays, on which most employees in Luxembourg have time off, are listed below.  

  • New Year's Day - 1 January
  • Good Friday - 15 April 
  • Easter Monday - 18 April
  • Labour Day - 1 May
  • Europe Day - 9 May
  • Ascension Day - 26 May
  • Whit Monday - 6 June
  • National Day - 23 June
  • Assumption Day - 15 August
  • All Saints' Day - 1 November
  • Christmas Day - 25 December
  • St. Stephen's Day - 26 December

Add 2022 Luxembourg Public Holidays to your calendar

Maternity and Paternity Leave Luxembourg

Maternity leave in Luxembourg is 20 weeks and can start 8 weeks before the expected date of delivery. In order to benefit from it, the woman must have been covered by the compulsory health insurance for at least 6 months during the last 12 months before the maternity leave. The employee is paid by the National Health Fund (CNS) during the maternity leave.

Paternity leave is specified in the employment contract. It usually lasts up to 10 days and does not have to be taken consecutively. The father must inform his employer at least two months before the planned date of leave. Otherwise, the days of leave may be reduced to 2 days. 


Learn more about PEO and EOR in Europe:

Get in contact or request a quote

 

Learn more about PEO and EOR in other European countries:


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PEO and EOR in
the UK

Currency: Pound Sterling (GDP)
Payroll Frequency: Monthly
Employer Taxes: 13.80%

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PEO and EOR in
Germany
 

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 19% - 20%

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PEO and EOR in
Italy
 

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 29% - 32%

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PEO and EOR in
France 

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 40% - 50%

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PEO and EOR in
Netherlands

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 23.59%

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PEO and EOR in
Spain

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 29.90%

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PEO and EOR in
Poland

Currency: Polish Złoty (PLN)
Payroll Frequency: Monthly
Employer Taxes: 19.48% - 22.14%

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PEO and EOR in
Denmark

Currency: Danish Kronne (DKK)
Payroll Frequency: Monthly
Employer Taxes: 14,892 DKK per year

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PEO and EOR in
Ireland

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 15.05%

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PEO and EOR in
Portugal

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 26.50%

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PEO and EOR in
Belgium

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 25% - 27%

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PEO and EOR in
Slovenia

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 16.10%

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PEO and EOR in
Greece

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 22.54%

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PEO and EOR in
Austria

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 21.23%

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PEO and EOR in
Finland

Currency: Euro (EUR)
Payroll Frequency: Monthly
Employer Taxes: 19.85% - 21.25%

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PEO and EOR in
Croatia

Currency: Croatian Kuna (HRK)
Payroll Frequency: Monthly
Employer Taxes: 16.50%

Interested in European expansion? Exciting! I am looking forward to discussing your European HR needs.

Monique Ramondt Sanders

Executive Vice President | HR Outsourcing