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Employer of Record in Luxembourg

Employer of Record in Luxembourg

Skuad’s Luxembourg Employer of Record (EOR) solution helps your business expand into Luxembourg without the need for an entity setup. Luxembourg is a landlocked Western European country with an extremely stable and high-income market economy. Its main economic sectors are banking, finance, and knowledge services. Luxembourg has a large population of skilled, employable youth. Skuad’s strong global network and automated HR platform ensure the quick onboarding of remote teams, payroll management, and the formalization of contracts in compliance with the local laws. Learn more by getting in touch with Skaud experts

Luxembourg at a Glance

Population: 626,000 people (2020 estimate)

Currency: Luxembourg Franc, Euro

Capital city: Luxembourg City

Languages spoken: Luxembourgish, German, and French

Gross Domestic Product (GDP): USD 115,582 (2020)

GDP growth: 2.8% (2020

Employment in Luxembourg

The labor laws of Luxembourg are governed following the International Labor Organization’s (ILO) standards and Luxembourg’s Labor Code. Luxembourg’s employment laws apply to both foreign nationals and citizens. A brief overview of entitlements is given in the table below.

Entitlements Explanation
Statutory working hours The workday is capped at eight hours per day. A workweek, therefore, has 40 hours.
This can be extended to 10 hours per day and 48 hours per week, if necessary.
In strictly defined sectors, the workday can extend to 12 hours per day. Then, a workweek would be capped at 60 hours weekly.
Overtime Eligibility Overtime can only be implemented if it satisfies certain criteria, including,
  • To perform special work
  • To avoid the loss of perishable products
  • To avoid the loss of result of work
  • In the case of force majeure involving public interest or danger at the national level
An employee cannot perform more than two hours of extra work per day and not more than 10 hours per week. If an employee works overtime, they are entitled to a 40% increase in their hourly wage for each extra hour worked.
Paid public holidays
  • New Year’s Day (January 1)
  • Easter Monday (variable; changes every year)
  • Labor Day (May 1)
  • Europe Day (May 9)
  • Ascension Day (40 days after Easter)
  • Monday of Pentecoste/Whit Monday (50 days after Easter)
  • Birthday of the Grand Duke (June 23)
  • Assumption Day (August 15)
  • All Saints’ Day (November 1)
  • First Day of Christmas (December 25)
  • Second Day of Christmas (December 26)
Holiday pay Luxembourg has 25 days of annual paid leaves. Further, six more days are allowed for individuals with disabilities.
Sick leave Employees are entitled to paid sick leaves, provided they inform the employer and furnish a medical certificate.
Weekly rest day An employee is entitled to a minimum of 44 consecutive hours of rest in one week. If the employee has worked overtime to the count of eight hours, they are entitled to a supplementary one-day leave.
Emergency family leave An employee is entitled to the following emergency family leaves.
  • One day paid leave for subscribing to the military service
  • Two days for the birth of a legitimate child, a child’s marriage, in case of house moving, or to welcome their adopted child younger than 16 years of age
  • Three days for the death of a spouse or close relative
  • Six days for a worker’s marriage
Parental leave Parents have a right to a parental leave of six months per child to care for children younger than five years of age.
Maternity leave Female employees are entitled to eight weeks of paid maternity leave before the child’s birth and 12 weeks of paid maternity leave after the child’s birth.
Therefore, female employees are entitled to 20 weeks of paid maternity leave. To avail of this, the female employee must provide a medical certificate to the employer concerning the delivery date.
Paternity leave Upon the child’s birth, male employees are entitled to a paid paternity leave of 10 days. This leave must be availed of within two months of the child’s birth.
To avail of this, the male employee is required to give two months’ advance notice before the delivery date.
Adoption leave If an unmarried employee adopts a child, this employee is entitled to 12 days of paid adoption leave.
However, if a married couple adopts a child and both the spouses are employed by your company, only one of the spouses is entitled to the 12-day paid leave. The other spouse will be granted a 10 day special paid leave too.
Termination of employment An employer has to give notice to the employee stating the reasons why their employment is being terminated.
The various reasons for which an employer can terminate an employee are,
  • Personal reasons, such as poor performance, and incompatibility with the company
  • Needs of the business, such as restructuring that would require laying off employees
  • Serious misconduct; in such cases, the employer is not required to give notice either
  • Mutual consent
Companies with more than 150 employees are mandated to conduct a pre-dismissal interview before terminating a worker’s employment.
In this interview, the employee is told the employer’s reason for terminating their employment and given a reasonable opportunity to be heard, per the Principles of Natural Justice.
Employment contracts In Luxembourg, employment contracts can be for an indefinite period or a limited duration.
Every contract is required to be in writing, and one copy must be furnished to each party.
A fixed-term contract, that is, an employment contract for a limited duration, cannot be renewed more than twice or be longer than two years or 24 months.
For an employment contract to be valid in Luxembourg, the following prerequisites must be included.
  • The identity of both the parties, the employer and the employee
  • The details regarding the workplace
  • List of the employee’s duties
  • The benefits to which the employee will be entitled
  • The salary to which the employee will be entitled
  • The employee’s working hours
  • The annual leave that the employee is entitled to
  • Other details, such as the probationary period, if any, and the requirement of a notice within a certain period before termination of the contract
Health insurance benefits National healthcare is available to everyone. All individuals residing in Luxembourg generally belong to one of the many insurance funds, classified according to occupation.
Many people also buy private insurance plans to cover the features that are not paid for by the government’s national healthcare setup.
Employee protection and anti-discrimination rights The Labor Code of Luxembourg contains general provisions about occupational safety and health.
The 2006 law has defined the basic terms and conditions for work. It aligns with the ILO Conventions that it is a party to. According to it, any direct or indirect discrimination is prohibited based on the following.
  • Religion
  • Beliefs
  • Disability
  • Age
  • Sexual orientation
  • Race
  • Ethnicity
Confidentiality of personal information Luxembourg has organized the protection of personal data through its Data Protection Act, 2018.
This is to implement the General Data Protection Regulations (GDPR) of the European Union (EU). The purpose of the law is to ensure a mechanism to protect private and professional life.

As your EOR service, Skuad takes over the burden of all HR-related activities, such as onboarding employees, handling their payroll, and managing employee life cycle, while complying with Luxembourg’s employment laws. To expand your business in Luxembourg and tap into its growing economy, connect with Skuad experts today.

Contractors vs. Full-Time Employees

In Luxembourg’s employment laws, most employees are hired full-time. Short- or fixed-term contracts are not the norm. Hiring contractors or full-time employees come with several advantages and disadvantages. It is pertinent to keep these aspects in mind during the hiring process. 

First, you must consider how long you want a certain position to be filled. If it is a permanent position that would benefit your company throughout all projects that you undertake, you should hire a full-time employee. However, if it is a temporary position that you only need for a certain time during a specific project, you should hire a contractor. 

Advantages of Hiring Contractors

  • Flexibility: Since contractors are hired on a short-term basis, you are free to determine the scope of their work. If new needs arise, new contracts can be drafted in the short term.
  • Independence: Short-term contractors work on an independent timeline. They do not require close supervision; your resources can be transferred elsewhere, as needed. 
  • Cost: Hiring contractors may be cheaper in the long run although their rates are higher than those of full-time employees because the former are not entitled to employment benefits such as bonuses and tax compensations.

Advantages of Hiring Full-time Employees

  • Organizational commitment: Full-time employees are likely more loyal as they exclusively work for your company. As their success depends on the performance of your firm, they are anticipated to put more effort into their work. 
  • Knowledge: All employees undergo training when they join a firm. The skills and knowledge gained by a full-time employee, however, stay within the organization. 
  • Legal freedom: Since full-time employees are defined as such in their contracts from the outset, misclassifications and the repercussions thereof can be avoided completely. When hiring full-time employees, you determine the terms of the contract and entitlements, and these are not liable to change unless mutually decided by both parties. 

Disadvantages of Hiring a Contractor

  • A large number of job applicants, which makes the vetting process more difficult
  • Higher individual costs due to their specific areas of expertise, resulting in payment issues
  • Possible lack of dedication as they do not enjoy employee benefits entitled to full-time employees

Disadvantages of Hiring a Full-time Employee 

  • The costs associated with employee benefits, such as insurance and bonuses
  • Difficulty in attracting the right employees whose ideals align with organizational goals
  • Resources spent in training the employees before they can resume work

Whether your organization requires contractors or full-time employees, Skuad’s EOR solution can cater to all your hiring requirements in Luxembourg. Learn more by talking to Skuad experts.

Hiring in Luxembourg

Luxembourg is an upcoming destination for various global companies because of its young, talented pool of prospective employees. As per the Labor Code in Luxembourg, the same rights must be provided to both locals and nonresident employees. These are inclusive of international standards of labor protection such as providing adequate wages, not indulging in forced labor, adhering to the legal working age, protecting workers against harassment, and providing professional training where needed. To hire employees in Luxembourg, the employer must have an understanding of the Luxembourg laws that govern this process. 

Employers often advertise job openings on search portals and job websites. The most popular job search platforms in Luxembourg are as follows.

In addition to this, LinkedIn always has several job openings for Luxembourg hiring companies. 

Skuad can ease the hiring process for its clients and ensure carefully vetted candidates with exceptional talent are onboarded into your team. An EOR service such as Skuad can save you time, labor, and resources to expedite your hiring process, allowing you to focus on the business side of expansion in Luxembourg. Talk to Skuad experts to know more.

Probation & Termination

Probation Period

The probation period in Luxembourg varies from two weeks to six months. It is generally included within the employment contract. However, it cannot be extended beyond three months in specific cases depending on the employee’s wages and qualifications. 

The maximum duration of probation (after due extension) is 12 months. 

Termination of Service

A fixed-term contract cannot be longer than two years, including two renewals. Workers’ salaries cannot be discriminated against based on the type of employment.

To terminate the indefinite term employment contract, the Labor Code requires a written notice to the other party before termination. The only exception to this is if there is serious misconduct. The grounds for dismissal are investigated on a case-by-case basis by a judge who ultimately determines whether the facts justify a dismissal for gross misconduct.

Thus, employee contracts can be terminated when, 

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

However, the Luxembourg employee laws protect certain individuals from facing termination. These include, 

  • Pregnant women
  • Employees on parental leave
  • Employees absent due to illness 
  • Employees’ representatives (hired to protect employee interests in organizations with more than 15 employees)

For full-time employees, the notice period depends on the length of service, as follows.

Duration of Service Notice Period
Less than five years One month
More than five and less than 10 years Two months
Over 10 years Three months

To ensure your expansion endeavors adhere to the laws regarding probation and termination in Luxembourg, talk to Skuad experts and book a demo today.

EOR Solution in Luxembourg

Establishing a successful enterprise in a different country requires expert intervention as it is nearly impossible to know the varied compliance policies of the country. With their teams of experts, EOR services can simplify your task of conducting business globally. Their extensive research on the country’s laws and HR policies ensures business expansion at a faster pace. 

An effective EOR service manages the entire life cycle of the employees. They handle complex HR-related matters and let you focus on your core administrative tasks. 

Hire talent from Luxembourg and improve your business prospects with Skuad’s tech-enriched platform for managing remote teams. We can ensure that your expansion process is conducted in a user-friendly manner. Further, we offer a single invoice on which you can track the details of all your HR tasks.

General Employer of Record Service Terms

Taxes that apply to invoices In Luxembourg, the income tax liability is based on a person’s economic and personal situation (including their family status). Thus, individuals are granted one of the following tax classes.
  • Class 1, for single persons.
  • Class 2, for married persons and civil partners (under certain conditions).
  • Class 1a, for single individuals with children and single taxpayers who are at least 65 years of age on January 1 in a particular tax year.
Currency accepted EUR; sometimes, USD and LUF.
Required details and documents It is pertinent to note a Luxembourg work visa is required by non-national employees. Luxembourg also provides the service of an e-visa, which can be obtained online. The requirements are as follows.
  • A certified copy of the applicant’s passport. This passport must be valid and a copy of the entire passport is required.
  • The applicant’s curriculum vitae or resume.
  • A certified copy of the employment contract from the employer.
  • A letter from the prospective employer confirming the said employment.
  • All relevant professional degrees, diplomas, and qualification records.
It usually takes around four to 12 weeks for the Luxembourg work visa to be processed.

Outsourcing Employment through an Employer of Record

When, as an organization, you decide to expand into Luxembourg, you also need to decide the route you want to take: Whether you want to build an in-house team or take the services of an EOR to manage payroll and employee lifecycle. Skuad can assist you with your expansion endeavors from start to finish. Feel free to connect with us, to resolve any queries that might arise.

Types of Visas in Luxembourg

Type of Visa Explanation
Business Visa A business visa is a short-stay visa and is valid for up to 90 days. It is meant for short professional training or a business visit.
Work Visa A work visa is a long-stay visa and is valid for more than 90 days. This is essential for any worker who is employed in Luxembourg and can be of two types.
  1. Work visa for an employee
  2. Work visa for independent activity
Tourist visas Tourist visas are short-stay visas and are valid for 90 days. However, an employee cannot work in Luxembourg based on a tourist visa. This is only for travel purposes.
Other visas Short stay visas valid for up to 90 days for sports/cultural events, family visits, or for members for an ADS group, are allowed. Long stay visas valid for longer than 90 days are available for family visits and students.

It is pertinent to note that Swiss citizens and citizens of the European Economic Area (EEA) do not need a work visa or a work permit to work in Luxembourg. 

Feel free to connect with us and book a demo to find out how Skuad can help with work visas in Luxembourg.

Work Permit

All individuals planning to work in Luxembourg will need a work permit to stay compliant. This is in addition to the requirement of a business visa. Skuad’s local partner in Luxembourg can sponsor foreign workers for work permits.

Work Permit Explanation
Can Skuad sponsor work permits in Luxembourg? Yes, Skuad can sponsor work permits in Luxembourg.
Processing time The processing time is between four to 12 weeks.
Passport submission This is required to obtain a work permit so that the Luxembourg authorities can verify the employee’s identity.
Work permit validity It cannot exceed one year. It is renewable.
Where is the application processed? The application is processed at the Ministry of Foreign Affairs on recommendations by the Department of Employment.
Work permit requirements The documents required for a work permit are,
  • A valid work visa
  • Certified copy of the applicant’s passport
  • The applicant’s birth certificate
  • The applicant’s curriculum vitae/resume
  • Certified copy of diplomas, professional degrees, and qualifications
  • An employment contract with the employer
When can an employee travel to Luxembourg? Once the visa is available and valid.
What is the cost of a work visa? There is no standard cost and it depends on the country from where you are applying.
Duration of work visa processing Normally, a work visa takes between 15 to 60 days to be processed.
Can you switch a business visa to a work permit? No, this is not permitted.
Termination of work permit The work permit is valid only for one year. It is renewable.

To know more about work permits in Luxembourg and how Skuad can secure them for you, speak to our experts today and kick-start your expansion.

Payroll & Taxes in Luxembourg

Things You Must Know to Set Up Payroll in Luxembourg

To set up payroll in Luxembourg, you need to be aware of the rules, which vary from one category to the other. The foremost thing you must consider is whether you want to employ foreign professionals or locals. As a foreign company, you must adhere to the local tax laws such as income tax, business tax, withholding tax, employee compensation insurance, and social security costs. 

There are four ways to set up payroll in Luxembourg. 

  • Internal payroll: Headed by an in-house HR department. You will require local assistance for accounting and legal compliance. 
  • Remote payroll: Your parent company will manage payroll for your employees in Luxembourg remotely, in this case. 
  • Local payroll: In this case, your company will be registered locally, and the payroll will be outsourced to a local payroll provider. 
  • Global EOR firm: An EOR firm such as Skuad will completely handle your payroll process, acting as the legal employer for your company in Luxembourg. It will take care of all HR compliance issues and liabilities. 

Taxation

The taxation breakdown is as follows.

  • A corporate tax of 24.94% of the annual turnover is imposed on corporations.
  • The personal income tax rate is 42%, plus 9% of solidarity tax. 
  • The standard VAT rate is 17%.
  • The withholding tax rate for residents and non-residents is equal, at 15%. 

For further details, the income tax rates applicable to resident individuals in Luxembourg are given below.

Income (EUR) Tax Rate (%)
Up to 11,265 0–9%
13,173–27,713 10–19%
27,713–32,253 20–29%
32,253–100,000 30–39%
Over 100,000 40%

The profits that are subjected to the corporate tax in Luxembourg are determined with sole regard given to profits earned by businesses carried out or transactions conducted by businesses in Luxembourg.

To understand how payroll and taxes are managed in Luxembourg and expedite your expansion process, talk to Skuad experts and book a demo.

Incorporation: How to Set Up a Subsidiary in Luxembourg

If your company wishes to set up a subsidiary for operational purposes, the following are the details that you need to be aware of.

There are seven ways to incorporate your company in Luxembourg. 

  1. Public limited liability company (Société anonyme) (SA).
  2. Private limited liability company (Société à responsabilité limitée) (SARL).
  3. Public simplified company (Société par actions simplifiée) (SAS).
  4. Partnership limited by shares (Société en commandite par actions) (SCA).
  5. General partnership (Société en nom collectif) (SENC).
  6. Common limited partnership (Société en commandite simple) (SCS).
  7. Co-operative company (Société coopérative) (SC).

To set up a SARL, the most common type of holding company in Luxembourg, the following actions are needed. 

  • Check and register your name of choice for your company with the Luxembourg Trade and Companies Registry. 
  • Open a bank account and deposit the minimum share capital. 
  • Obtain a certificate from the bank that is addressed to the notary, informing them of the availability of your share capital. 
  • Ensure the company owners declare anti-money-laundering intentions.
  • Draft and translate the company’s articles of incorporation into either French or German. 
  • Incorporate the company before a notary in Luxembourg. 
  • Release the company’s share capital and inform the bank through a certificate that your company has been established. 
  • Ensure the articles of incorporation drafted by the notary are filed and published online with the Luxembourg Trade and Companies registry and the Electronic Journal of Companies and Associations.

To be more cognizant of the platform that you will be integrating your business with, you may book a demo to know what Skuad has to offer.

Professional Employer Organization (PEO)

A professional employment organization partners with small- and medium-scale organizations to provide comprehensive HR services such as training and development, regulatory compliance, payroll processing, tax filing, recruitment, and other services. It can be considered as an outsourced, co-employing HR department. It provides access to affordable yet expert services in business expansion. 

Although a PEO is similar to an EOR service, there are three main points of difference.

  • EOR companies become the legal employers of employees instead of the co-employers. An EOR firm has all the liabilities and responsibilities of the employees. A PEO retains your organization as the legal employer. 
  • With EOR solutions, the employees are covered under the insurance plan of the EOR firm. With a PEO, employees will have to opt for a plan by themselves. 
  • With an EOR firm, you need not register your company in the country. You can have employees in the country without setting up an entity. The same is not true for a PEO. 

Companies can go for any of the two according to their preferences. Skuad provides EOR solutions for companies. Hire Skuad’s EOR solution for Luxembourg to take care of all the compliance and HR-related tasks, from onboarding to training. Talk to Skuad experts to learn more.

Conclusion: What Gives Skuad’s Luxembourg Solutions an Edge? 

Skuad is a global, tech-enriched, unified HR platform that allows companies to hire, onboard, and manage employees, take care of payroll, taxation, probation, and termination, arrange for visas and work permits, and ensure full compliance with the local laws.

 With a pool of carefully selected, “ready to hire” talent, Skuad offers to set up a team for you without delay and expedite your expansion. Our services are streamlined through our network of experts across over 150 countries.

Before you start with the business operations in Luxembourg, we will help you to ensure a smooth transition for setting up a subsidiary. Our bespoke EOR solution for Luxembourg even includes contract templates and taxation guidelines to kick-start your expansion. To learn more, partner with Skuad today.

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