If you’re working in Luxembourg, here’s a comprehensive guide to employment contracts and remuneration in Luxembourg.
The Labour Code, which came into effect in September 2006, unified all Luxembourg’s previous employment legislation. You can therefore expect similar employment contracts and wage regulations when working in any part of Luxembourg.
Employment contracts are generally for an indefinite period, known as CDI (contrat à durée indéterminée), and must be finalised in writing (in duplicate) at the latest on the first day of employment. If there is no written contract, the employee may prove the existence and performance of a working contract in any way, which would generally classify it as an indefinite period contract.
An employment contract must include:
- the identities of the parties involved;
- the date on which work is to begin;
- the workplace;
- the nature of the post and, where applicable, a description of the duties involved;
- normal working hours;
- basic remuneration and any supplements (agreed bonuses or profit-sharing);
- the length of the probationary period, if applicable;
- the duration of paid leave and notice periods to be observed;
- any other additional clause (e.g., collective agreements).
In certain cases, a precise term of work may be set and a fixed-term contract known as a CDD (contrat à durée déterminée) would be awarded. Fixed-term contracts are for specific, short-term jobs, e.g. for seasonal work or to replace an absent employee; restrictions are in place so that they cannot be used to cover work related to the normal activity of a company for a lasting period. A CDD may not be terminated prior to its completion date, except in cases of serious misconduct.
A CDD should include the following additional information:
- the date on which the contract ends or the minimum length of time for which it will run;
- the name of the employee who has been replaced, where applicable;
- the length of the probationary period, if any;
- the renewal clause, where applicable.
Wages in Luxembourg
There is a guaranteed minimum wage (Salaire Social minimum, SSM) for all workers hired by an employer under a work contract. The SSM rate is based on the employee’s classification and age.
Unskilled workers over 18 years old receive 100% of the SSM. Fifteen- and 16-year-olds receive 75%, and 17 year-olds 80%. Skilled workers over 18 are covered at a rate of 120%. Since 1 March 2009, the SSM has stood at €1,682.79 a month for an unqualified worker over 18 years old and €2,019.33 for skilled workers.
The guaranteed minimum wage for skilled workers is available to employees performing an occupation based on a vocational qualification acquired through education or a training course recognized by an official certificate (at least a Certificate of Technical and Professional Aptitude, or CATP). Any employee that cannot produce such a certificate must be able to prove a minimum of 10 years’ professional experience.
Gross and net pay
Gross pay includes basic pay and any benefits and additional earnings such as overtime, bonuses, profit-sharing, and earnings in kind. Net pay is the amount actually received by a worker after deduction of social security contributions and Luxembourgish income tax, withheld at source.
Social security contributions and tax
These are calculated on the basis of a tax file sent to the employer in advance, and are relatively low. The maximum amount to be paid in social security contributions in Luxembourg is five times the minimum wage. Personal income tax in Luxembourg is at one of the lowest rates in Europe. The rate of income tax is set on a sliding scale of 17 progressive steps, with a maximum marginal rate of 38%.
Family allowance contributions
Family allowance contributions (1.7%) are paid by the state. The employer must send the employee a detailed statement at the end of each month showing how the wage or salary has been calculated. This statement should mention the time period concerned, the number of working hours being paid in total, the rate of pay for the hours worked, and any other payment in cash or kind.