Hiring in Luxembourg

The contract sets out role, salary in EUR, working time, leave, notice and any restrictive covenants. The EOR is the counterparty to the employee, which is what removes the need for your own entity.

French, German and English are all common contract languages, provided the employee understands the one used.

Fixed-term contracts are allowed only for specific temporary tasks and are capped at 24 months, including no more than two renewals. Most EORs default to indefinite terms.

Set probation from day one. It cannot be extended or renewed, except automatically during sick leave, and then by no more than a month.

Neither side can end the contract in the first two weeks unless there is serious misconduct. Some EORs shorten probation as policy because they, not you, carry the dismissal risk. Ask before you agree a start date.

Overtime is compensated with 1.5 hours of paid time off per extra hour, or at the hourly rate plus 40% where time off is not possible. Total working time is capped at 10 hours a day and 48 hours a week.

Senior executive status depends on salary, real authority and control over working time, so do not assume a well-paid professional is exempt. Put the position in writing either way.

The statutory 26 days is already generous by international standards, though collective agreements and some employers add more, so check what applies when you budget.

The employer pays full salary during sickness until the end of the month in which the 77th day of absence falls, after which the national health fund takes over. Maternity and parental leave are state funded, while paternity leave is advanced by the employer and largely reimbursed, so confirm which side the EOR carries.

Dismissal needs a real and serious reason, and notice starts on the 15th or the 1st of the month depending on when the letter lands. The employee can demand written reasons within a month, and a late or vague reply makes the dismissal unfair.

The EOR runs the process as the legal employer and will want the paperwork in order, including final pay, unused leave and severance of 1 to 12 months' pay. Employers with 150 or more staff must also hold a pre-dismissal interview.

Supplementary pension, meal vouchers and top-up health cover are common for professional roles even though they are not mandatory.

EORs often bundle benefits through a group scheme. Ask what is included in the fee and what is billed on top.

Employer social security adds roughly 12.5% to 15% on top of gross salary, capped at five times the social minimum wage. The spread depends on the employer's absenteeism class, and all of it comes before the EOR fee.

Cross-border telework is the trap. Commuters who work from home beyond the treaty day limits become partly taxable in their home country, and their social security can move too, so track every day worked outside Luxembourg.

Ask whether the EOR sponsors directly or refers to a partner. A partner-model EOR often cannot sponsor at all, and the vacancy must first be declared to ADEM, the national employment agency, by the sponsoring employer rather than by you.

Set start dates after approval, not before.

Get the data processing terms in the service agreement, not just the privacy notice. Transfers outside the EEA need an adequacy decision or standard contractual clauses.

Ask where payroll data is hosted and who in the partner chain can see it.

Incorporation needs a notary, 12,000 EUR of paid-up capital for an SARL and a business permit tied to a qualified manager. The running cost is the point: that manager, accounting, annual filings and payroll software set an annual floor.

Permanent establishment risk is about what people do, not where payroll sits. Revenue-generating activity can create exposure regardless of the employment route.