Luxembourg has many opportunities for companies looking to expand overseas, with strong banking, steel, and IT sectors. Staying ahead of payroll and compliance requirements is vital to your success.

There are several types of companies that can be established in Luxembourg, including general partnerships, co-operative companies, and private limited liability companies. Branches of foreign companies operating in Luxembourg must register yearly with tax authorities. Local companies are registered with the Tax Office.

Payroll and Tax Considerations

  • The social minimum wage is €2,141 per month. The minimum wage is increased 20% for a skilled worker and decreased by 20-25% for employees under 18 years old
  • Employees can choose to be paid for overtime or they can receive extra time off. Overtime is paid at 1.5 hours of time off per hour of overtime worked
  • Severance pay is given if the employee has worked in the business for 5 or more years and if they were dismissed for any reason other than serious misconduct
  • Employees who live in Luxembourg for over 6 months in a 2-year period are considered residents and are taxed on their income earned in Luxembourg and their worldwide income
  • Non-residents pay tax on earnings made in Luxembourg only
  • Individual taxpayers are categorized into 3 classes depending on their marital status. The taxable amount is calculated differently for each class. Income tax rates are progressive and range from 8 – 42%

HR and Statutory Requirements

  • All employees are entitled to paid recreational leave of 26 days per year after working 3 months with the same employer
  • Employees are protected against dismissal for being ill for a maximum of 77 days. On the 3rd day of illness the employee must provide a doctor’s note
  • Employees receive 20 weeks of maternity leave including 8 weeks before childbirth and 12 weeks after
  • The employer is required to hold the job for the employee who is on maternity leave, or if not possible, a similar job with an equivalent salary must be made available to the employee
  • Employees receive 10 days of paternity leave. The employee must notify their employer at least 2 months before their expected leave time
  • The legal retirement age is 65 years. Employees are eligible for old age pension if they have paid mandatory, optional, or retroactive insurance premiums for at least 120 months
  • Contributions to social security are made by both the employee and employer

Holidays in Luxembourg

  • January 1 – New Year’s Day
  • April 18 – Easter Monday
  • May 1 – Labor Day / May Day
  • May 26 – Ascension Day
  • June 6 – Whit Monday
  • June 23 – National Day
  • August 15 – Assumption of Mary
  • November 1 – All Saints’ Day
  • December 25 – Christmas Day
  • December 26 – St. Stephen’s Day

If you need help managing employee payroll and compliance in Luxembourg, we can help. Our easy-to-use cloud-based payroll platform provides customized monthly reporting with real-time access across 150+ countries. We have a hybrid service model with a dedicated US-based team and in-country experts to help when questions come up. To learn more, click here