Taxes and payrolls: the labour market in Luxembourg

Taxes and payrolls: the labour market in Luxembourg

Each labour market has some peculiarities. It may be tricky for foreigners to understand fully the payment methods, the taxes and other benefits related. In TalentUp we are starting a series of different blog articles, one for each country. This article analyses the labour market in Luxembourg.

General data about the Luxembourger labour market

Minimum wage3,009.88
Payment basisUsually monthly, but weekly is also common
PaymentMust be paid by the last day of the month
Maximum working hours a week40h
Maximum overtime hours a week8h 
Working hours compensationPaid at 150% rate.
Luxembourg’s minimum wage and maximum working hours disclosure. Data for January 2024. Source:

In Luxembourg, it is customary to pay the 13th salary. 

Work on Sunday is prohibited unless under certain circumstances or for specific sectors; specific compensation should be paid.

Payroll taxes in Luxembourg

Social security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.

ContingenciesEmployer %Employee %
Health Insurance2.80% to 3.05%2.80% to 3.05%
Accident at Work0.68% to 1.13%
Mutual Health Benefit0.60% to 2.98%
Health at Work 0.14%
Dependency Contribution1.40%
Total12.22% to 15.30%12.20% to 12.45%
Share of contingencies applied to the gross salary. Data source:

Contributions can be up to a maximum of 11,284.77 EUR per month.

Once contributions are paid, employees need to pay an income tax that varies depending on their gross salaries. It depends on whether the taxpayer is married or single. There are many salary bands and the tax is not a share, is an established amount of euros.

Contingencies from self-employees

Self-employed have to pay communal business tax (6.32%), personal income tax and property tax. The withholding tax scheme does not apply to them.

Example of net salary in Luxembourg

As a reference, we use the average salary of a software engineer. In Luxembourg, on average, software engineers earn annually 53,700€.

Gross salary (annually)53,700
Health Insurance2.80% to 3.05%1,503 to 1,637.852.80% to 3.05%1,503 to 1,637.85
Accident at Work0.68% to 1.13%365.16 to 606.81
Mutual Health Benefit0.60% to 2.98%322.2 to 1,600.26
Health at Work 0.14%75.18
Dependency Contribution1.40%751.8
Total12.22% to 15.30%6,562.14 to 8,216.112.20% to 12.45%6,551.4 to 6,685.65
Income tax* if single13,081
Net salary (annually)33,933.35 to 34,067.6
From gross to net salary of a software engineer in Luxembourg.

The employer contributes 6,562.14 to 8,216.1€ to social security and the employee 6,551.4 to 6,685.65€.

After paying the income tax, the employee has a net salary of 33,933.35 to 34,067.6€ coming from a gross salary of 53,700€. 

Unemployment regulation in Luxembourg

For employers with more than 150 employees, a hearing must be conducted before the employee is dismissed. For employers with at least 15 employees, the employer must notify the economic committee of the dismissal.

The amount of notice is dependent on the length of service:

Time workedNotice period
Less than 5 years2 months
Between 5 and 10 years4 months
More than 10 years6 months
Notice periods in Luxembourger contracts.  Data source:

Notice begins on the 15th of the month if the dismissal letter is provided before or on the 1st of the month. Notice begins on the 1st day of the following month if the letter of dismissal was sent between the 15th and the last day of the month.

The amount of severance pay is dependent on the length of service:

Time workedSeverance pay* 
Less than 5 yearsNo severance pay
Between 5 and 10 years1 month or 5 months
Between 10 and 15 years2 months or 8 months
Between 15 and 20 years3 months or 9 months
Between 20 and 25 years6 months or 1 year
Between 25 and 30 years9 month or 15 months
More than 30 years1 year or 18 months
Severance period in Luxembourger contracts.  Data source:

*The long period is only if the employer has less than 20 employees.

The probation period can be defined by various things:

  • If an employee receives a monthly salary of at least 4,586.12 EUR, the maximum probation period is one year
  • If an employee has a vocational skills certificate or equivalent, the maximum probation period is six months
  • If the employee does not have a vocational skills certificate or equivalent, the maximum probation period is three months

Different kinds of leaves in Luxembourg

Employees receive a minimum of 26 working days of paid leave per year. Disabled persons or those who have suffered a work accident have an additional 6 days, and mining employees have an additional 3 days.

They have 11 public holidays.

The maximum duration for paid sick leave is 26 weeks. During the first 77 days of sickness leave within a 12-month consecutive period, employers provide full salary coverage, regardless of whether the leave is continuous or intermittent. Employers can seek reimbursement for 80% of this salary expense from their mutual scheme insurance. After the 77th day, Social Security takes over the responsibility for covering additional sick leave.

Maternity leave in Luxembourg is 20 weeks and can begin 8 weeks before the expected due date. it is paid by social security and it ranges from the minimum wage to 5 times the minimum wage.

Paternity leave lasts up to 10 days. To maintain the full duration, fathers must notify their employer at least two months in advance. Failing this notice, the leave can be limited to 2 days, and it can be taken non-consecutively within two months of the child’s birth.

Parental leave is also allowed. it depends on the hours worked by each parent and it is unpaid.

Other common Luxembourger benefits

Benefit% of companies with this benefit
Cutting Edge Technology16.7
health Insurance16.7
Professional Development12.5
Company Car8.3
Top 5 benefits offered in Luxembourger companies. Datasource: TalentUp’s database.

How to employ a Luxembourger worker

If you plan to hire employees, you’ll need to register as an employer with the Luxembourg Social Security and Tax Authorities. And you need to register your business for taxation purposes. You will obtain a business identification number (n° d’identification fiscale, NIF).
Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.

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About Author

Èlia Adroher i Llorens

Content Writer. Èlia studied International Business Economics with a focus on digital marketing. She is also interested in learning about data analysis.