Key Factors to Consider When Employing in Luxembourg:
There are several key areas to be aware of within the Luxembourg employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
Full time contracts with an indefinite duration constitute the rule, while short term employment contracts are the exception and they are valid only when all conditions provided for by law are fulfilled.
Short term contracts may not exceed 24 months (including renewal). Particular attention should be given to corporate officers appointed in accordance with Luxembourg company law who may also have an employment contract.
Statutory Working Hours
Generally, the common principle is a maximum of 40 hours per week and 8 hours per day. Overtime work is allowed only in special and subject to prior ministerial authorization (i.e. overtime should not applicable to employees holding a superior management position as defined by the law). Overtime may be either given by time off. Sunday work is generally not allowed, although some derogations are possible based on the type of workers, business, firms or occupations.
In case of an accident or sickness, the employee must inform the employer verbally or in writing on the day of the accident/sickness, he/she must send a medical attest confirming his/her inability to work along with the expected period of absence. When these formalities are fulfilled, the employer may not dismiss the employee, even for gross misconduct, for a period of 26 weeks following the accident/illness.
Annual Leave Accrual Entitlement
A part from the 10 days of public holidays (per calendar year) a full time employee is entitled to receive 25 days of statutory leave per calendar year. Additional holidays are possible under certain circumstances (e.g. collective bargaining agreements, internal regulations or disabled employees).
Maternity Leave in Luxembourg
A pregnant employee must receive a paid maternity leave for between 16 and 20 weeks, subject to certain conditions. This leave is paid by the Luxembourg social security authorities up to an amount equaling five times the minimum social wage. Both parents may have a right to six months full time parental leave or one year part-time parental leave, upon certain conditions are met, until the child has reached the age of five years. Family leave is paid by the Luxembourg social security authorities on a monthly lump sum basis.
It is possible for an employer to terminate a full time contract for real and serious reasons and in respect of the applicable notice periods (2-6 months). The employer must notify the dismissal by registered letter.
A severance payment must be paid to a dismissed employee who has completed at least five years of service. In the case of resignation, the employee has to give notice to the employer, which is half the length the employer would have to give. In this case, the employee has then no right to a severance payment and no right to unemployment benefits.
The employer (or the employee) may terminate the contract without notice in case of gross misconduct by the other. In this case, a judge may state whether or not the facts justify a dismissal for gross misconduct.
A trial period may be provided for in both indefinite and definite duration contracts, which normally varies from two weeks to six months. In certain circumstances (depending on the wage of the employee or the level of his qualifications) the trial period may not be longer than 3 months or may be extended up to 12 months.