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Employment in Luxembourg

The employment relationship in Luxembourg is governed by the Labour Code, which came into effect in September 2006, unifying all Luxembourg’s previous employment legislation.

The internal market is characterized by the major role played by Belgian, French and German who constitute more than 50% of the labour force in the territory.

The main sources of labour law are international treaties, European law, Luxembourg employment laws and regulations and collective bargaining agreements.

Key points on employment in Luxembourg

There are several key areas to be aware of within the Luxembourg employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department.  These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

  1. Contracts

    Full time contracts with an indefinite duration constitute the rule, while short term employment contracts are the exception and they are valid only when all conditions provided for by law are fulfilled.

    Short term contracts may not exceed 24 months (including renewal). Particular attention should be given to corporate officers appointed in accordance with Luxembourg company law who may also have an employment contract.

  2. Probation Period

    A trial period may be provided for in both indefinite and definite duration contracts, which normally varies from two weeks to six months. In certain circumstances (depending on the wage of the employee or the level of his qualifications) the trial period may not be longer than 3 months or may be extended up to 12 months.

  3. Remuneration

    Generally, the common principle is a maximum of 40 hours per week and 8 hours per day. Overtime work is allowed only in special and subject to prior ministerial authorization (i.e. overtime should not applicable to employees holding a superior management position as defined by the law). Overtime may be either given by time off. Sunday work is generally not allowed, although some derogations are possible based on the type of workers, business, firms or occupations.

  4. Statutory Leave

    A part from the 10 days of public holidays (per calendar year) a full time employee is entitled to receive 25 days of statutory leave per calendar year. Additional holidays are possible under certain circumstances (e.g. collective bargaining agreements, internal regulations or disabled employees).

    Sick Leave: In case of an accident or sickness, the employee must inform the employer verbally or in writing on the day of the accident/sickness, he/she must send a medical attest confirming his/her inability to work along with the expected period of absence. When these formalities are fulfilled, the employer may not dismiss the employee, even for gross misconduct, for a period of 26 weeks following the accident/illness.

    Family Leave: A pregnant employee must receive a paid maternity leave for between 16 and 20 weeks, subject to certain conditions. This leave is paid by the Luxembourg social security authorities up to an amount equaling five times the minimum social wage. Both parents may have a right to six months full time parental leave or one year part-time parental leave, upon certain conditions are met, until the child has reached the age of five years. Family leave is paid by the Luxembourg social security authorities on a monthly lump sum basis.

  5. Termination Procedures

    It is possible for an employer to terminate a full time contract for real and serious reasons and in respect of the applicable notice periods (2-6 months). The employer must notify the dismissal by registered letter.

    A severance payment must be paid to a dismissed employee who has completed at least five years of service. In the case of resignation, the employee has to give notice to the employer, which is half the length the employer would have to give. In this case, the employee has then no right to a severance payment and no right to unemployment benefits.

    The employer (or the employee) may terminate the contract without notice in case of gross misconduct by the other. In this case, a judge may state whether or not the facts justify a dismissal for gross misconduct.

  6. Pension and Benefits

    The financing of the social security benefits is carried out dividing the statutory contribution rate of 24% among insured (8%), employer (8%) and public authorities (8%). The minimum income considered for contributes is approx. €  23.000. The legal normal retirement age is set at 65 years old, both for men and for women.


    • All insured members with 120 months of mandatory or voluntary coverage insurance or those that paid for retroactive insurance can receive a retirement pension from the age of 65;
    • All insured members with 480 months of insurance can receive a retirement pension from age 60. The months of insurance can be effective insurance, assimilated periods or voluntary insurance, but a minimum of 120 months of mandatory insurance is required;
    • A retirement pension can be obtained from age 57 if the member has accrued 480 months of mandatory pension insurance.

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Luxembourg. For companies, which intend to employ their staff directly through their incorporated Luxembourg entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Luxembourg.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Luxembourg.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Luxembourg

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Luxembourg

– the company needs help with tax, employment, immigration and payroll compliance in Luxembourg

Shield GEO can contract directly with the company to employ and payroll their staff in Luxembourg. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

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