Global Employers’ Guide to Understanding Luxembourg’s Labor Laws

International businesses seeking to expand in Europe continue to find Luxembourg to be an appealing location. The country provides a solid foundation for expansion because to its strategic position, multilingual workforce, and business-friendly infrastructure.

Careful attention to compliance is required, however, due to the unique employee-centric nature of Luxembourg’s employment rules. Designed with international companies recruiting in Luxembourg in mind, we’ll cover off all the important labor legislation in Luxembourg.

Employment Agreements Are Essential

Luxembourg law mandates the use of written contracts for all employment relationships. Prior to the employee’s start date, these contracts must be issued and must explicitly include all necessary terms, such as the employee’s position, responsibilities, hours worked, pay rate, benefits, place of employment, notice periods, and any relevant probationary period.

The permanent contract known as a Contrat à Durée Indéterminée (CDI) is the most popular form of contract. Under some conditions, such as seasonal employment or maternity leave, fixed-term contracts (CDD) are legal, although they are subject to strict regulations.

Their total term cannot be more than 24 months, and they can only be extended twice.The parties to the contract are free to choose the language of the contract between English, French, and German. Contracts must adhere to Luxembourg’s labor code, but foreign companies should always check with local attorneys or an EOR partner to be sure.

Requirements for Working Hours and Overtime

The typical workweek in Luxembourg is forty hours, broken down into five eight-hour days. Unless certain legal requirements are satisfied, employers are obligated to ensure that their employees do not over this threshold. Working hours, including overtime, must not, on average, exceed 48 hours per week during the reference period.

Working hours cannot exceed 10 hours per day, and rest intervals must be 11 hours daily and 44 hours weekly. Paid time off or monetary compensation is required for overtime hours. Unless otherwise specified in a collective bargaining agreement, an employee is typically paid 150% of their base hourly wage for overtime.

Collective bargaining agreements (CBAs) have the potential to impose industry-specific limitations on working hours in a number of fields, including healthcare, banking, and construction. To comply, businesses must first identify which workers are subject to such agreements and then modify their policies and procedures appropriately.

Salary and Minimum Wage Indexation

The minimum salary in Luxembourg is among the highest in the EU. The legally mandated minimum salary for unskilled workers is €2,637.79 per month as of 2025, while the minimum wage for skilled workers, who are described as having the necessary vocational qualifications or experience, is €3,165.35. Automatic wage indexation is one distinctive aspect of the Luxembourg system.

Using government-issued cost-of-living indices, salaries are modified to reflect inflation, typically once or twice a year. Businesses are required to swiftly adopt any changes to their minimum and contractual salaries as soon as they are advised of them. It is critical for employers to keep an eye on statements about indexation and adjust employee compensation according to national regulations, particularly if they handle payroll remotely or across borders.

Paid Time Off and Leave Benefits

Statutory leave entitlements in Luxembourg are quite high. Paid vacation time of at least 26 days is due each year to all full-time employees. In addition, there are 11 public holidays that are recognized by law. Luxembourg also stands out when it comes to sick leave. When an employee is sick, their employer must pay their full salary until the end of the month in which their 77th calendar day of cumulative or continuous absence occurs.

The national health fund of Luxembourg, known as the Caisse Nationale de Santé (CNS), takes over payment duties after this point. Ample time off for parents is also provided. Parents are eligible for a maximum of twelve months of part-time or six months of full-time parental leave for each additional child. Rather than the employer footing the bill, the state provides paid leave that parents are required to use before their child is six (or twelve in the event of adoption).

Timely applications are required, and eligibility is based on length of service and number of hours worked per week. Special leave rights, such as those for marriage, family emergency, and civic duties, are also the responsibility of employers.

Process for Termination and Notice Requirements

Luxembourg safeguards workers from unfair termination. In most circumstances, employers are required to offer a valid reason and notice when terminating permanent contracts. The employee’s tenure determines the notice period:

• One month for service below five years.
• Two months for five to ten years of service.
• Three months for more than ten years of service.

A pre-dismissal interview is usually required before a termination, particularly when the basis for the dismissal is personal (rather than financial). Employers have the right to terminate contracts immediately in the event of misbehavior, but they must carefully consider and document any evidence of wrongdoing.

Depending on the grounds for dismissal and the duration of employment, employees with a continuous service of at least five years may also be eligible for severance pay. Many international businesses choose to collaborate with an EOR to guarantee local compliance due to the complexity of termination procedures and the possibility of legal claims.

Exclusivity Clauses

An important reform to the legislation of Luxembourg concerning exclusivity regulations in employment contracts came into effect on August 4, 2024. A provision in an employee’s contract that forbids them from participating in any other employment arrangement outside of their regularly scheduled work hours is now deemed invalid by the new law.

This change is an effort to improve workers’ rights by giving them greater freedom to seek out side jobs, so long as they don’t conflict with their main job duties. The law does, however, recognize certain situations in which exclusivity might be warranted.

This rule does not apply in cases when holding down more than one job may damage company secrecy, endanger employees’ health, or cause a conflict of interest. To make sure they are in compliance, businesses need to check all of their employment contracts carefully in light of this development.

The legal permitted exclusions must be carefully considered in order to determine whether any current exclusivity arrangements qualify.

If this is not the case, these provisions should be changed or eliminated to prevent any possible legal disputes. In addition, businesses must be careful not to penalize workers in any way just because they have legitimate side jobs.

Fair and transparent employment practices are emphasized by the new legislation, which specifically forbids any negative actions taken against employees who exercise their right to further employment.

Employee Representation and Collective Bargaining

There are strong channels for worker participation and social discourse in Luxembourg’s labor framework. Every company with fifteen or more workers is required by law to have an internal works council in the form of a staff delegation. When it comes to issues like terminations, training, working conditions, and health and safety, the staff delegation is there to represent the workers.

Collective bargaining agreements (CBAs) also include a lot of industries, and they can say things that aren’t in the minimum wage, overtime, or working conditions laws. All employers in the affected sectors are obligated to comply with these agreements, regardless of their involvement in the negotiation process, because they are legally enforceable.

Avoiding inadvertent violations requires familiarity with relevant CBAs and compliance with them. In order to make sure that commitments are fulfilled, EOR partners with knowledge of the country can offer ongoing guidance.

The Significance of Luxembourg Labor Law Compliance

Employers who put in the effort to learn Luxembourg’s employment system will reap the benefits of its structure, fairness, and predictability. Building a sustainable, people-first employment framework requires compliance, which goes beyond being a legal obligation. Without a local HR presence or the ability to manage compliance remotely, it can be an enormous challenge for international businesses.

For this reason, a lot of people use an EOR to function as their legal employer and see to it that all aspects of their job, including contracts, payroll, and termination, adhere to Luxembourg’s strict regulations.

When companies work with reliable partners, they can avoid penalties, litigation, and damage to their reputations caused by noncompliance with local legislation, freeing up resources for expansion and talent acquisition.

Consider making a hire in Luxembourg?

Without the hassle and expense of establishing a Luxembourgish legal organization, Agility EOR facilitates business expansion within the country. Inquire about our EU-wide compliance and HR strategy support services by getting in contact.