Table of Contents

Luxembourg

Table of Contents

Currency

Euro (EUR)

Payroll Frequency

Weekly, Monthly

Employer Taxes

12.22% to 15.30%

About Luxembourg

A country with a booming economy, Luxembourg, in 2023, was ranked second on the list of countries with the highest GDP per capita at USD 131,580 and also boasts of the highest minimum wage in Europe at €3.085,11 per month. To make things even brighter, Luxembourg has some of the lowest unemployment rates in Europe. With such an economy, Luxembourg only encourages its workforce to enhance their skills and dedication.

Employment Relationship

• Permanent Employment

Permanent employees are defined as persons employed on a contract for an indefinite duration for the regular and permanent activity of the business. Employment agreements must be made in writing. Permanent employment contracts can include a trial period upon entry into work, which may not be shorter than two weeks or exceed six months.

• Fixed-Term or Specific-Purpose Contracts

In Luxembourg, fixed-term contracts can be concluded for jobs unrelated to the business's regular and permanent activity. Such agreements must be made in writing with an explicitly mentioned end date or specific job. The duration of fixed-term contracts cannot exceed 24 months with the same employer, including renewals. The Labor Minister may exceptionally authorize the increase of the maximum period to 60 months. The legal and contractual provisions applicable to permanent employees also apply to fixed-term employees.

• Temporary Employment Contratcs

Employers in Luxembourg can hire temporary employees only through temporary work agencies. A temporary employee is an employee who engages under an assignment contract with an employer to carry out specific and temporary jobs. This contract is made in writing and sent to the employee within no later than two working days. The temporary work contractor is solely responsible for the salary of the temporary worker as well as social charges and related taxes. The pay of a temporary employee cannot be less than that of a permanent employee with equal qualifications. Temporary employees have the same access to collective facilities, such as catering and transport, as permanent employees.

Probationary Period

Employment contracts in Luxembourg can include a non-renewable trial period not exceeding 3 months for employment contracts of indefinite duration. For employment contracts concluded for a fixed period, the trial period is calculated in relation to the term of the contract or is agreed upon by the parties. Trial periods can also be included in temporary employment contracts. The duration of the trial period may not exceed 3 days if the contract is concluded for 1 month or less, 5 days if the contract is concluded for a period exceeding 1 month and eight days if the duration of the contract exceeds 2 months. An employment contract can be terminated during the trial period without any notice. 

Working Hours

The Labor Code of Luxembourg dictates that working hours cannot exceed 8 hours per day and 40 hours per week. In exceptional cases, working hours may be extended to up to 12 hours, compensated with an extra holiday, so that the average weekly working hours do not exceed 40 hours over four weeks. The standard working time of night workers may not exceed eight hours, on average per 24-hour period calculated over 7 days. Employees must be employed by an organization with the capacity for remote work in order to request the option. Any employee of a Luxembourg company governed by private law hired under a fixed-term or indefinite-term contract can participate in telework. When remote work occurs consistently, rules must be agreed upon by both parties in writing. Employers are prohibited from contacting employees during non-working time in violation of their right to disconnect.

Holidays / PTO

• Statutory Holidays

Nawruz (first day of the Afghan new year), the Independence Day of Afghanistan (twenty-eight of Asad), Victory of the Islamic Revolution of Afghanistan (eight of Sawr), Start of Ramdan (date may vary), three days of Eid-ul-Fitr (dates may vary), four days of Arafat and Eid-ul-Adha (date may vary), The birthday of Hazrat-e-Muhammad (twelfth day of Rabi-ul-Awal), The day of Ashura (tenth day of Muharram-ul-Haram), Withdrawal of USSR forces from Afghanistan (twenty Sixth day of Dalw).

• Paid Annual Leave

All employees are entitled to a paid recreational leave of 26 days per year, regardless of their age. Sundays and statutory holidays are not included in annual leave. If, during the annual leave, the employee falls sick, the days of sickness recognized as such by the medical certificate are not considered a part of paid annual vacation. The right to annual leave is acquired after 3 months of work with the same employer. The leave can be taken all at once or split on request of the employee, in which case one of its parts must be at least two weeks long. The leave must be taken within the calendar year or postponed until March 31 of the next year.

• Sick Leave

The Labor Code of Luxembourg provides paid sick leave to employees. They are required to inform the employer on the first day of absence and provide a medical certificate on the third day of absence, at the latest. In the event of urgent hospitalization, the employee has eight days from the date of the hospital admission to send a medical certificate to the employer. Employees have the right to 1 additional day within a 12-month period for any exigent circumstances that may arise related to their health. employees are also entitled to 5 days of leave within a 12-month period in total, but have to furnish the employer with a medical certificate from the third day of incapacity. These entitlements are strictly for unforeseeable incidents. Employees are protected against dismissal for a maximum period of 77 days. Salary and benefits are paid until the end of the calendar month in which the 77th day of incapacity for work falls.

• Maternity Leave

The Labor Code of Luxembourg grants a total of 20 weeks of paid maternity leave to pregnant employees: 8 weeks before and 12 weeks after childbirth. It is prohibited to employ a pregnant woman in night work. Pregnant employees and nursing mothers cannot be required to work overtime. During the employee's absence due to maternity leave, the employer is required to hold the job for the employee, or, if it is not possible, a similar job corresponding to her qualifications and with at least an equivalent salary. An employee cannot be dismissed during her maternity leave. 

• Paternity Leave

According to Luxembourg's labor law, employees receive 10 days of paid paternity leave in case of the birth of a child or adoption of a child under the age of 16 years. The employer must be notified 2 months prior to the expected start date on which the employee intends to take the leave. The state covers the costs for paternity leave from the third day of absence on specific request from the employer to the Ministry of Labour, Employment, and the Social and Solidarity Economy.

Termination of Employment

• Notice Period

In Luxembourg, the required notice period for termination of an employment contract depends on the duration of the employee's service and is as follows: Under 5 years of service – 2 months' notice period Between 5 and 10 years of service – 4 months' notice period More than 10 years of service – 6 months' notice period The notice period can be waived if the responsible party pays compensation in lieu of notice to the other party.  The employer can dismiss the employee without notice in cases of gross misconduct. 

• Severance Benefits

Luxembourg's Labor Code states that employees who are dismissed for a reason other than serious misconduct must be given notice of dismissal. If they have worked in the business for five or more years, they are also entitled to severance pay. Severance pay amount is based on an employee's length of service as follows: 5 to 10 years of service – 1 month's salary Ten to 15 years of service – 2 months' salary 15 to 20 years of service – 3 months' salary 20 to 25 years of service – 6 months' salary 25 to 30 years of service – 9 months' salary More than 30 years of service – 12 months' salary The employer and the dismissed employee may also agree on a voluntary severance package.  In addition, businesses with fewer than 20 employees may: disburse the severance pay, or extend the dismissed employee's notice period The employer must specify the option they have chosen in the letter of dismissal.