The questions every international employer asks about hiring in Luxembourg

1

How do you employ someone in Luxembourg?

You employ someone in Luxembourg either by setting up your own company there or by hiring them through an Employer of Record that is already registered to employ. Either way the contract has to be in writing, signed in two originals by the first day at the latest, the employee declared to the Centre commun de la sécurité sociale within eight days of starting, and payroll run under Luxembourg rules. There is no at-will employment in Luxembourg, so the contract and the declarations matter from day one.

2

How much does it cost to employ someone in Luxembourg?

The real cost is the gross salary plus employer social security on top, plus any benefits you offer. Employer contributions come to about 13.29% of gross pay for a standard commercial employer, charged on a base capped at €13,856.63 a month from 1 June 2026, so very high salaries are partly capped.

Separately, income tax and the employee’s own social security of 12.95% come off their pay. The employer withholds and files all of it: tax to the Administration des contributions directes, contributions to the Centre commun de la sécurité sociale.

3

How long does it take to hire someone in Luxembourg?

Through an Employer of Record, someone can be employed and working within days, because the EOR is already registered to employ in Luxembourg and can issue a contract within hours. Setting up your own company first usually takes 8 to 14 weeks, and the business permit is the critical path: the Ministry of the Economy works to a three-month target from a complete file, and the notary, the bank account and the registrations follow it.

4

Do you need a Luxembourg company to employ someone there?

No. You do not need your own Luxembourg company to employ someone there. You can incorporate a SARL, which carries €12,000 of share capital, roughly €3,300 to €17,000 of year-one costs outside that capital, and permanent accounting and filing obligations. Since the law of 18 May 2026 the capital can be paid up to twelve months later. Or you can employ through an Employer of Record and have someone working within days. At a single employee an own company can work out cheaper than an EOR over a year, so the honest arguments for an EOR are speed, no business permit to wait for, no capital tied up, and no compliance tail once the employee leaves.

5

Should you hire an employee or a contractor?

If the role is ongoing and the person works under your direction, treat them as an employee, not a contractor. Luxembourg courts decide this on the facts rather than the label, weighing a bundle of indicators around subordination: who sets the hours, who supplies the tools, whether the person can refuse work and whether they have other clients. The Inspection du travail et des mines enforces it, and requalification brings back-dated contributions, penalties and employment rights. A genuine contractor runs their own business and works for several clients.

6

What must a Luxembourg employment contract include?

A Luxembourg contract sets pay, hours, role, place of work and probation, and Article L.121-4 of the Code du travail lists the particulars it has to carry. It is signed in two originals, one for each side, by the first day of work at the latest, and it has to be in a language the employee understands. A collective agreement can set pay and conditions above the statutory floor, and the contract cannot undercut either. Reused overseas templates usually miss what Luxembourg law requires.

7

How do tax and social security work?

Two things come off each Luxembourg payslip: income tax, withheld against the employee’s tax card on a progressive scale of 23 bands reaching 42% above €234,870 in 2026, with a solidarity surcharge of 7% on top, and the employee’s social security at 12.95% of gross pay. Salaries are paid monthly, twelve times a year: there is no statutory thirteenth month, though many collective agreements and contracts provide one. The employer files tax with the Administration des contributions directes and contributions with the Centre commun de la sécurité sociale each month.

8

What is the minimum wage in Luxembourg?

The Luxembourg social minimum wage (salaire social minimum) is €2,771.33 a month for an unskilled adult and €3,325.59 for a skilled one, both from 1 June 2026. It is one of the highest statutory minimums in Europe, and it moves automatically with the index, so it changes whenever a tranche is triggered rather than once a year by decree.

9

What leave are employees in Luxembourg entitled to?

Employees in Luxembourg get a minimum of 26 working days of paid annual leave, plus 11 public holidays. On top of that sit maternity leave of 20 weeks, paternity or second-parent leave of 10 days, and parental leave of four or six months per parent, paid through the state. There are also shorter statutory entitlements for events such as marriage, moving house and a death in the family, and paid leave to learn Luxembourgish. Collective agreements often improve on all of these.

10

How does sick pay work?

The employer keeps paying the 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 in practice runs to somewhere between 11 and 15 weeks. The Caisse nationale de santé then pays the employee directly. The part most foreign employers miss is that the Mutualité des employeurs reimburses the employer 80% of that continued pay, gross salary and employer contributions together, and 100% where the incapacity falls in the trial period.

11

How do social security and pensions work?

Luxembourg social security is a single system that funds healthcare, sick pay, family benefits and the state pension, and the Centre commun de la sécurité sociale collects all of it in one monthly invoice. The global pension contribution rose from 24% to 25.5% on 1 January 2026, split three ways between employer, employee and the State. There is no auto-enrolment obligation, but a supplementary occupational pension, the régime complémentaire de pension, is common as a benefit: the employer pays a flat 20% tax on the contributions and the benefit is then free of income tax for the employee.

12

How do you end employment in Luxembourg?

Dismissal in Luxembourg has to be justified and documented, and there is no at-will termination. Notice runs in months, not weeks: two months under five years’ service, four months from five, six months from ten. It does not start on the date of the letter but on the 15th of that month if the letter is posted before the 15th, and on the 1st of the next month if it is posted on or after it, so the real elapsed time is the notice plus up to a fortnight. Severance, the indemnité de départ, starts only at five years’ service, at one month’s pay, and rises with seniority.

13

What are the rules on remote work?

Remote work in Luxembourg is mostly a cross-border question, because a large share of the workforce lives in Belgium, France or Germany and commutes in. For those employees two separate thresholds decide where tax and contributions are due: a tolerance of 34 days a year of home working before income tax starts to shift to the country of residence, and a limit of under 50% of working time before social security moves there. Going over either one changes where the employee is taxed or insured, so teleworking days need to be tracked rather than assumed.

14

What an Employer of Record takes off your desk

An Employer of Record is already registered to employ in Luxembourg, so you skip the company set-up entirely. The EOR issues the contract, declares the employee to the Centre commun de la sécurité sociale, obtains the tax card, runs payroll each month and applies the index when a tranche triggers, and handles the obligations on this page, from leave and sick pay to notice and severance. You direct the work, and get one named contact and a single monthly invoice.