Here you will find all the latest news about HR management in Luxembourg!
2/New developments regarding Sunday work in the retail and craft sectors
3/Electronic medical certificates are coming to Luxembourg !
4/Administrative simplification: annual declaration of the profit-sharing bonus
5/Tax reform: single tax class as of 2028
6/Remember to declare your employees’ teleworking via DEMDET (Telework Declaration)
8/What about the next indexation?
1 – Payroll news
As the year 2025 ends with the issuance of remuneration certificates, which must be prepared no later than 1 March 2026, several changes will affect salary calculations this year.
New social security contribution rate
Since 1 January 2026, new contribution rates apply for the Employers’ Mutuality, pension insurance and accident insurance.
With regard to the Employers’ Mutual Insurance Fund, companies are allocated each year to one of four contribution classes based on the financial absenteeism rate of their employees.
For this year, the contribution rates for the four classes of the Employers’ Mutual Insurance Fund are as follows:
| Class | 1 | 2 | 3 | 4 |
| Contribution rate 2025 | 0.07 % | 0.99 % | 1.48 % | 2.64 % |
| Contribution rate 2026 | 0.23 % | 0.95 % | 1.56 % | 2.66 % |
Contribution rates will rise again in 2026, particularly for Class 1. This marks the end of the transitional measure reducing contribution rates to offset the three index increases of 2023. The government had committed to compensating these three increases by lowering the contribution rates of the four Employers’ Mutual Insurance Fund classes as of 1 January 2024, thereby freeing up cash for businesses to offset the cost of wage indexation.
Regarding social security contribution rates, two changes should be noted:
- As part of the first phase of the pension reform, the pension insurance contribution rate now applicable to both employees and employers is 8.5%, compared with 8% previously.
- Conversely, the accident insurance contribution rate has been reduced from 0.70% to 0.65%. As a reminder, this single rate is adjusted for each company by applying the bonus‑malus factor, which may be 0.85, 1, 1.1, 1.3 or 1.5.
| Insurance branch | Rate | Employer share | Employee share |
| Pension insurance | 17.00 % | 8.50 % | 8.50 % |
| Health insurance | 6.10 % | 3.05 % | 3.05 % |
| Employers’ Mutual Insurance Fund | / | Depending on the risk class | / |
| Accident insurance | 0.65 % | ||
| Occupational health | Industrial Occupational Health Service: 0.13 % Multisector Occupational Health Service: 0.14 % | ||
| Long-term care insurance | 1.40 % | / | 1.40 % |
Increase in the CO₂ tax credit
To mitigate the potential impact of the CO₂ tax on low or middle incomes, the CO₂ tax credit is increased by €24 in 2026. The annual amount of this credit is therefore raised to €216 for taxpayers whose income does not exceed €40,000.
From the 2026 tax year onwards, the CO₂ tax credit applicable to employees is set as follows, depending on annual gross salary:
- From €936 to €40,000: the employee CO₂ tax credit amounts to €216 per year,
- From €40,001 to €79,999: the employee CO₂ tax credit amounts to [216 – (gross salary – 40,000) × 0.0054] euros per year,
- From €80,000 upwards: no CO₂ tax credit is granted.
Students and interns: increase of the exemption threshold
When hiring students during school holidays or interns as part of a compulsory internship of up to six months, a tax exemption may be requested provided that the hourly remuneration does not exceed €16. As of 1 January 2026, this threshold is raised to €18 per hour.
2 – New developments regarding Sunday work in the retail and craft sectors
Two new laws adopted on 19 December 2025 significantly amend the rules governing Sunday work and opening hours in the commerce and craft sectors.
These rules apply to commercial and craft activities requiring an establishment authorisation, carried out in a physical point of sale accessible to the public, and involving direct sales or the provision of services to the final consumer.
As of 1 January 2026, the maximum permitted duration of Sunday work increases from 4 to 8 hours. This 8‑hour limit is absolute and cannot be exceeded. The wage supplement of 70% for all hours worked on Sundays is maintained.
The applicable rules vary depending on company size:
- Up to 30 employees: companies may have their employees work up to 8 hours on Sundays without any special conditions.
- More than 30 employees: a collective agreement or inter‑professional agreement is required to exceed the currently authorised 4 hours of Sunday work.
- Exception maintained for large companies: In the absence of a collective agreement, companies with more than 30 employees may nevertheless require their staff to work for up to eight hours on a maximum of six Sundays per year (“Mantelsonndeg,” clearance sales, end‑of‑year festivities, etc.), subject to obtaining ministerial authorisation.
As from 19 June 2026, new rules will apply to opening hours for points of sale in the commerce and craft sectors. The main upcoming changes are as follows:
- Monday to Friday: shops may open from 5:00 am to 09:00 pm without condition. An extension until 1:00 am will be possible where a collective agreement or an inter‑professional agreement has been concluded.
- Saturdays and Sundays, as well as public holidays and the eves of public holidays, shops may open from 5:00 am to 07:00 pm. As during the week, an extension until 1:00 am is possible via a collective agreement or an inter‑professional agreement.
3 – Electronic medical certificates are coming to Luxembourg !
The issuing of medical certificates of incapacity for work will become a fully digital process very soon in Luxembourg through the electronic sickness certificate (eCIT).
Insured persons/employees will be able to consult their electronic incapacity certificates (eCIT) directly in their MyGuichet.lu personal space.
In practice, when a doctor practising in Luxembourg is technically equipped to issue an eCIT and the employee has activated their personal MyGuichet.lu space, the certificate may be transmitted electronically. The employer may then receive the eCIT in their professional MyGuichet.lu space, provided that this space has also been activated beforehand. However, if the employee does not have an activated personal space, they may still request a printed version of the medical certificate from the doctor.
Notification of the incapacity for work to the CNS may be carried out via MyGuichet.lu (as part of the eCIT process), by post, or using the form available online on the CNS website.
To inform their employer of their incapacity, employees may make their eCIT available in the company’s professional MyGuichet.lu space and/or send their certificate through traditional channels (postal mail, email, etc.).
For further information, please consult the following link: CNS – Luxembourg – Certificat de maladie en ligne
4 – Administrative simplification: annual declaration of the profit-sharing bonus
Introduced in 2021, the profit‑sharing bonus scheme allows employers to grant employees a bonus linked to the company’s results when profits have been made. Subject to certain conditions, this bonus benefits from a 50% tax exemption, provided that a declaration is submitted to the tax authorities. Good news: this declaration is now becoming annual!
To benefit from the 50% exemption, the employer must inform the Luxembourg Inland Revenue electronically.
This communication is made using a predefined Excel file, which must first be requested from the competent RTS tax office. In this file, the employer must indicate, inter alia, the previous year’s result, the employee’s expected annual gross salary, and the maximum exemption limit.
This secure method of transmission is mandatory. In the absence of a declaration, the exemption cannot be granted, and an adjustment may be made in the event of a tax audit.
Until now, this declaration had to be submitted each time the profit-sharing bonus was paid. From now on, it may be submitted once per year for all employees of the company, and no later than 1 March of the year following the payment of the bonus.
5 – Tax reform: single tax class as of 2028
On 6 January 2026, the Minister of Finance tabled a bill aimed at reforming fundamentally the taxation of personal income by introducing a single tax class.
According to the Minister of Finance, the new tax scale will be more favourable for all taxpayers currently in Tax Classes 1 and 1a. The same will apply to around 85% of taxpayers currently taxed in Class 2.
As of 2028, all new taxpayers, as well as those currently falling under Tax Classes 1 and 1a, will be taxed according to this new single tax class. Taxpayers taxed jointly before 1 January 2028 may continue to benefit from the rate applicable under the former tax class 2 for a period of 25 years. In the event of a death or divorce during this transitional period, entitlement to the former class 2 rate will be maintained for five years (instead of the current three years).
As part of this tax reform, it is also proposed to introduce an indexation mechanism for the tax scale following three index‑bracket movements.
6 – Remember to declare your employees’ teleworking via DEMDET (Telework Declaration)
As you know, since July 2023, Luxembourg employers allowing their cross‑border employees to work remotely must submit the “DEMDET (Telework Declaration)” declaration to the Joint Social Security Centre in order to ensure the continued affiliation of those employees to the Luxembourg social security system.
To avoid triggering multiple procedures, it is advisable to declare teleworking for a projected period of at least 12 months (or for the longest foreseeable period). Once the initially declared period has expired, the employer must submit a new declaration.
7 – Annual adjustment
For employees hired in 2025, it may be worthwhile to complete an annual adjustment – here is why!
Taxpayers who began working in Luxembourg during the 2025 tax year may request a regularisation of wage tax through an annual adjustment in order to obtain a refund of any excess tax withheld at source.
The purpose of this calculation (Form 163) is to determine the tax actually applicable to the taxpayer’s annual taxable income. Indeed, during the first year of employment in Luxembourg, and where the employee arrives during the course of the year, tax is withheld at source as if the employee had worked for the entire year, which may result in excessive withholding.
In many cases, the tax withheld at source therefore exceeds the tax actually due. The annual adjustment enables the taxpayer to recover this excess.
The annual adjustment relating to the 2025 tax year may be submitted until 31 December 2026. This form may be used both by non‑resident employees who are not eligible to file a tax return because they did not work at least nine months in Luxembourg in 2025, and by resident taxpayers who are not required to file a tax return.
8 – What about the next indexation?
The most recent indexation took place on 1 May 2025.
An automatic indexation is triggered whenever the six‑month average of the index shows a difference of 2.5% compared with the last reference value.
Based on the current inflation rate, STATEC estimates that the next indexation will not occur before the third quarter of 2026.
By way of reminder, indexation is a matter of public policy and applies to all employees under a Luxembourg employment contract, as well as students, interns and apprentices, whose remuneration will increase by 2.5%.
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