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Employment Laws

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Luxembourg

Employment Laws in Luxembourg

Updated on:
16 Jan, 2024
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Luxembourg is among the most dynamic European economies, consistently ranking higher for territorial competitiveness, digitalization, and innovation. While the nation’s financial sector makes about one-fourth of its GDP, logistics and satellite tech are fast catching up. 

Moreover, cross-border workers from Belgium, France, and Germany contribute to over half the nation’s workforce. However, to set up a business in Luxembourg, you must comply with local labor laws. 

Several sources shape the legal framework for employment laws in Luxembourg, including international treaties, European Union directives and regulations, national laws and regulations, collective bargaining agreements, and individual contracts. It is equally important to understand the regulations around remote work.

Dive into this comprehensive guide on the employment laws in Luxembourg targeted toward employers looking to grow here.

Contractual Agreements

While the employment laws in Luxembourg recognize an oral contract, you may conclude a written contract outlining the nature and conditions of the employment relationship. 

Employers must add the following information in all employment contracts:

  • Name and address of both parties
  • Date of entry into service
  • Place of work
  • The registered office of the business
  • Nature of job
  • Duration of employee’s daily and weekly work
  • Working schedule
  • Basic salary and the index in force
  • Duration of paid annual leave
  • Notice period
  • Duration of trial period 

And wherever applicable:

  • Reference to collective agreements governing working conditions 
  • Additional or derogation clauses that may override the law that are favorable to the employee. 

Apart from this, there are separate requirements for different types of employment contracts you must include with the above information. 

Types of employment contracts in Luxembourg

Here are the types of employment contracts per the employment laws in Luxembourg.

  • Permanent: Must contain the mandatory information mentioned above.
  • Fixed-term: This can be concluded for a specific and temporary task but not exceed 24 months. You must specify the following, along with mandatory information:
    • End date or minimum period of validity
    • Duration of trial period, if any
    • Renewal clause, if applicable
  • Seasonal: This is for tasks you require repeatedly at the same time every year. You may sponsor a medical examination or demand a certificate of vocational aptitude before engaging such workers.
  • Temporary agency work: This type of work requires two parallel contracts: an assignment contract between the ‘temp’ agency and the worker and a labor supply contract between the agency and you. Mandatory information you must add:
    • Name of the absent worker
    • Duration of the assignment
    • Characteristics of the position
    • Salary paid by you to a salaried worker with the same qualifications
    • Reason for hiring the temporary agency worker
  • Part-time: You must include the following details in a part-time contract:
    • Weekly work schedule
    • Distribution of working hours throughout the week
    • Conditions for overtime (wherever applicable)
    • Conditions regarding flexibility of working hours

You may engage with independent contractors, freelancers, or remote employees under any suitable contract employment law in Luxembourg.

Obligations and rights for both parties

  • You must conclude an employment contract before or on the first day of employment. 
  • You must pay fair wages and overtime according to labor law regulations.
  • You must implement company policies and regulations per the employment laws in Luxembourg. 
  • Since the General Data Protection Regulation (GDPR) is applicable in Luxembourg, you may sign separate Data Processing Agreements to minimize risks during employee management.

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Working Hours and Overtime

Luxembourg labor law regulates working hours and overtime compensation as follows: 

Regular working hours

  • The standard is eight hours per day and 40 hours per week.
  • You may schedule working hours beyond the statutory limits but over a reference period of up to four months. 
  • You must also provide a rest period of 11 consecutive hours within 24 hours and 44 consecutive hours within seven days. 

Overtime regulations and compensation

  • You cannot schedule work any longer than 10 hours per day or 48 hours per week.
  • You may request the Labor Ministry to authorize a working time of 12 hours per day. However, the average working time cannot exceed 40 hours per week over the reference period.
  • The labor laws of Luxembourg require you to compensate employees for working overtime in the following way:
    • Pay every hour of overtime with a minimum of 140% of the hourly salary or
    • Rest time calculated at 1.5 per hour of overtime or
    • Record on time-saving account at the same rate capped at 1,800 hours.

Minimum Wage and Compensation

You must ensure all employee salaries are above the social minimum wage prescribed under the employment laws in Luxembourg.  

The minimum wage rate in 2024

Age & Qualification % of the social minimum wage Gross monthly wages
Skilled workers (>=18 years) 120 3,085.11
Unskilled workers (>=18 years) 100 2,570.93
17 to 18 years 80 2,056.74
15 to 17 years 75 1,928.20

Factors affecting wage determination

  • The employee salaries could be affected by:
    • Increase in the social minimum wage
    • Wage indexation (adjust with inflation)
  • The labor laws of Luxembourg advise you to increase the applicable minimum wage by 20% for skilled workers and decrease by up to 25% for adolescent workers.
  • Overtime pay is exempt from taxes and, to some extent, from social security contributions.

Learn more about remote employees and effective ways to pay them.

Employee Benefits and Social Security

Here are the following benefits your employee is entitled to as per the employment laws in Luxembourg:

Statutory benefits

  • You must extend paid, sick, and maternity & paternity leave.  
  • You must withhold employee contributions towards social security coverage under the Joint Social Security Centre (CCSS). The fund may administer pay benefits during sickness, maternity, old age, disability, survival, unemployment, etc. 
  • You must register your employee for an occupational health service. 

Additional perks and benefits

  • Supplemental benefits for employees in Luxembourg include the 13th month pay, meal voucher, annual bonus, travel allowance, dental and vision insurance, and so on. 

Social Security contributions and requirements

Social Scheme Employer Contribution (%) Employee Contribution (%)
Health insurance Benefits in cash: 0.25
Benefits in kind: 2.80
Benefits in cash: 0.25
Benefits in kind: 2.80
Pension insurance 8 8
Long-term care insurance N/A 1.40
Accident insurance 0.75 N/A
Occupational health (STM) 0.14 N/A

Vacations and Paid Time Off

The employment laws in Luxembourg prescribe the following paid and unpaid leave entitlements: 

Annual leave entitlement

  • Luxembourg labor law requires you to grant a minimum paid leave of 26 working days each year. 
  • An additional leave of up to six more days is mandatory for some categories of employees (like registered disabled). 
  • You may adjust the leave allowance of part-time workers based on their actual working hours.

Public holidays and special leaves

  • There are 11 public holidays in Luxembourg in addition to Sundays:
    • January 1st: New Year
    • April 1st (2024): Easter Monday
    • May: Labor Day (1st), Europe Day (9th), Ascension of Christ (9th, 2024), Whit Monday (20th, 2024)
    • June 23rd: National holiday (Grand Duke's birthday celebrations)
    • August 15th: Assumption Day
    • November 1st: All Saints Day
    • December: First day of Christmas (25th), Boxing Day (26th)
  • The labor law in Luxembourg obliges you to extend the following special leaves:
    • Paid maternity leave: 20 weeks, preferably eight weeks before the birth of the child and 12 weeks after.
    • Paid paternity leave: 10 days, typically taken all at once and immediately after the birth (or adoption).
    • Parental leave in multiple flexible options:
      • Full-time: Four to six months
      • Half-time: Eight to 12 months
      • Split leave: Four months for 20 months (maximum) or one day per week for up to 20 months
  • Unlimited paid sick leave: Employers are obliged to pay only for the first 77 days, while the National Health Fund (CNS) takes over after.
  • Job search leave: Up to six days during the notice period (more on this later)
  • Marriage/Partnership: Three days leave (one for the child's marriage).
  • Death: Three days for a partner/close family, five days for a child under 18, and one day for other relatives.
  • Sick Child: Up to 12 days per year, based on the child's age. Extended leave may apply for serious illness/cancer.
  • Family Hospice: Up to five days per year for seriously ill/dying partners or relatives.
  • Training leave may apply for skill upgradation of employees.

Termination and Severance

The employment laws in Luxembourg inform you about acceptable causes for employee termination, notice period, and severance pay in detail. 

Ground for termination

  • You must inform the employee about dismissal in writing by sending a registered mail or hand-written letter.
  • You must give an employee notice before termination for reasons other than serious misconduct. Here are the valid reasons for termination:
    • Employees’ poor performance or otherwise
    • Business’ operational requirements or company restructuring
  • You can terminate the contract rapidly during the probation period. The trial period duration varies between two weeks to 12 weeks, depending on the level of qualification and salary.
  • You should conduct a pre-dismissal interview if you employ 150+ employees. If you have at least 15 employees, you must notify the Economic Committee about the dismissals.

Notice period and severance pay

  • The notice period you must give an employee depends on how long they have worked with you.
    • Less than five years: Two months
    • Five to 10 years: Four months
    • More than 10 years: Six months
  • Employees are entitled to severance pay if they have worked for over five years.
  • The severance pay varies from the salary of one month to 12 months, depending on the length of service.
  • For less than 20 employees, you can either pay the severance or increase the notice period.

Discrimination and Equal Opportunity

The Labor Code and Criminal Code prohibit direct and indirect discrimination. Employees can claim the labor court to enforce their rights. Therefore, you must stay compliant with the labor laws

Prohibitions against workplace discrimination

  • The employment laws in Luxembourg prohibit discrimination based on religion, conviction, belief, handicap, age, sex, sexual orientation, and ethnic origin.
  • The labor laws of Luxembourg explicitly provide for non-discrimination between part-time and full-time employees.

Health and Safety Regulations

The labor laws in Luxembourg state the following health and safety obligations for employers:

  • Protection of the employee
  • Risk prevention, information, and training
  • Appointing a designated employee in charge of health and safety issues
  • Enrolling new employees under an occupational health insurance scheme

Stay Compliant with Skuad

Skuad looks after local payroll processing, taxes, benefits administration, and legal administrative complexities in 160+ countries (including Luxembourg) without you having to set up local entities.

Now, you can outsource administrative tasks of onboarding and managing employees to an Employer-of-Record solution like Skuad while complying with the employment laws in Luxembourg and focusing on your core expertise. 

How about booking a demo to explore your options better?

FAQs

Q1. What are the employment rights in Luxembourg?

A1. In Luxembourg, you must guarantee employees' right to minimum wage and fair overtime pay. Working hours are capped, with a generous annual leave allowance. You may ensure transparency during terminations, including mandatory severance pay. Employees have the right to associate, work in a safe environment, and be free from discrimination.

Q2. How many hours can you work in Luxembourg?

A2. The standard working hours in Luxembourg cannot exceed eight hours a day and 40 hours per week. Even for overtime, the working hours cannot exceed 10 hours per day and 48 hours per week. 

Q3. What is the contract law in Luxembourg?

A3. Luxembourg contract law borrows heavily from French laws and is based on the civil code. Specific to the case of employment, contract law in Luxembourg should be a written draft outlining the nature and conditions of work in detail. 

Q4. What are the three ways a contract can be terminated in Luxembourg?

A4. An employment contract in Luxembourg is terminated with notice, without notice for cases of serious misconduct, or rapid termination during the probation period.

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EOR in 
Luxembourg
Monthly
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Annually
Pay monthly at a discounted rate with a 12-month commitment
$
499
/month
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EOR in 
Luxembourg
Monthly
$
549
/month
(billed annually)
Annually
Pay monthly at a discounted rate with a 12-month commitment
$
499
/month
(billed monthly)
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Employ contractors and employees in 160+ countries

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Table of Content

Building a remote team?

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