Payroll in Luxembourg - Integrated Payroll Solutions

If you need payroll services in Luxembourg, you can rely on our accountants. Find out how we can help you in the guide below.

Quick Facts
Legal framework	Payroll in Luxembourg is governed by the country’s Labour Code and social security laws.
Minimum wage	Since 1 June 2026 the social minimum wage is EUR 2,771.33 per month for unskilled workers aged 18+ and EUR 3,325.59 for qualified workers.
Working hours	The standard legal working week is 40 hours.
Employer contribution	The employer pays social security contributions of roughly 12.5% to 15.3% of the gross salary, depending on the accident-insurance and Mutualité classes.
Income tax	Income tax is progressive, meaning the rate increases with the income. The tax rates range from 0% to 42%.
Tax exemptions	Luxembourg offers a special tax regime for highly qualified foreign employees moving to the country, providing certain tax exemptions on their income and relocation costs.
Protection against inflation	When the consumer price index rises by 2,5%, all salaries are automatically increased by 2.5%. Employers must apply this increase, otherwise they will receive a fine. The automatic indexation system is a defining characteristic of payroll in Luxembourg and it applies whenever a new index tranche is triggered (the latest on 1 June 2026).
Holidays & leave	Employees are entitled to minimum 26 working days of paid annual leave and 11 public holidays.
Mandatory payslips (YES/NO)	Yes. It is mandatory for employers to issue detailed payslips to all employees. The payslip must show gross pay, all deductions (taxes, social security), and net pay.
Profit-sharing schemes	Companies can offer profit-sharing bonuses to employees, which may be partially exempt from income tax under specific conditions.
Social security contributions of the employee	Social security contributions are approximately 12.95% of the gross salary (pension 8.5%, health 3.05%, dependency 1.4%).
Termination & notice periods	For a permanent contract, the employer must give 2 months' notice for less than 5 years of service, 4 months for 5-10 years, and 6 months for ten or more years (1, 2 and 3 months apply when the employee resigns).
Non-resident employees	Non-resident employees are only taxed on their Luxembourg-sourced income. However, they may be subject to different tax classes and rules, especially if they are cross-border commuters.
Record keeping	Employers are legally required to keep all payroll records for minimum 5 years to comply with tax and social security audits.
Outsourcing payroll in Luxembourg	Due to the complexity of the system and language requirements, many foreign investors opt to outsource their payroll management to local firms and accountants. If you need professional services, you can contact our specialists.

What payroll services do you supply in Luxembourg?

employer and employee registration;
payroll setup;
salary computation and payment;
tax computation and withholding;
payroll documentation drafting and filing with the required authorities;
employee records maintenance.

How do you handle payroll in Luxembourg?

Our payroll specialist in Luxembourg uses different platforms and software to calculate salaries in a company. This calculation includes the related taxes and contributions, paid by both the employee and the employer.

We also have an infographic on this subject below:

When should I set up the payroll for my company in Luxembourg?

As soon as you complete the Luxembourg company registration procedure, as you need to register as an employer and with the National Employment Agency to post job offerings.

What are the authorities I need to register my company for payroll in Luxembourg?

The Common Center for Social Security: registration required for both the employer and each employee;
the Direct Contributions Administration: the authority in charge of collecting the wage tax;
the National Employment Agency: employers must register here in order to post their job vacancies;
the Accident insurance association;
the employer’s mutual insurance scheme for sickness;
an occupational health service provider.

IMPORTANT: Registration can be handled by our accountants in Luxembourg as part of our payroll services.

What are the payroll contributions I need to consider in Luxembourg?

As an employer, you will pay:

8.5% to the pension scheme;
3.05% to the health insurance;
0.65% base rate for work accidents in 2026, multiplied by the employer's bonus-malus factor (0.85 to 1.5);
0.23% to 2.66% to the Employers' Mutual Insurance (Mutualité des employeurs), depending on the company's absenteeism class;
0.14% to the health at work scheme.

For employees, you must withhold:

8.5% for the pension contribution;
3.05% for health insurance;
1.40% as a dependency contribution.

We will calculate and withhold the necessary amounts before distributing employees’ salaries in their bank accounts.

What is the automatic wage indexation?

When you open a company in Luxembourg, it is essential to know about the automatic indexation system. This consists of salaries being automatically adjusted when the cost of living increases by 2.5% or more. This usually happens once or twice a year and requires immediate payroll adjustments.

This is an important rule of payroll in Luxembourg that all companies must obey. Not complying with Luxembourg’s mandatory automatic wage indexation results in significant fines.

What is the payroll cycle in Luxembourg?

Monthly.

How much do you charge for your payroll services in Luxembourg?

We recommend those interested in payroll services in Luxembourg to reach out to our accountants in Luxembourg and learn more about our offers. It is much more advantageous to work with a dedicated and experienced team, instead of setting up a department in the company.

Our specialists are at your disposal with information and support, so contact us whenever you decide to start a business in Luxembourg.