Employer of Record Guide in 

Luxembourg

Vacation Leave

• Standard Entitlement: 25 working days per year (5 weeks)
• Accrual: Earned monthly at 2.08 days per month
• Additional Days: Extra days for age (1 day at 50, 2 days at 60)
• Payout Rules: Unused vacation must be paid out on termination

Sick Leave

• Duration: Up to 78 weeks over 104-week period
• Payment:
  • First day: Unpaid (waiting period)
  • Days 2-77: 100% of salary paid by employer
  • Days 78+: Social security benefits
• Medical Certificate: Required from day 3 of absence

Maternity Leave

• Duration: 20 weeks total
  • 8 weeks prenatal (2 weeks mandatory)
  • 12 weeks postnatal (12 weeks mandatory)
• Payment: 100% of salary up to 5× minimum wage
• Job Protection: Position guaranteed upon return

Parental Leave

• Duration: 4-6 months per parent (depending on sharing arrangement)
• Eligibility: 12 months of continuous employment
• Payment: Flat rate allowance from social security
• Flexibility: Can be taken part-time over longer period

Bereavement Leave

• Duration:
  • 3 days for spouse/partner, children, parents
  • 1 day for grandparents, siblings, in-laws
• Payment: Fully paid by employer
• Additional: Extra days may be granted for distant funerals

Personal & Family Leave

• Family Events: 1-2 days for weddings, communions, etc.
• Civic Duties: Time off for jury duty, elections
• Training Leave: Educational leave available under certain conditions

Summary

Termination Types

Termination With Cause (Dismissal for Serious Misconduct):

• No notice period required
• Must involve grave misconduct (theft, violence, serious breach of duties)
• Burden of proof on employer

Termination Without Cause:

• Standard termination requiring notice or payment in lieu
• Must follow proper procedures and notice periods

Notice Period Requirements

Notice periods depend on length of service and employee category:

Special Categories:

• Manual workers: 2 weeks to 2 months depending on tenure
• Employees: 1-6 months as above
• Senior executives: May have longer contractual notice periods

Severance Pay

• No statutory severance: Luxembourg law doesn't require severance payments
• Contractual severance: May be specified in employment contracts
• Collective agreements: Some sectors provide severance through collective bargaining

Probationary Periods

• Standard period: Up to 6 months for most positions
• Extended period: Up to 12 months for senior roles
• Notice during probation: 2 weeks' notice required after first month

Final Pay Requirements

• Timeline: Final payment due on last working day
• Components: Base salary, accrued vacation, overtime, bonuses
• Deductions: Only legally permitted deductions allowed

Anti-Discrimination & Retaliation Laws

Protected characteristics include:

• Gender, age, race, religion
• Disability, sexual orientation
• Pregnancy and family status
• Trade union membership
• Whistleblowing activities

National Statutory Holidays

Luxembourg observes the following public holidays:

Regional Variations

• Octave: Religious celebration in Luxembourg City (additional local holiday)
• Kermesse: Local fair holidays in various communes
• Schueberfouer: Traditional fair period with modified working arrangements

Holiday Pay Eligibility

To qualify for holiday pay, employees must:

• Be employed on the holiday
• Have worked their scheduled day before and after the holiday (unless on approved leave)
• Receive full daily wage for the holiday

Working on a Statutory Holiday

• Premium pay: 100% premium (double pay) for work on public holidays
• Alternative: Compensatory day off plus normal holiday pay
• Voluntary basis: Generally cannot be forced to work on holidays

Required Documents for Employment

• Employment Contract: Must be in writing, include all essential terms
• Work Permit: Required for non-EU nationals
• Tax Card: Obtained from tax administration
• Social Security Registration: Automatic upon employment start
• Bank Details: For salary payments
• Identification: Valid passport or national ID

Language Requirements

• Official languages: Luxembourgish, French, German
• Business language: Often English in international companies
• Contract language: Must be in language understood by employee
• Translation: Required for non-native speakers if requested

Background Checks & References

• Criminal record: Can be requested for relevant positions
• Employment verification: Standard practice
• Education verification: Common for professional roles
• Credit checks: Only for financial positions
• Consent required: Written consent needed for all checks

Data Protection & Privacy

• GDPR compliance: Full European data protection regulations apply
• Consent requirements: Explicit consent for data processing
• Data retention: Limited to employment duration plus legal requirements
• Cross-border transfers: Special rules for data outside EU

IP Assignment & Confidentiality

• Automatic assignment: Work-related IP belongs to employer
• Confidentiality clauses: Standard in employment contracts
• Non-compete agreements: Limited enforceability, must be reasonable
• Trade secrets: Strong legal protection available

Probation Period Setup

• Duration: Up to 6 months (12 months for senior roles)
• Notice period: 2 weeks after first month
• Evaluation: Regular performance reviews recommended
• Conversion: Automatic conversion to permanent after probation

Onboarding Timeline

What the EOR Handles

Borderless AI manages:

• Employment contract preparation
• Social security registration
• Tax compliance and registration
• Work permit assistance
• Payroll setup and processing
• Local legal compliance
• Multi-language documentation

Worker Classification: Employee vs Contractor

Luxembourg has strict rules distinguishing employees from independent contractors:

Employees:

• Work under employer direction and control
• Use employer-provided tools and equipment
• Receive regular salary with social benefits
• Protected by labour law

Independent Contractors:

• Operate autonomously with own business
• Use own tools and bear business risks
• Invoice for services provided
• Not covered by employment protections

Risk of Misclassification:

• Social security audits and penalties
• Retroactive employment benefits
• Tax penalties and interest
• Legal liability for labour law violations

Collective Bargaining & Trade Unions

• Union membership: Approximately 35% of workforce
• Collective agreements: Common in many sectors
• Sectoral agreements: Often extend to non-union members
• Works councils: Required in companies with 150+ employees
• Co-determination: Employee representation on company boards

Cultural Norms & Workplace Expectations

Communication Style:

• Formal and respectful approach
• Multilingual environment common
• Punctuality highly valued
• Hierarchical but collaborative

Work-Life Balance:

• Strong emphasis on personal time
• Flexible working arrangements increasingly common
• Long lunch breaks traditional
• Vacation time fully respected

Remote Work Considerations

Legal Framework:

• Right to request flexible working
• Health and safety obligations extend to home office
• Equipment provision requirements
• Data protection compliance essential

Cross-Border Issues:

• Tax implications for remote work from other countries
• Social security coordination with EU countries
• Work permit requirements for non-EU remote workers

Employer Obligations:

• Provide necessary equipment
• Ensure ergonomic workspace
• Maintain regular communication
• Respect right to disconnect