---
title: "Luxembourg Tax and Payroll 2026 | CCSS, Income Tax"
description: "Luxembourg payroll 2026: pension rose to 8.5% each side from January, plus a 23-band income tax to 42%, all run through the CCSS."
canonical: https://www.teamed.global/country-hiring-guides/luxembourg/tax-and-payroll
---

Luxembourg · Tax & payroll child

Served by Teamed vetted partner-entity network in Luxembourg

# How does *Luxembourg payroll tax* work in 2026?

On 1 January 2026 the pension contribution climbed to 8.5% for the employer and 8.5% for the employee, up half a point on each side under the pension reform law of December 2025. Add health, dependency and accident cover, then a 23-band income tax that tops out at 42%, and the Luxembourg payslip carries more moving parts than almost any neighbour.

Last reviewed 13 June 2026 · Luxembourg guide

![The old town of Luxembourg City at golden hour, the Adolphe Bridge arching over the green Pétrusse valley below sandstone ramparts.](/images/country-guides/luxembourg-tax-payroll.webp)

Illustration · Luxembourg City, Luxembourg

Answer.cite this

Luxembourg runs social security through one body, the CCSS. The employer pays pension at 8.5%, health in-kind at 2.8%, and health cash at 0.25%.

The employer alone covers accident at 0.70% and occupational health at 0.14%. An Employer Mutuality charge is added on top and varies by sick-leave class.

The employee pays pension at 8.5%, health at 2.8% plus 0.25%, and dependency cover at 1.4%.

Income tax is deducted at source across 23 bands. The first band is 0% on the lowest pay and the top is 42%. Pay runs monthly. There is no legal 13th-month salary.

## What does an employer pay in Luxembourg social security?

The employer pays pension at 8.5% of gross pay. That rose from 8% on 1 January 2026.

On top come health at 2.8%, health cash at 0.25%, accident at 0.70%, and occupational health at 0.14%.

CCSS · Contribution rates

Every Luxembourg employer registers with the **Centre commun de la sécurité sociale (CCSS)**. The CCSS collects all social contributions in one monthly run. Pension moved to 8.5% for the employer on 1 January 2026, half a point up on the year before.

Source: [CCSS: contribution rates](https://ccss.public.lu/fr/cotisations/taux.html)

| Employer contribution | Rate | Notes |
| --- | --- | --- |
| Pension | 8.5% | Raised from 8% on 1 January 2026 |
| Health, in-kind benefits | 2.8% | Matched by the employee |
| Health, cash benefits | 0.25% | Matched by the employee |
| Accident insurance | 0.70% | Employer only |
| Occupational health | 0.14% | Employer only |

### The pension rise is the 2026 story

The pension reform law of 18 December 2025 lifted the global pension rate from 24% to 25.5%. Each party, the State, the employee and the employer, moved from 8% to 8.5%. For any employer running Luxembourg payroll this is a real cost step from January 2026, on every salary, with no ceiling relief at the rates shown here.

### The Employer Mutuality charge

One employer-only charge sits outside the table because it has no single rate. The Employer Mutuality (Mutualité des employeurs) reimburses part of the salary an employer continues to pay during sickness. Its rate is set by the employer's absenteeism class, so it changes from one company to the next rather than being a fixed percentage. We model your actual class in the employer-cost figure rather than quoting a placeholder.

## What comes off a Luxembourg employee's gross pay?

Pension takes 8.5% of gross pay, also up from 8% on 1 January 2026.

Health takes 2.8% plus 0.25%. Dependency cover takes a further 1.4% and has no employer match.

| Employee deduction | Rate | Notes |
| --- | --- | --- |
| Pension | 8.5% | Raised from 8% on 1 January 2026 |
| Health, in-kind benefits | 2.8% | Matched by the employer |
| Health, cash benefits | 0.25% | Matched by the employer |
| Dependency insurance | 1.4% | Employee only, no employer share |

### Pension and health, matched

Pension and health are shared evenly between the two sides. The employee pays pension at 8.5% and the employer matches it. The same holds for health in-kind at 2.8% and health cash at 0.25%.

### Dependency cover is the employee's alone

Dependency insurance (assurance dépendance) funds long-term care. The employee pays 1.4% and the employer pays nothing toward it. It applies after a monthly deduction set in the social security code, so it does not start from the first euro of pay. Income tax is then worked out on what remains after these contributions.

## Luxembourg income tax bands for 2026

Income tax is a 23-band progressive rate, deducted at source each month.

The lowest pay sits at 0%. Rates climb band by band to 42% on the very highest income. The 2025 rate table still applies in 2026.

Luxembourg taxes employment income at source through the rate table (barème) set by the income tax law. The 2025 table remains in force for 2026, with no new band rates enacted. Rates rise step by step from a zero band on the lowest pay to the top marginal rate.

| Position in the scale | Rate |
| --- | --- |
| Lowest band, tax-free floor | 0% |
| First taxed band | 8% |
| Lower-middle earnings | 20% |
| Upper-middle earnings | 30% |
| Long high-earner band | 39% |
| Top marginal rate | 42% |

The table above shows the shape, not every band. The full scale moves in small steps: 0%, 8%, 9%, then on through the teens and twenties, reaching 39% across a wide high-earner band before the final climb to 42%. Where each band starts is set by the rate table and by the employee's tax class, which depends on marital and family status.

### Tax class changes the take-home, not the rate

The rate table is the same for everyone, but the tax class shifts where the bands bite. A single employee, a married couple and a single parent each sit in a different class, so two people on the same salary can take home different amounts. Teamed applies the correct class on every run so the deduction at source is right the first time, not corrected at year end.

## How does Luxembourg payroll filing and remittance work?

Salary is paid monthly, at the latest on the last day of the month it relates to.

Social contributions go to the CCSS each month. Income tax withheld at source is declared to the tax administration (ACD). Every employee gets a detailed payslip with the run.

Luxembourg payroll runs on a monthly cycle. The employer must pay the salary by the last calendar day of the month it covers, and must hand the employee a detailed written payslip with that payment (Code du travail, art. [L.125-7](https://itm.public.lu/fr/questions-reponses/droit-travail/remuneration/c/c1.html)).

- **Social contributions** to the [CCSS](https://ccss.public.lu/fr/cotisations/taux.html), which bills the employer monthly for both the employer and employee shares
- **Income tax withheld at source** declared and paid to the Administration des contributions directes (ACD)
- **Payslip** issued to each employee every month, showing the gross, each contribution, the tax withheld, and the net

The CCSS is the single door for social security. It registers the employee, collects every fund in one statement, and chases late payment. Income tax sits on a separate track with the ACD. Getting both filed and paid on the monthly rhythm is what keeps a Luxembourg payroll clean. Miss the CCSS schedule and interest and recovery action follow on the unpaid contributions.

1. Collect pay data Gather salary, hours, bonuses and any taxable benefits for the month before the run closes.
2. Apply social contributions Work out the employee pension, health and dependency deductions, then the employer pension, health, accident and Mutuality shares.
3. Withhold income tax Apply the rate table at the employee's tax class to the pay left after contributions, and withhold the tax at source.
4. Issue the payslip Hand each employee a detailed payslip showing gross, every contribution, the tax withheld and the net pay.
5. Remit and declare Pay the CCSS statement for social contributions and declare the withheld tax to the ACD on the monthly rhythm.

## Pension and care funds in the Luxembourg payroll stack

Pension is the largest single contribution. The employer pays 8.5% and the employee pays 8.5%.

Both rose from 8% on 1 January 2026 under the pension reform law of December 2025.

Pension is shared evenly. The employer pays 8.5% and the employee pays 8.5%, with the State adding the same share on top. Together the three sides now fund a global pension rate of 25.5%, up from 24% before January 2026.

### Health and dependency sit beside pension

Health insurance is split into in-kind and cash benefits. In-kind cover is 2.8% from each side. Cash cover, which funds sick pay, is 0.25% from each side. Dependency insurance, for long-term care, is 1.4% from the employee only.

### What the employer carries alone

Accident insurance at 0.70% and occupational health at 0.14% fall on the employer with no employee match. The Employer Mutuality charge, which varies by absenteeism class, is also employer only. There is no statutory pension cap shown in these rates, so the pension rise lands on the full salary.

## How does Teamed handle Luxembourg payroll for you?

Teamed becomes your legal [employer of record](/lp/employer-of-record) in Luxembourg for [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency.

CCSS registration, monthly contributions, tax at source, payslips and the full Luxembourg employment law stack run on **one platform**.

**Real HR and legal experts** run your Luxembourg hires, from the first contract through every monthly CCSS statement and tax-at-source declaration. **An actual person**, not a chatbot or a pooled queue. There is **no setup fee** and **no exit fee**. Employer cost **passes through at cost, itemised** on every invoice, so you see pension, health, accident and the Employer Mutuality as separate lines, never one blended number.

EOR payroll, contractor onboarding and entity setup all live on **one platform**. A Luxembourg contractor who moves onto payroll keeps their record. That same employee can **graduate** from EOR to your own Luxembourg entity without switching systems. EOR is the right model for a first Luxembourg hire, **until it isn't**, and we tell you when the numbers turn. Run the [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost) to see the full picture, including the January 2026 pension step. Start from [the Luxembourg hiring overview](/country-hiring-guides/luxembourg).

Key sources: [CCSS contribution rates](https://ccss.public.lu/fr/cotisations/taux.html), [ACD income tax table](https://impotsdirects.public.lu/fr/az/t/tarif_pers.html), and the [2025 pension reform communiqué](https://gouvernement.lu/fr/actualites/toutes_actualites/communiques/2025/12-decembre/18-adaptations-pension.html).

## Frequently asked questions

What does an employer pay in Luxembourg social security in 2026?

The employer pays pension at 8.5%, health in-kind at 2.8%, and health cash at 0.25%. On top, the employer alone pays accident insurance at 0.70%, occupational health at 0.14%, and an Employer Mutuality charge that varies by the company's absenteeism class. All of it is collected by the CCSS in one monthly statement.

What is deducted from a Luxembourg employee's salary?

Pension takes 8.5% of gross pay, health takes 2.8% plus 0.25%, and dependency insurance takes 1.4% with no employer match. Income tax is then withheld at source on the pay that remains.

How much did Luxembourg pension contributions rise in 2026?

From 1 January 2026 the pension contribution rose to 8.5% for the employer and 8.5% for the employee, up from 8% on each side. The pension reform law of 18 December 2025 lifted the global rate from 24% to 25.5%, with the State, the employer and the employee each moving to 8.5%.

What are the Luxembourg income tax bands for 2026?

Income tax is a 23-band progressive rate deducted at source. It starts at 0% on the lowest pay and rises step by step to 42% on the highest income. The 2025 rate table carries into 2026 with no new band rates. Where each band starts depends on the rate table and the employee's tax class.

How is Luxembourg payroll filed and paid?

Salary is paid monthly, at the latest on the last day of the month it covers, and each employee gets a detailed payslip with that payment. Social contributions go to the CCSS each month for both the employer and employee shares. Income tax withheld at source is declared and paid to the ACD. There is no statutory 13th-month salary, so any bonus is set by contract or practice, not by law.

Teamed Legal Operations

The mistake we see most on Luxembourg payroll is treating the 1 January 2026 pension rise as a rounding change. It is half a point on both the employer and the employee share, with no salary ceiling in these rates, so it lands on every euro of pay. On a team of any size that is a real number, and it is the kind of step a bundled invoice quietly absorbs without anyone seeing it.

A note from Tom Price-Daniel

Luxembourg payroll changed on 1 January 2026, when pension stepped up to 8.5% on each side.  
Pension, health, dependency, accident and the Employer Mutuality all run through one body, the CCSS, every month.  
See each line before you sign off the run.

Tom Price-Daniel · Co-founder, Teamed

## Related Luxembourg guides

- [Hiring in Luxembourg, overview](/country-hiring-guides/luxembourg)parent
- [Luxembourg termination and severance](/country-hiring-guides/luxembourg/termination-and-severance)sibling
- [Luxembourg cost breakdown](/country-hiring-guides/luxembourg/cost-breakdown)sibling
- [Employer of Record overview](/lp/employer-of-record)core
- [Pricing, Zero FX Fixed](/pricing)core
- [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator)tool
- [Talk to an expert](https://www.teamed.global/contact)CTA

A note on this page.

This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction. Verify current requirements with the Centre commun de la sécurité sociale (CCSS) and the Administration des contributions directes (ACD), or speak to a qualified professional, before relying on any specific figure. The pension contribution rose to 8.5% on each side on 1 January 2026 under the pension reform law of 18 December 2025, and the global pension rate is on a phased schedule that may move again. The income tax rate table is the 2025 barème carried into 2026.