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.
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
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.
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
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
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.
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.
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.
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.
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.
- Public limited liability company (Société anonyme) (SA).
- Private limited liability company (Société à responsabilité limitée) (SARL).
- Public simplified company (Société par actions simplifiée) (SAS).
- Partnership limited by shares (Société en commandite par actions) (SCA).
- General partnership (Société en nom collectif) (SENC).
- Common limited partnership (Société en commandite simple) (SCS).
- 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.