A simple guide on hiring employees in Luxembourg in 2024

Hire employees in Luxembourg in 2024 - Where to start

Congratulations on the expansion of your business!

Before proceeding in hiring employees, make sure you followed all necessary steps for establishing your business:

• Make sure you chose the correct form of business
• Ensure your business permit and company registration are in order
• Your tax obligations should be sorted which means you are officially declaring your company’s income

Your business is evolving and it is not a sole entrepreneurship anymore, therefore you need to hire employees in Luxembourg in 2024. This means you would need to take into consideration local laws and regulations as well as demographics. Luxembourg might be one of the richest countries in the world, with the highest minimum wage in Europe, but it is still a small country of less than 700,000 residents, therefore the workforce market is also small.

We will look into the Luxembourgish labor law, for some basics, but the main plan regarding hiring employees in Luxembourg, will be as follows:

• Advertise a position and recruitment process
• Types of employment contracts
• Register new employee for social security
• Tax considerations
• Onboarding
• Payroll and benefits

Hiring employees in Luxembourg - The basics of Luxembourgish labor law and costs involved

Starting with some small details about Luxembourg, besides the population and minimum wage we mentioned earlier. Luxembourg’s capital is Luxembourg City, where the biggest part of the workforce is concentrated, and the national currency is the euro, much like in most EU countries by now. The official languages of Luxembourg are Luxembourgish, French and German. You can find more statistics regarding employment and inflation here. 

In order to hire employees in Luxembourg, you would need to be familiar with local employment laws. Here is a list of the main labor laws in Luxembourg, based heavily in French law, some of which we will explain more in the hiring steps later on:

• The minimum wages depend on age and skills, starting from 1,928.20 euros gross monthly and going up to 3,085.11
• The working hours in Luxembourg are normally 40 hours weekly, but paid overtime might also apply
• Paid leaves: paid time off, sick leave, maternity,paternity and parental leave, public holidays, training leave
• Other benefits including health insurance

Cost for hiring employees in Luxembourg in 2024

Something very important to consider though before starting the process of finding and hiring the right candidates, is the cost of the whole procedure. It is not only the salaries of your new employees that you would have to pay as a business owner, but a number of things before and after hiring. Here is a comprehensive but non-exhaustive list of those costs, so you don’t get caught by surprise:

• Job advertisement costs
• Job application reviews and interviews, if done by a third-party, or costs of internal HR team to handle recruiting and onboarding
• Potential translation costs in order to have official documents in one of the official languages of Luxembourg
• Potential cost of third-party to conduct background checks
• Legal costs for contracts
• Potential visa, relocation and travel costs, including for family members
• Payroll costs
• Taxes and accountant’s costs
• Social security contributions
• Salary, benefits, leaves and bonuses, if any
• Potential training costs, and travel which might be involved
• Other administration costs

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Steps for hiring employees in Luxembourg in 2024

• 1. Advertise a new vacancy - Job description

  The very first thing you would need to do is think about the position carefully, write -you or an HR partner- a detailed and yet comprehensive job description, and find places to post the job ad, potentially at a cost. Besides the international job boards such as LinkedIn and Glassdoor, there are some specific ones for Luxembourg that are worth taking a look: - Jobs in Luxembourg - Jobs.lu - Work in Luxembourg - JobFinder.lu Important to mention here that any vacancy needs to be registered with the National Employment Agency (ADEM).

• 2. Recruitment process - Hiring and recruitment agencies

  The recruitment process includes screening CVs, conducting interviews and getting down to your candidate of choice. You might need some help with that so you would have to either set up an HR team in advance, or hire a recruitment agency or an independent recruiter, to help you with the process. Headhunting companies also help finding talent, especially for very specific fields, so you might want to consider hiring one as well. At this phase, before choosing your top candidate, you may ask for a background check, such as criminal record and references.

• 3. Employment contracts

  When the recruitment phase is over, and you have chosen your top candidate, you should be able to offer them an employment contract, regarding which you can negotiate the terms and starting date with the future new employee. For this, you would need a lawyer, as you need to comply with the local labor law. Ideally, it should be in English and French or German. In order to choose which contract you need though, let’s look into the different types of employment contracts offered in Luxembourg: Indefinite or open-ended (CDI) → Contract used to hire permanent employees, both full-time and part-time Definite or fixed-term (CDD) → This one cannot exceed 24 months in total and it can only be renewed twice Seasonal → Part of the year employment, for example in tourism, and it cannot exceed 10 months within a year Collective agreements → Those depend on specific conditions of employment in specified sectors and often temporary appointments

• 4. Register new employee for social security

  You would have to declare the entry of the employee to the Social Security Center (CCSS) within 8 days of hiring. That applies to all employees, including interns, students, temporary appointments and even volunteers. You can find all the forms needed here. This happens because both employees and employers must pay social contributions for health insurance, pension and taxes.

• 5. Compliance with tax regulations

  Both employers and employees must comply with all requirements of Luxembourgish tax authorities and both are contributing.Luxembourg’s corporate tax rate is at 17%, from companies with taxable income more than 175,000, as well as the standard VAT rate. The main ones to be covered by the employer are health and pension contributions, which include workplace accidents as well. Since the tax system of Luxembourg though, much like in most countries, is quite complicated, it is highly recommended to hire an accountant for this purpose. The elements that make the system a tad more difficult are the various citizenships of the employee force as well as marital statuses and dependents. Also, for cross-border employees, a different rule applies, according to which they only need to declare income obtained within Luxembourg, but not elsewhere, such as their home country. Only residents - technically meaning lived and worked in the country for at least 182 days in a full year - need to declare their global income in Luxembourg. Keep in mind that there are various tax treaties between Luxembourg and many countries in order to prevent double taxation.For more clarity regarding taxes you can check the Corporate taxation overview of guichet.lu or ask the Luxembourg Tax Administration.

• 6. Onboarding

  The day has come that your new employee is finally on the right track to join your company. At this point, you would need to double-check that it is all in order with social security and taxes, before enrolling the new employee to payroll. Also, you need to ensure the right equipment is ready for him/her and that everything has been signed and understood from their side. An orientation presentation including the necessary training would be a good idea as well as to present the new employee to the team.

• 7. Payroll

  The payroll cycle is monthly, as in most EU countries, and the tax year coincides with the calendar year, 1st of January to 31st of December. Payments include salaries, bonuses and vacation allowances, as well as all deductions. There has to be a specific payday and pay schedule shared with the employees. Your company can have set up internal payroll (in-house HR), remote from a parent company, local payroll outsourced to a local payroll provider or an Employer of Record (see below in FAQs for more details on EoRs).

• 8. Notify the Labor Inspectorate

  After the employee is on payroll, one last thing to do is to notify the Labor Inspectorate of Luxembourg. See here for more information.

• 9. Specifics when hiring non-EU citizens, cross-border workers and independent contractors

  Hiring non-EU employees and independent contractors can be a bit more complicated but still relatively simple. The main consideration for non-EU is the residence and work permits, for which they would need to apply here.

In all cases of non-EU employees, cross-border workers and independent contractors, the employer needs to take into consideration potential visa requirements, tax conditions, legal compliance and in the case of the contractors alone, the different classifications and the various ways of payment. Some other factors to be taken into account would be cultural, religious and linguistic differences, in order to make your business the most inclusive possible.

Employee benefits

Those are the main employee benefits, based on local labor law, you would need to keep in mind:

• Health and pension insurance
• Paid overtime
• Paid leaves including vacation, sickness, maternity-parernity-parental, disability and more
• Special leaves for marriage, death and sick child
• Training leave
• Public holidays
• 13th month pay, calculated based on the employee’s annual base salary - not mandatory by law, but widely granted
• Potential annual bonus
• Supplemental benefits might include meal vouchers, travel allowances, dental insurance
• Severance pay and accurate notice period