Payroll in Luxembourg

In Luxembourg, cash salary is payable monthly, no later than the last calendar day of the relevant month. Monthly is the norm, and the last day of the month is the latest date the law allows.

Payday and payslips

Provide a payslip when you pay salary, and keep proof of payment. Show gross pay components, employee deductions and net pay as separate lines so each item can be traced. Certain salary accessories have their own deadline, tied to the service year, the financial year or the date the result is established. Keep those dates in your payroll calendar apart from the monthly payday.

At termination, outstanding salary and accessories must be paid within five days of the contract ending. That includes compensation for unused annual leave and any applicable severance.

Extra or 13th-month payments

There is no statutory 13th-month payment. A thirteenth-month payment or bonus is not owed just because it is common in an industry. It becomes obligatory where the employment contract, a collective agreement or a qualifying established practice requires it. Repeated awards can create an obligation when the legal conditions are met. If you offer one, state the calculation, eligibility and payment date in writing, and include any guaranteed amount in annual employment costs.

Contributions and tax

Each month you report gross remuneration components and the exact paid hours to CCSS. You pay both the employer contributions and the employee contributions you withheld to CCSS. In 2026 the ordinary employee shares are 8.5% for pension and 3.05% for health. Long-term care adds 1.4% on its own base after an allowance. Employer shares for pension and health are the same 8.5% and 3.05%, plus accident insurance, mutual scheme and occupational health charges that vary by employer. Ask for the actual employer rates.

Contribution bases differ by pay component, so overtime and occasional benefits do not necessarily attract every charge applied to basic pay. Use the CCSS component rules rather than one percentage for every payment. From June 2026 the standard monthly contribution ceiling is €13,856.63.

Wage-tax reporting and payment follow your monthly, quarterly or annual schedule, generally within ten days after the reporting period. A missing electronic tax card can trigger the least favourable withholding rules, so check it before the first pay run.

Working time rules that affect pay

The ordinary limits are eight hours a day and forty a week. The usual maximum including overtime is ten hours a day and forty-eight a week. Record working time, including remote work.

An overtime hour ordinarily gives one and a half hours of paid compensatory rest. Where recovery cannot be given for the statutory reasons, or employment ends first, pay the hour at 140% of the ordinary hourly wage. Follow the notification or authorisation procedure.

• Sunday work generally brings a 70% premium and compensatory rest, subject to sector exceptions.
• Public holiday work that would normally be worked generally attracts ordinary holiday pay, pay for hours worked and a 100% supplement on those hours.
• Night premiums depend on a collective agreement or sector rules. There is no single universal night premium.

Employees need eleven consecutive hours of daily rest and forty-four consecutive hours of weekly rest. A working day longer than six hours requires a break.

Luxembourg taxes employment income through a progressive personal income tax tariff. For the tax year 2025 the tariff has 23 bands, running from 0% to 42%. The dossier does not list the threshold for each band, so this guide does not reproduce a band table. Take the current tariff from the tax authority and have payroll apply it, rather than building a table from memory or from a calculator.

How income tax is calculated

The tax an employee owes depends on their tax class, deductions, credits, residence and other income. Two people on the same gross salary can end up with different tax. The top rate is 42%, but it applies only to the slice of income that falls in the top band, not to the whole salary.

On top of the calculated tax, the Employment Fund surcharge is 7% of that tax. It rises to 9% above the relevant adjusted taxable-income threshold: €150,000 in classes 1 and 1a, or €300,000 in class 2. The surcharge is a percentage of the tax, not of gross salary, so it must not be added to payroll as an extra 7% or 9% of pay.

How withholding works

The employer withholds wage tax from pay and reports and pays it on its own schedule, which is monthly, quarterly or annual. Reporting and payment generally fall within ten days after the reporting period. Check which schedule applies to your company.

Check each employee's valid electronic tax card before running payroll. A missing card can trigger the least favourable withholding rules, which would over-deduct from the employee until the card is in place.

Allowances and credits

Deductions and credits change the final result, and they are tied to the employee's personal circumstances and tax class. The dossier does not give amounts for individual allowances or credits, so do not apply a standard figure. Rely on the information on the employee's tax card, and ask the employee or the tax authority where something looks wrong.

Employee social contributions

Employees also pay social contributions, which are withheld from gross pay and paid to CCSS together with the employer's share. In 2026 the ordinary employee shares are:

• Pension: 8.5%
• Health: 3.05%
• Long-term care: 1.4% on its own separate base, after an allowance

Pension and health together make 11.55% on their applicable bases. From June 2026 the full monthly care allowance is €692.83. Where declared monthly work is below 150 hours, the allowance is prorated against 173 hours.

The standard monthly contribution ceiling is €13,856.63 from June 2026. Long-term care has no matching ceiling. Overtime and occasional benefits do not necessarily attract every charge that applies to ordinary basic pay, so follow CCSS component rules instead of applying one percentage to every payment.

Employer shares on top of pension and health include the mutual scheme and, where it applies, occupational health. Ask for the actual employer rates rather than assuming a standard total. These employer costs are not deducted from the employee and are not added again to the employee's deductions.

Business taxes are a separate matter

The corporate tax rate is 17% and the VAT rate is 17%. These are business and transaction taxes. Neither is an extra percentage taken out of an employee's salary.

Employer contributions in Luxembourg are social-security charges paid on top of gross salary, and they go to the social-security body, CCSS. The employer also pays over the employee's withheld share each month. The 2026 employer shares below come from the national guidance, and the actual rates for a given employer can differ, so ask for the real rates before you budget.

Employer contribution rates

At accident factor one with STM, the totals are 12.57%, 13.29%, 13.90% or 15.00% across the four mutual classes.

Employee contribution rates

In 2026 the ordinary employee shares are 8.5% for pension and 3.05% for health, a combined 11.55% on their applicable bases. Long-term care adds 1.4% on its separate base after an allowance. From June 2026 the full monthly care allowance is EUR 692.83. Where declared monthly work is below 150 hours, it is prorated against 173 hours. These deductions are withheld from gross pay and are not an extra employer cost.

Ceilings and contribution bases

From June 2026 the standard monthly contribution ceiling is EUR 13,856.63. Long-term care has no corresponding ceiling and uses its own allowance. The base also varies by pay component: overtime and occasional benefits do not necessarily attract every charge that applies to ordinary basic pay. Use CCSS component rules and the applicable annual ceiling instead of applying one percentage to every payment.

What is and is not included

• Included in the employer subtotal: the employer shares of pension and health, accident insurance, the mutual scheme and STM where applicable.
• Not added to the employer subtotal: the employee's deductions, which come out of gross salary.
• Not included in a contribution subtotal: employer-of-record fees, agreed benefits, equipment and any extra or exit payments. Add these separately.
• Guaranteed bonuses: a thirteenth-month payment is not automatic, but amounts guaranteed by contract, collective agreement or qualifying practice belong in annual employment costs.

Worked cost example

Take EUR 5,000 of ordinary gross monthly pay, with 2026 rates, mutual class 2, accident factor one and STM affiliation. Employer contributions total 13.29%.

This subtotal is a floor, not the full budget. Add EOR fees, agreed benefits, equipment and any extra or exit payments.

Annual leave

The statutory entitlement is 26 working days, and a leave week counts at most five working days. Part-time entitlement is proportionate to working time, and the year of starting or ending accrues proportionately. New ordinary hires generally wait three continuous months before taking accrued leave unless the employer agrees earlier. Agency employees do not have that waiting period.

Employees normally take leave in the year it is earned, with business needs and other employees' justified wishes taken into account. Defined carryovers exist, including first-year leave until the end of the following year on request, and certain operational or family-leave cases until 31 March. Sickness has separate preservation rules. Leave pay is based on the applicable average earnings. Do not replace ordinary ongoing leave with cash. Unused entitlement is settled at termination and paid with final salary within five days of the contract ending.

Public holidays

Luxembourg has 11 public holidays:

• New Year's Day
• Easter Monday
• 1 May
• Europe Day on 9 May
• Ascension
• Whit Monday
• National Day on 23 June
• Assumption on 15 August
• All Saints on 1 November
• Christmas Day
• 26 December

A holiday falling on a Sunday or a normal non-working day can give compensatory leave under the statutory rules. Check the actual work schedule. Work on a public holiday that would normally be worked generally attracts ordinary holiday pay, pay for the hours worked and a 100% supplement on those hours.

Sick pay

The employer normally maintains full pay until the end of the month containing the seventy-seventh calendar day of incapacity in the rolling eighteen-month reference period. CNS takes over for the following month when the applicable test is met. The overall sickness-benefit limit, including the employer-paid period, is seventy-eight weeks within 104 weeks. CNS calculates its benefit from the applicable basic and variable earnings, subject to its limits and eligibility rules.

The employee must notify the employer on the first day of incapacity and provide the medical certificate by the third day. Dismissal protection generally lasts up to 26 weeks of continuous illness. That is a different test from the employer-pay rule and the overall benefit limit.

Maternity leave

Maternity leave normally consists of eight prenatal and twelve postnatal weeks. An early birth transfers unused prenatal days, and a late birth extends prenatal leave without reducing the twelve postnatal weeks. Qualifying insurance registration is at least six months in the preceding twelve. CNS pays an earnings-related benefit, subject to the applicable minimum and a ceiling of five times the minimum.

Paternity and parental leave

The father or recognised second parent can take birth leave of eighty hours per child when working 40 hours weekly, pro-rated for other hours. It must be taken within the first two months after birth. The employer maintains pay and can seek State reimbursement from the seventeenth hour, subject to the salary cap and a five-month application deadline.

Eligible parents can each take four or six months of full-time parental leave. Alternatives include eight or twelve months at half time. The normal insurance condition is twelve consecutive months, with at least ten contracted hours weekly for employees. CAE pays the parental allowance, not the employer. It is taxable and subject to social contributions. For full-time leave following full-time work, the June 2026 gross monthly minimum is €2,771.33 and the maximum is €4,618.88.

Other leave to check

Family leave, carers' leave, special leave for events such as marriage or bereavement, and training leave each have their own rules and pay routes. Check them against the employee's circumstances before processing pay.

Luxembourg compliance risk concentrates in a few places: registration within eight days, the written contract, monthly payroll reporting, probation and the termination rules. The ordering below follows the life of an employment, from the start date to the final payment.

Registration and right to work

Submit the employer's operating declaration within eight days of the first employee's start. Each employee also needs an entry declaration within eight days of hiring. Registering the company does not register the worker automatically, so obtain the employee's social-security number and confirm the right to work before you fix a start date.

Check nationality, residence status and the exact work permission. Third-country recruitment may need ADEM certification and pre-entry immigration permission, with route-specific exemptions. The employer must verify and keep evidence of permission and notify immigration of the start within three working days. An employer-of-record agreement does not grant work permission.

Employment contracts and written terms

Provide a signed employment contract in two originals no later than entry into service. An accessible, saveable and printable electronic document can be used if you keep proof of delivery or receipt. The contract should cover the parties, start date, location, duties, pay components and payment method, hours, overtime, probation, leave, termination procedure, collective agreement, social protection and any training rights. The 2024 rules set seven-calendar-day and one-month deadlines for specified missing information. They do not remove the duty to document the contract at the start.

Put later changes in a written addendum. An unfavourable change to an essential term, such as cutting pay, requires the prescribed procedure.

Probation

Agree probation in writing. The minimum is two weeks. The ordinary maximum is three months below the relevant vocational qualification level, or six months otherwise. Up to twelve months is possible where starting gross monthly pay is at least €5,318.41 at index 992.24. Ordinary probation cannot normally be ended unilaterally in the first two weeks, except for serious misconduct. Agency assignments use separate trial limits.

Payroll deadlines and records

Cash salary is payable monthly, no later than the last calendar day of the month. Provide a payslip with each payment and keep proof of payment. Each month, report gross remuneration components and the exact paid hours to CCSS. The employer pays both employer and withheld employee contributions to CCSS. Wage-tax reporting and payment follow the employer's monthly, quarterly or annual schedule, generally within ten days after the reporting period. Check the employee's valid electronic tax card, because a missing card can trigger the least favourable withholding rules.

Record working time, including remote work. The ordinary limits are eight hours a day and forty a week.

Notice and termination

Dismissal with notice needs a real and serious personal or operational reason. Employer notice is two months below five years of service, four months from five to under ten years, and six months from ten years. Employee resignation notice is one month below five years, two months from five to under ten, and three months from ten years.

At least 150 employees triggers the pre-dismissal interview procedure. Check protected status first, as pregnancy, maternity, qualifying sickness, parental leave and employee representation can restrict dismissal. The ordinary deadline for a Labour Tribunal dismissal claim is three months.

Final pay

Pay outstanding salary and salary accessories within five days of the contract ending, including unused annual-leave compensation and any severance. Declare the CCSS exit within eight days of the relationship ending. The correct exit date can be the end of the legal notice period even where work stopped earlier.