Expanding a company internationally opens up new opportunities for growth and success. When considering global expansion, Luxembourg often stands out as an attractive option due to its favorable business environment.
Let’s explore the costs and considerations associated with hiring employees in Luxembourg.
An Overview of Luxembourg’s Workforce
The total labor force in Luxembourg was estimated at about 510,000 individuals in 2022. Luxembourg has consistently maintained a high employment rate. As of February 2023, Luxembourg’s unemployment rate dropped to 4.83% from 4.90% in January 2023.
Luxembourg has a significant foreign workforce, largely due to its geographical location and cross-border commuting. Around 75% of the working population in Luxembourg are from or commute from another country. These individuals often commute from neighboring countries such as Belgium, France, or Germany. Unlike other countries, Luxembourg is experiencing a brain gain – attracting top talent from all over Europe and the world.
Required Costs of Hiring in Luxembourg
There are a number of required costs when hiring in Luxembourg.
Minimum Wage: In Luxembourg, the minimum wage is one of the highest in the European Union. As of January 1, 2023, the gross monthly minimum wage for skilled workers is €2,936.48 (about USD 3,150).
However, wages paid depend on the industry and the level of skills required. Furthermore, wages in Luxembourg are also indexed for inflation, so adjusting according to inflation is another consideration.
Vacation and Paid Leave: Employees in Luxembourg are entitled to a minimum of 26 days of paid leave per year. Additionally, there are 11 public holidays that employees are entitled to take off with full pay.
In Luxembourg, mothers are entitled to 20 weeks of maternity leave. During this time, the benefits are paid by Caisse Nationale de Santé (CNS). The amount received must equal no less than the mother’s highest income in the three months prior to birth.
Meanwhile, adoption leave is 12 weeks. Employees must apply for this type of leave and receive approval from their employers. Employees will receive a benefit from the CNS during this time following the rules for sick leave payments.
Both parents are entitled to parental leave, granted once per child after maternity or adoption leave. Parental leave can be taken flexibly between certain periods of a child’s life and can be taken on a full-time, part-time, or split basis. This must be approved by an employer unless it’s a full-time parental leave. During parental leave, employers do not pay employees. Instead, employees receive a monthly parental leave allowance from the Caisse pour l'avenir des Enfants (CAE or Children's Future Fund).
In terms of sick leave, employees are entitled to 77 days of sick leave paid by the employer before the CNS takes over. Employers or collective agreements may have different rules depending on the role or industry.
Pension Contributions: Employers in Luxembourg are required to contribute approximately 12-15% to the social security system, including pension funds. The specific contribution rates depend on the employee's salary and the applicable social security schemes.
Optional Costs of Hiring in Luxembourg
Health Plans: While healthcare in Luxembourg is generally provided by the state, some employers offer additional health insurance benefits to their employees. These plans may cover services such as dental care, vision care, and complementary therapies.
Fitness Memberships and Other Perks: Employers in Luxembourg may choose to provide additional benefits to attract and retain talent. This can include subsidizing or covering gym memberships that cost USD 45 per month on average. They may also offer wellness programs or provide employee discounts for various services and products.
Average and Gross Salary in Luxembourg
The average salary in Luxembourg varies across industries. Here are the average gross monthly salaries for some key sectors based on available data from Teleport, Paylab and Luxtoday:
- Financial Services: €4,000 - €8,500 (USD 4337 - 9217)
- Information Technology: €5,000 - €7,500 (USD 5422 - 8133)
- Professional Services: €4,500 - €6,500 (USD 4880 - 7048)
- Healthcare: €3,500 - €5,500 (USD 3795 - 5964)
Luxembourg's workforce is diverse and employed across various sectors. The country is known for its strong financial services sector, including banking, investment funds, and insurance. The ICT (Information and Communication Technology) sector is also prominent, with numerous technology companies and data centers located in Luxembourg. Other significant sectors include construction, healthcare, education, and research.
To estimate the gross salary, additional costs such as social security contributions, income taxes, and other deductions must be considered. These costs can vary based on factors like the employee's salary level, family status, and tax regulations.
Estimated Cost to Employer
Calculating the total cost to the employer involves considering the required costs mentioned earlier, optional benefits, social security contributions, and any other applicable taxes (up to 12-15% of salary).
This would add up to at least €54,006 per year when you calculate using Luxembourg’s median salary of €48,220. It is recommended to consult with tax advisors or payroll specialists to accurately estimate the total cost range based on individual circumstances.
Hiring employees in Luxembourg presents numerous benefits for companies expanding internationally. Luxembourg is keen to be the Silicon Valley of Europe – there will be many opportunities for business in this rising tech hub.
Please note that the figures provided above are based on available information and should be used as a general guide. An EOR like Borderless can provide more guidance regarding hiring costs in Luxembourg.
Want to hire in Luxembourg but not sure where to start? Let our knowledgeable staff help you. Book a demo to see how Borderless can help you expand your business and hire in Luxembourg.
Disclaimer
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