Hiring Guide: Key Intel to know before Hiring Luxembourg Employees

Luxembourg is located in Northwestern Europe and is famed for being a high-ranking economy despite having a sparse population of around 6,40,000. 

Despite the low population, several companies have chosen to set up offices and subsidiaries here thanks to the highly skilled workforce. Naturally, they also engage in recruitment and selection in Luxembourg. One important thing to note in this context is that Luxembourg regularly gets a stream of workers who come in to work from neighboring countries such as Belgium and France. This way, businesses have a solid pool of where and how to hire employee in Luxembourg.

The country ranks first under the list of Open for Business. It encourages companies to scout for talent in the Duchy of Luxembourg. Companies hire in Luxembourg from cross-border workforces comprising around 45% of the domestic workforce. Gross Domestic Product in Luxembourg stands at 85.51 billion US dollars as per World Bank’s 2021 estimates. The top sectors in the country that companies hire from are-

• Fintech
• Space Tech
• Automotive
• Construction
• Logistics

The tax structure is business-friendly, and companies can access a workforce with solid command over several languages, such as English, Luxembourgish, German, and French. These help in better recruitment and selection in Luxembourg.

When you initate recruitment and selection in Luxembourg,  you need to keep track of the laws governing the employment relationships in the country.

Things to Know Before Hiring in Luxembourg

Before hiring employees and beginning recruitment and selection in Luxembourg, here are a few specific things to remember. These help when you move on to hire employees in Luxembourg.

• International hiring– If you want to hire staff in Luxembourg,  research the rules by taking expert guidance.
• Largest sector– Finance is a prominent niche, followed by life and space sciences.
• Relocation coverage– In Luxembourg, employees can take advantage of the coverage of relocation costs from the employer’s end. It is done from the latter’s end to retain or hire top talent.

• The Code du Travail is Luxembourg’s primary source for employment norms. Another reference the country follows as employment guidelines is the Social Law for closing any hire staff in Luxembourg.

Employment Contract

It is customary for working relationships in Luxembourg to be contract-governed. The employment contracts must be in written form, but there is no barrier to the language. The only condition in this context is that both parties mentioned in the employment contract must understand the language. Most contracts in the country are indefinite and open-ended, but the code also allows for a fixed-term contract. Such a contract for recruitment and selection in Luxembourg needs to mention the following when you seek to complete the process for recruitment and selection in Luxembourg-

• Employer and employee identities
• Main job duties of the employee
• Main location for work with all site details 
• Duration of the contract
• Probation period
• Collective bargaining agreements mention
• Salary and benefits
• Work hours and overtime pay
• Annual holidays
• Notice period or rules around dismissal

Termination

As per the Labor Code in Luxembourg, an employer may terminate an employment contract when a job offer or contract fizzles out due to financial or closure-related reasons. 

The reasons relating to the termination of a hire staff in Luxembourg might also be reorganization-related. In case of proven failure to perform on the job, termination from the employer becomes a possibility. Voluntary resignation by an employee is allowed and accepted as a just cause for dismissal.

Notice period

The notice period for varies depending on the tenure of service, but the minimum notice period is at least 30 days.

It goes up to 60 days for a service span of fewer than five years, 120 days for a service span between 5 and 10 years, and 180 days when the service span is more than ten years.

In case of employee resignation, the notice period is-

• 30 days for a service period lesser than five years
• 60 days for a service period of more than five years and lower than ten years
• 90 days for a service period higher than ten years
• 14 days for a service span of up to a year
• One month for 1-4 years
• Two months for 4-8 years
• Four months for 8-12 years
• Six months for 12 years and above

Employment laws

When handling recruitment and selection in Luxembourg, one must comply with local laws.

• Employers need to draw up a contract for a working relationship to be in force 
• The Labor Code in Luxembourg promotes inclusiveness and non-discrimination across workplaces.

Working hours and breaks

When you hire staff in Luxembourg, the applicable working hours and breaks are as under-

• The standard working hours for staff in Luxembourg in Luxembourg are 8 hours per day or 40 hours per week.
• Employees agree over overtime at add-on payments mutually with the employer.
• Overtime hours must not exceed 120 hours annually or more than four hours in a couple of days consecutively.
• Pregnant employees cannot perform overtime duties.

Payroll

• Once you set up a company and hire employees in Luxembourg, payment occurs monthly. 

Minimum wage

• The average wage to hire employees in Luxembourg has increased ten times in 10 years and now stands at €2,936.48 per month.

Bonuses

• The bonus payment is made at the employer’s discretion once every year.

Holidays for employees 

Official public holidays in Luxembourg are listed below-

Other Leaves

Vacation Leave

• Employees are entitled to 25 days of annual vacation leaves.
• Veterans, mining workers, and disabled individuals can avail a certain number of extra leave days annually.
• Annual vacation leave can be carried forward to the following year.

Maternity and Paternity Leave

• Pregnant employees are entitled to 8 weeks of pre-delivery leave and 12 weeks of post-delivery leave.
• Fathers can also take paternity leave of 10 days after the birth of a child.

Social security

Employees and employers must pay social contributions for insurance and related heads, as under

Health insurance

• The health insurance contribution is 2.80% each from the employer and employee, based on the salary in Luxembourg.

Pension contributions

• The pension contribution is 8% each from the employer and employee, based on the taxable salary. 

Taxation

• Luxembourg’s corporate tax rate is 17% for a business clocking annual figures above 200,001 Euros.
• The VAT rate stand as under- -Standard VAT at 17% 
• Reduced VAT at 16%, 13%, and 7%.
• The income tax brackets are classified in columns for married taxpayers, single taxpayers with a child/ those aged up to 65 years, and single taxpayers below-

The Cost of Hiring an Employee in Luxembourg

The hiring costs and recruitment fees in Luxembourg take up 12% of the employee’s salary. The basic costs involved in the recruitment process in Luxembourg are-

• Advertisement costs
• Hours for reviewing job applications
• Travel and visa costs
• Payroll costs
• Tax payment
• Social security contributions
• Salary and benefits
• Bonuses
• Vacation and leave coverages
• Contracting and legal costs
• Onboarding and training costs
• Paperwork and inventory costs
• Overheads related to assets, if any

What Does a Company Need to Hire Employees in Luxembourg?

Employers in Luxembourg can employ permanent, seasonal, part-time, or internship employees. To hire employees in Luxembourg, a company has to comply with all governing norms. All employers must also mandate working relationships with employees via a contract in Luxembourg. The documentation involved in hiring for any organization here are-

1. Valid work visa
2. Certified passport copy of the employee
3. Birth certificate of employee
4. Certified copy proving employee qualifications
5. Employment contract
6. Notarized deed stating company incorporation
7. Registry with the Trade and Companies Register
8. Tax registration
9. Business operation licenses

Various Options for Hiring Employees in Luxembourg                                                         

Once you understand the rules related to the process for recruitment and selection in Luxembourg, you could pick from either of the options-

1. Hire a reputed EOR service: Outsource all needs while conducting a recruitment and selection Luxembourg. The solutions provider will handle hires and close contracts while enabling solutions for further management.
2. Internal hiring: Set up an HR team to handle job-related hires from end to end.

The Steps to Hiring in Luxembourg

The recruitment and selection in Luxembourg could be conducted via a standard procedure as outlined below-

Register open positions and advertise the same

• Begin the hiring process in Luxembourg  by registering any open positions in the company with the National Employment Administration. It is a mandatory part of the hiring process in Luxembourg.  
• Recruit a team externally or internally to begin the recruitment process for hiring.
• Use connections and networking to get references for prospective candidates.
• Job adverts online also help; top job boards in Luxembourg are jobs.lu and jobfinder.lu.
• Social media resources such as Linkedin are also helpful in finding the right candidates for a job.

Shortlist candidates

• Employer teams will receive CVs and cover letters from candidates in the same language as the job advert. 
• Shortlist the candidates who fit in well with the requirements and arrange for callbacks to schedule interviews.

Interview rounds

• Schedule interview rounds or a single round with the shortlisted candidates. It can occur on-site or even online.
• Avoid any discriminatory questions. Employers might plan additional interview rounds,  completely in tune with the Luxembourgian work culture. You can also conduct background checks.

Offer letter and contract

• Share a relevant offer letter and draft an employment contract in line with the norms in Luxembourg.
• Mention that you will initiate a background check for rounding up the process on recruitment and selection in Luxembourg, in the offer letter. Do so while ensuring that all data protection laws and anti-discrimination policies are honored.

Onboarding employees

• When both parties sign a contract before or on the joining date, onboarding can begin.
• It includes obtaining employee tax cards, payroll setup, and Social Security Common Center registrations. Round up the process in Luxembourg by inducting the new employee into the organization.

Let Multiplier be Your EOR Platform in Luxembourg

The hiring process in Luxembourg needs an understanding of the finer details and nuances of its Labor Code. A reputed PEO-EOR firm such as Multiplier could greatly help in this context.

Smoothen the recruitment and selection in Luxembourg and round up all answers on how to hire employee in Luxembourg. You may do this with the outsourcing of all hiring-related work to a SaaS-based Employer of Record solutions. Multiplier allows you to focus on understanding a new market while helping frame teams per the local norms. All this, minus the need to set up a branch in Luxembourg!