Payroll & Employment Guide: Luxembourg

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Employee Benefits

Mandatory Benefits

• Paid annual leave (minimum 26 days)
• Paid public holidays
• Health insurance
• Pension insurance
• Accident insurance
• Unemployment insurance
• Maternity and parental benefits

Many employers offer:

• Meal vouchers
• Transport allowance
• Supplemental health and life insurance
• Pension top-ups
• Bonus schemes

Leave Policies

• Annual Leave: Minimum 26 working days.
• Sick Leave: Salary is maintained for a defined period; beyond that, the health insurance fund (CNS) may take over payments within rules.
• Maternity Leave: Typically 16 weeks, with social security paying benefits if eligibility conditions are met.
• Paternity / Co-Parent Leave: Several days/weeks of leave, depending on reforms and eligibility.
• Parental Leave: Flexible schemes (full-time, part-time or split) with benefits paid by the state.

Healthcare

Luxembourg has a compulsory public health insurance system administered through CNS.

• Both employer and employee contribute
• Employees can access a wide network of healthcare providers
• Optional supplemental private insurance is common in professional sectors.

Retirement & Social Security

The social security system covers:

• Old-age pension
• Disability and survivor pensions
• Health and maternity
• Long-term care insurance

Contributions (high level)

• Employer and employee both contribute significant percentages of salary (for pension, health, accident, unemployment, long-term care).
• Combined employer contributions typically add a notable double-digit % above gross salary.
• Exact percentages vary by year and scheme, so always confirm current rates for 2026.

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Taxes in Luxembourg

Personal income tax is progressive, with tax classes based on marital status, and social contributions on top.

• Employees benefit from various tax allowances
• Cross-border workers (e.g., residents of France, Belgium, Germany working in Luxembourg) have specific tax considerations

Payroll in Turkey

• Payroll Frequency: Typically monthly
• Payroll Currency: TRY

Employer obligations:

• Calculate gross-to-net
• Deduct income tax and employee social security
• Pay employer social security contributions
• Remit all amounts to the Tax Authority and SGK on time
• File monthly declarations

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Legal Regulations

Key sources:

• Luxembourg Labour Code
• Social Security Code
• Health & Safety and anti-discrimination legislation

Total Employment Cost:

• Employer contributions usually add a significant uplift (often 15–20%+ or more) on top of gross salary, depending on precise rates and benefits.

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Work Permits & Visas for Luxembourg

Non-EU/EEA nationals must obtain:

• A residence permit with work authorisation, for example:
• Highly Qualified Worker / Blue Card
• Other categories for executives and specialists.

Processing times: generally several weeks to a few months.

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Employer of Record (EOR) in Luxembourg

Employer of Record (EOR) services in Luxembourg allow companies to hire employees quickly and compliantly without establishing a local Luxembourg entity. This enables fast market entry while avoiding complex registration processes, payroll requirements, and administrative burdens. The EOR becomes the legal employer, ensuring full compliance with Luxembourg's labour and tax regulations.

EOR services in Luxembourg let you:

• Hire staff in Luxembourg without forming a local company or navigating entity setup
• Provide fully compliant employment contracts aligned with Luxembourg labour laws and applicable collective agreements
• Run monthly payroll, including tax withholding, social security contributions (CCSS), and mandatory filings
• Manage social insurance, taxes, and employer obligations on your behalf
• Handle local HR administration, including onboarding, documentation, employee records, and ongoing support
• Ensure compliance with working time rules, leave entitlements, and employment protections

PEO Services in Luxembourg

PEO services in Luxembourg are ideal for companies that already have a local entity but want to streamline HR processes, simplify payroll management, and ensure full compliance with Luxembourg's labour and tax regulations. A PEO functions as an extension of your HR team, reducing administrative work and minimizing compliance risks.

PEO services support existing entities by:

• Managing HR and payroll operations, including onboarding, employee records, monthly payroll, and statutory reporting
• Administering employee benefits, including social insurance, leave entitlements, and optional benefits programs
• Supporting compliance and documentation, ensuring all employment contracts, filings, and HR processes meet Luxembourg's legal requirements
• Providing ongoing employee lifecycle management, from hiring to termination procedures

EOR in Luxembourg

Payroll Calculator

A Luxembourg payroll calculator helps you:

• Estimate net salary from gross
• Understand total employer cost including social charges
• Model different compensation structures

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