What do you need to know to hire in Luxembourg?

Employer charges in Luxembourg stack across several funds. Pension is 8.5%, health in-kind cover 2.8%, health cash benefits 0.25%, accident insurance 0.7%, and occupational health 0.14%. The Employer Mutuality adds a further employer charge that varies by your absenteeism class. Teamed's Luxembourg fee sits inside the total cost envelope, not outside it.

Teamed's Luxembourg price is a starting rate, with zero FX in any currency pairing. No setup fees. No exit fees. Salaries, taxes, and benefits passed through at cost on every invoice.

The full breakdown, with worked examples at current statutory rates, is in the cost guide.

Setting up a Luxembourg company means incorporation, a business permit, CCSS social security registration, and a tax number with the ACD. It runs to several weeks of setup plus ongoing monthly filings. An Employer of Record is faster and cheaper at low headcount. Teamed runs Luxembourg payroll, contracts, and compliance from day one.

The crossover point depends on Luxembourg salary levels and your local accounting costs. For most professional-services roles it lands around 5 to 8 employees. The EOR vs entity guide runs those numbers.

Most EOR providers will not tell you when you have crossed it. We do, and we help you move. You progress from contractor to EOR to your own Luxembourg entity on one platform under Teamed's Graduation Model, with tenure preserved.

The pension reform law of 18 December 2025 lifted the global pension contribution rate from 24% to 25.5% from 1 January 2026. The State, employees, and employers each now pay 8.5%, up from 8%. Budget any 2026 Luxembourg hire on the new rate, not the old one.

The minimum social wage rose again on 1 June 2026 through indexation, at index 992.24. The unskilled rate is now €2,771.33/month and the qualified rate €3,325.59/month. Because Luxembourg indexes pay to inflation, every salary, not just the minimum, can move mid-year. The hiring guide covers each current obligation in detail.

Statutory paid annual leave is 26 days of working days per year for full-time staff, on top of 11 legal public holidays. Maternity leave runs to 20 weeks, made up of 8 weeks before the birth and 12 weeks after it. The maternity allowance is paid by the CNS, the national health fund, not by the employer.

In sickness, the employer keeps paying salary until the end of the month containing the 77 days of incapacity, counted over a rolling 18 months window. After that the health fund takes over. There is no mandatory 13th-month salary. A bonus stays discretionary unless a contract or collective agreement makes it due. The benefits guide covers each entitlement in full.

Luxembourg taxes personal income on a sliding scale under the income tax tariff. Earnings below the first threshold are taxed at 0%. The rate then climbs through 8%, 9%, and 10% on the lower bands, reaching the top marginal rate of 42% on the highest incomes.

On the social side, the employee pays pension at 8.5%, health in-kind cover at 2.8%, and dependency insurance at 1.4%. Salary is paid monthly, by the last calendar day of the month at the latest, and a written monthly payslip is required by law. Teamed handles every deduction and remittance. The tax and payroll guide sets out every band and threshold.

Employer notice runs 2 months for under five years' service, 4 months for five to under ten years, and 6 months for ten years or more, under Code du travail art. L.124-3. Severance begins only at five years. It is 1 month from five years, 2 months from ten, and reaches 12 months from 30 years.

An unfair dismissal claim has no fixed payout in Luxembourg. The labour court assesses damages for the lost pay and any moral harm. An employee has 3 months to bring a claim. The trial period gives both sides a faster exit, from a minimum of 2 weeks up to 6 months for qualified staff. The termination guide runs the full process.

Indexed pay moves on its own. Luxembourg ties salaries to a cost-of-living index. When the index triggers, every salary rises, not just the minimum. The minimum already moved on 1 June 2026 to €2,771.33/month for unskilled staff. Budget for an index step you do not control, and treat any January forecast as provisional.

Severance is a cliff, then a staircase. Under five years' service there is no severance at all. From five years it is 1 month, and it climbs to 12 months at 30 years. Notice runs alongside it, up to 6 months. A trial period of up to 6 months for qualified staff is the main way to part ways cheaply early on. The hiring guide and the termination guide both cover safe process in detail.