Payroll and HR in Luxembourg

Payroll and HR in Luxembourg

Local Information

Local Time (Vienna) (LIVE):7:10 PM
Local Currency:$1 = €0.84
Business Language(s):French (recommended), German, Luxembourgish  
Tax Year Dates:1st January – 31st December

 

Economically savvy and growing, Luxembourg’s international attraction is the result of its openness as a keen global partner, its status as a driver in early European politics, and its locational benefits as a landlocked territory at the heart of Europe. Known as a powerhouse in private banking for its successful financial sector, Luxembourg’s economy defies the size of its geography to offer up strong wealth. In fact, Luxembourg boasts a top seating in the world’s wealthiest countries according to GDP per capita.  

Early into the 20th century Luxembourg entered several strategic partnerships across Europe, transforming itself into a founding member for multiple economic and political organizations. This country’s memberships are impressively broad and connected: not limited to the European Union, Luxembourg also sits on NATO and the United Nations. Meanwhile, Luxembourg city is the grand host to the European Investment Bank and the European Court of Justice.  

As a landlocked territory, Luxembourg is an easily accessed European country. Despite its size, it is often known for being its larger international presence. Sharing a border with the likes of Belgium, Luxembourg is attractively intercontinental. Internally, this country recently made its public transport a free service. Locals will benefit from nationwide access via busestrams and trainsBoasting a modernised transport network, car rentals or train links offer alternative travel options. These networks branch out into neighbouring countries for easy access, too.   

Expansion into Luxembourg is certainly attractive, yet businesses looking to grow their presence in this economically strong European territory should consider the various local laws and barriers. Luxembourg is known, for example, for its multilingualism and multiculturalism that comes from its neighbours. As it borders France and Germany, Luxembourg has many spoken languages, specifically its local dialect called Luxembourgish. Along with a host of languages, there are certain local laws that require compliance, such as stricter labour hours on working days. Guidance from an expert in HR & payroll is essential in understanding the oftentimes complex employment legislation and regulations local to Luxembourg. FMP Global are uniquely capable of helping expansion plans succeed into far and exciting new places. 

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Details correct at time of publication. You should not rely on these details without first seeking professional international advice.

Employer Must-Dos

To set up payroll in Austria, the following processes must be undertaken:

  • Adhere to the allowance of time in a working week (normally 40hours against 8 -hour days). 
  • Ensure social security contributions are timely.  

HR in Luxembourg

What are the regular working hours in Luxembourg? 

Similar to many territories, the working hours in Luxembourg are guided by strict labour laws that shape the working weeks. Employees are held to a 40-hour work week against an 8hour working day, though there is some flexibility in how this materialises. Commuting time is not calculated into the workable allowance; and other urgencies can prompt longer working hours that may stretch up to a length of 48-hours per week. However, where there are exceptions to the laws, the provisions for the weekly time allowances must be adhered to over four-consecutive weeks.  

Vacation, Maternity, and Sickness  

For businesses in Luxembourg, employees are entitled to a minimum annual leave of 25 working days per year – more generous than its neighbouring countries, which average 20 daysCertain employees are eligible for additional vacation time, depending on any agreements reached with the employer. Luxembourg routinely celebrates a further nine public holidays.  

Regarding sick leave, however, employers are entitled to the full benefits of their contract up until the 77th day of absence. Where employers are responsible for upkeeping sickness benefits, employees must be complaint with business obligations. Absences longer than two-days must be justified by a medical opinion or certificate, anything shorter is usually exempt.  

Maternity leave in Luxembourg (known locally as allocation de maternité) is available to working mothers for 16 weeks: eight weeks before birth, and twelve weeks after. Prior to commencing maternity leave, employees must have had social security for six months. A special leave of 10 days can be granted to the father for paternity leave (otherwise known as papperconge).  

Dismissal  

An employee’s contract may be terminated for reasons pertaining to their aptitude, or for behavioural misconduct. The operational needs of the company can be consulted in relation to the actions and behaviours of the employee under scrutiny.  

For larger operations defined by 150 employees or more, the employee under scrutiny must be allowed to discuss their proposed dismal openly. In the scenario of a successful dismissal, the employee must be informed of the reasoning driving the decision.   

Payroll in Luxembourg

What tax considerations are there?  

Understanding the Luxembourg tax landscape, there are various incentives for companies willing to learn how to establish their presence. Being compliant with taxation means being cognizant of personal income tax and corporate income tax.  

Personal Income Tax  

Liability for income tax is based on the unique personal situation of an individual (marriage status, for example). The tax system can seem complicated with its tiered scaling of three classes (Class-1, Class-1A and Class 2) against 23 different income tax brackets (from 0% to 43% with incremental rises)Structurally, residents pay tax on their worldwide income, while non-domestic residents (expats) or businesses only pay against income generated in Luxembourg.   

Luxembourg’s tax regime attracts regular investment from the US as foreign interest normally qualifies for economic rewardsTax is largely territorial in Luxembourg, keeping taxes lower than neighbouring countries.  

Corporate Income Tax (CIT)  

Tiered, the taxable income for business is graded against size: companies amassing less than EUR 175,000 meet the CIT threshold rate of 15%; whereas companies exceeding EUR 200,001 are subjected to 17%.  

Known as “Taxe sur la Valeur Ajoutee”, or TVA, Luxembourg’s standard VAT is at 15%, but can lower to 12%, 6% or 3% 

Find Out More About International Payroll

Download our free guide to international payroll today, covering further considerations and implications of payroll and HR abroad.

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FMP’s Luxembourg Payroll and HR Solutions  

A specialist in overseas expansions, we are helping hand in navigating the complexities of Luxembourg’s employment laws across several of its cities, such as Luxembourg City, Esch-sur-Alzette, Dudelange and beyond. Essential to strong HR & payroll compliance is an understanding of the local laws for international destinations like Luxembourg, which is no easy feat without expert guidance on the matter. Always keep your plans smartly aware and compliant through the advice from our expert team at FMP Global. Our services are vast and varied:  

  • Payroll processing  
  • Emailed payslips 
  • Holiday, maternity & sick leave  
  • Multi-language payroll  
  • Multi-currency payroll  
  • End-of-year tax admin  
  • Payroll audits  
  • International money transfers  
  • Employment contracts  
  • Regulatory Compliance  
  • Tax & Labour Law Consulting  

Stay Compliant with Luxembourg Payroll

Avoid payroll pains and smoothly deliver your international expansion plans with expert help and guidance from FMP Global. Our professionals can lend a helping hand to manage your global payroll and HR.

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