How to choose an EOR in Luxembourg: the questions to ask

Ask which legal entity will be named as the employer on the contract, the payslip and the social security declaration, and get the answer in writing. In Luxembourg the employment contract is a written document made out in two signed originals, in place by the first day of work at the latest, carrying the particulars listed at Article L.121-4 of the Code du travail. The party that signs as employer is the party a Tribunal du travail will look at years later, so vagueness here is expensive.

Providers answer in two ways. Some employ the person directly. Others take your instruction and pass the employment to a local company you never meet, which adds a margin and a handover step to every question you ask afterwards. Neither is concealed if you ask plainly: does your organisation issue the contract and file the déclaration d’entrée to the Centre commun de la sécurité sociale (CCSS) within eight days of the start date, or does someone else? Employer of Record Luxembourg is registered to employ in Luxembourg, and the employment contract is with us.

Ask for a redacted specimen contract during the sales process. You are testing whether the provider drafts to Luxembourg requirements or adapts a template from elsewhere, since the probation clause, intellectual property and any non-compete follow rules a generic template misses.

Language has a clear answer. Luxembourg imposes no compulsory language on the contract; the test is that the employee genuinely understands it, so English is accepted where both sides read English. The administration is different, since CCSS and tax filings are made in French or German. Ask who handles that correspondence.

Ask how index tranches reach payroll and when you are told. Luxembourg salaries are index-linked by law: when the six-month moving average of the national consumer price index rises 2.5% above the previous threshold, pay across the country rises by 2.5% from the first of the following month. STATEC publishes the index monthly and no employer has any discretion over the uplift.

This is the feature that surprises foreign buyers most, because payroll cost rises without a pay review. The cote d’application has stood at 992.24 since 1 June 2026, and seven tranches landed in the five years to that date, a cumulative automatic uplift of about 18.9%. A provider that runs Luxembourg payroll regularly tells you the effective date, the new gross salary and the revised employer cost before the pay run closes rather than after it. Our explainer on how Luxembourg wage indexation works sets out the mechanism in full.

Three follow-up questions are worth asking. Does the uplift reach every index-linked element of the package or only base salary? How is it shown on the payslip and the invoice, so finance can see why the number changed? And does the fee move with the salary? A flat fee per employee per month does not, while a percentage of gross rises with every tranche and every pay rise you award.

Ask how sick pay is funded, who receives the refund and how it reaches you. The employer continues to pay full salary until the end of the calendar month in which the 77th day of incapacity falls, counted in calendar days over a rolling 18 months, which is roughly 11 to 15 weeks in practice. From the month after that 77th day the Caisse nationale de santé (CNS) pays the employee directly.

The part that changes the arithmetic is the refund. The Mutualité des employeurs reimburses the employer 80% of the payroll charge, gross salary plus employer contributions, and 100% where the incapacity falls in the trial period. Because an EOR is the legal employer, that refund is paid to the EOR, not to you. Ask whether it is credited to your account in full, when, and how it is labelled on the invoice. The reimbursement arrives later than the pay run it relates to, so charge and credit rarely appear in the same month, and a provider that cannot explain the lag is probably not tracking it.

Ask about the paperwork behind the money. The employee must notify absence on the first day and get a medical certificate to the employer by the third day, and missing those deadlines costs the employee the protection against dismissal that otherwise runs up to 26 weeks from the onset of incapacity. Ask who chases the certificate and how you hear an absence has started. the Luxembourg sick leave rules are covered separately in more detail.

Ask who pays if a dismissal is challenged, and what insurance stands behind the answer. An employee has three months to bring an unfair dismissal claim before the Tribunal du travail, and the named defendant is the employer, which in an EOR arrangement is the provider. That does not settle who bears the cost, because the services agreement decides that, and the two are often confused in a sales conversation.

Most Luxembourg risk on termination is procedural. Notice runs two months under five years of service, four from five to ten and six beyond ten, and it starts on the 15th if the letter is posted before the 15th, or on the 1st of the next month if posted on or after it, with the postmark governing. Severance, the indemnité de départ, begins at one month’s pay at five years of service. An employee may request written reasons within a month and the employer must reply within a month by registered letter; failure makes the dismissal automatically abusive whatever the facts.

So put the questions in this order. Who drafts and posts the letter, against which deadline? Who answers a request for written reasons? Who instructs Luxembourg counsel, pays for the defence, and funds damages if a claim succeeds? Is there an indemnity in the services agreement, and is it capped? What employer’s liability and professional indemnity cover is held? Our guide to ending employment in Luxembourg sets out the timetable those answers have to fit.

Ask which data protection role the provider takes, and for which processing. An EOR that is the legal employer decides on and answers for payroll calculation, social security filings and personnel records in its own right, which is the position of a controller. For data you pass over for your own purposes it may act on your instructions as a processor. A provider that cannot separate the two in writing has never been asked.

Get the practical detail into the contract rather than into an email. Where does the payroll system hold the data, and does any support or processing happen outside the EEA? If it does, what transfer mechanism applies? Which sub-processors are involved, and do you get notice before that list changes? Who answers the employee if they exercise their access or erasure rights?

Retention and breach handling are the points buyers skip. Ask how long personnel and payroll records are kept after the employment ends and which obligation sets that period, since an employer holds documents for tax and social security reasons long after the person has left. Ask who notifies whom after a breach, and whether the provider notifies the supervisory authority itself.

Ask for names, time limits and a route above the named person. Two contacts matter: yours, for invoicing, contract changes and costs, and the employee’s, for payslips, leave and sickness. Ask what response time is committed to, what the monthly cut-off is for payroll changes, and who covers during holidays. A named contact who works on Luxembourg every day is worth more than a ticket queue with a service level attached.

Then ask what happens when something goes wrong. If a payslip is miscalculated or a declaration filed late, how quickly is a corrected payslip issued, who tells the employee, and who absorbs any interest or penalty? Ask for the escalation path in writing: the person above the account manager, and how long each step may take.

Offboarding is the part almost nobody tests before signing, and it is where a weak provider shows. Ask what happens in the final month: the exit declaration to the CCSS, the last payslip with untaken leave paid out, the certificate of employment, notice served on the correct date under the rule of the 15th, and severance where service requires it. Ask how much notice you owe the provider, whether the fee runs through the employee’s notice period, and what happens if you later form a company of your own and want to move the employee onto it.

Ask for a written breakdown for your actual salary, with three lines kept apart: gross salary, statutory employer costs and the fee. Our fee starts at €499 per employee per month, €5,988 a year, charged flat rather than as a percentage of pay, and the pricing page shows what is included. A single blended number is the thing to push back on, because it hides which part of the price is fixed by law and which part is margin.

The statutory part is the same whoever employs the person. On €90,000 gross, employer contributions at 13.29% come to €11,961, for a total employer cost of €101,961; at €60,000 gross the same rate produces €67,974. Those figures assume a standard commercial employer, the neutral accident bonus-malus factor and the Mutualité class a new employer starts in, with most branches stopping at the plafond cotisable of €13,856.63 a month from 1 June 2026. A provider marking up the statutory element should be asked to justify it.

Ask what sits outside the fee. Benefits usually do: chèques-repas at a face value of up to €15, with an exempt employer share of €12.20; a régime complémentaire de pension, on which the employer pays a 20% flat withholding tax. So do work authorisations for non-EU nationals, recruitment and equipment. Ask whether each is passed through at cost.

One warning is worth more than the rest. Be careful with a provider that quotes a list price in dollars against a cost base that is entirely in euros. Salary, contributions and every index tranche arise in euros, so a dollar headline turns a fixed cost into a moving one and shifts the exchange risk to you. Ask which rate is used, when it is fixed, and whether the fee can be invoiced in euros.