When private individuals wish to hire someone to help them in their home, to look after a child or care for a dependent person, they can follow a simplified administrative procedure for staff management requirements (registration with social security, social security contributions, taxation etc.).
Who is concerned
The following are concerned:
- employees who:
- carry out domestic tasks in a person's private residence;
- provide childcare services to their employer's disabled children, or children under 14 years of age, on a strictly personal and private basis;
- provide the necessary assistance and care either to their employer or to someone living in their employer's household, due to their state of dependence (state of a person who, owing to a physical, mental or psychiatric illness, requires significant help and regular assistance from another person for basic day-to-day tasks such as bathing, eating, moving, etc.);
- persons (employers) who employ these workers on a strictly personal and private basis.
How to proceed
Drawing up an employment contract
Employers (one or more members of a private household) are obliged to draw up an employment contract for persons they employ on a personal and private basis.
However, if a family member or another close relation (neighbour or friend) is providing care and help to a legally dependent person, the employer is exempted from having to draft an employment contract and the worker is referred to as an informal carer (aidant informel). Services provided on an occasional basis, with no obligation to do so and with total freedom cannot, therefore, be qualified as a working relationship, even where payment for the services is involved.
Dependent persons may, however, decide to engage the services of a third party under an employment contract.
Form and content of the employment contract
Employment contracts, whether open-ended or fixed-term, must be drawn up, in writing, for each individual employee, no later than the date on which the employee starts work. The signed and dated contract must be produced in duplicate: the first copy for the employer, the second for the employee. The employment contract must include the following:
- the identity of the parties involved;
- the start date of the employment contract;
- the place of work;
- the nature of the work;
- the number of daily or weekly working hours of the worker;
- the normal working times;
- the basic wage or salary and, as the case may be, wage or salary supplements, perks, bonuses or profit shares agreed, as well as the frequency with which employees are to receive the pay to which they are entitled;
- the amount of paid leave to which the worker is entitled, or, if this cannot be quantified when the contract is signed, how this leave is to be awarded and determined;
- the notice period that the employer and employee must give if the contract is terminated or, if this cannot be quantified when the contract is signed, how this notice period is to be determined;
- the duration of the trial period if any.
In addition to the mandatory content, the parties are free to insert derogation or additional clauses into their agreements. Derogation clauses are clauses that deviate from the legal requirements. They only apply if the derogations are in the employees' interests and do not impose additional legal obligations upon them. Additional clauses are, as a general rule, those which grant employees a benefit (for example, a bonus).
A fixed-term employment contract (contrat à durée déterminée – CDD) may only be concluded for a specific and temporary task.
Fixed-term employment contracts can be renewed twice provided that the total duration of the contract does not exceed 24 months.
The parties to the contract may also amend the employment contract by means of an addendum, following specific procedures depending on the nature of the desired amendment.
Pay and payslips
Like all other employees, the employee is entitled:
- to the payment of a salary corresponding at least to the social minimum wage;
- to paid leave;
- to the payment of wages during public holidays;
- to compliance with the legal notice in case of dismissal, etc.
Employees are paid on a monthly basis, and at the latest on the last day of the month. Employers are exempted from issuing pay slips to their domestic staff. In fact, at the beginning of the year, a salary statement will be issued to the employer and the employee by the Joint Social Security Centre (Centre commun de la sécurité sociale – CSSS).
Statutory leave and public holidays for part-time employees
Full-time employees are entitled to 26 days of paid annual leave (26 days × 8 hours = 208 hours of paid annual leave). The principle of proportionality is applied for part-time employees.
In addition, employees are entitled to payment for public holidays. This also applies to part-time employees. Persons working 40 hours a week are entitled to 11 public holidays per year (or 11 days × 8 hours = 88 hours). The principle of proportionality is, once again, applied for part-time employees.
End of the working relationship
Employers and employees can terminate the employment contract by following the general rules applicable to the termination of employment contracts.
The salaried worker can:
- resign with immediate effect for serious misconduct on the employer's part; or
- resign with advance notice in other cases.
Similarly, the employer can:
- dismiss the employee with immediate effect in the event of serious misconduct on the employee's part; or
- dismiss the employee with advance notice:
- for reasons related to the attitude or conduct of the employee (for example, for professional incompetence); or
- for economic reasons (when the income of the household no longer allows to cover this expense).
In the event of termination of the employment contract, a declaration of end of employment must be made to the Joint Social Security Centre.
Registering the employee with the Joint Social Security Centre
Sending the related declaration to the Joint Social Security Centre
In addition to drawing up an employment contract, the employer must also register the employee upon hiring with the Joint Social Security Centre.
Persons employing domestic staff only need to be in contact with one administrative body, i.e. the Joint Social Security Centre which is responsible for collecting the flat-rate tax and the social security contributions. The future employer only needs to complete one declaration which concerns the net salary paid to the person employed and which then must be sent to the CCSS, Department of Affiliation (Département Affiliation). The CCSS then calculates the gross salary and determines the amount of social security contributions and the amount of the 10% flat-rate tax to be withheld.
The declaration of employment in a private household is valid as:
- operating declaration for employers (the declaration allows private households that are first time declarants to obtain a social security number as an employer);
- declaration of start of employment for the worker;
- declaration of salaries.
The declaration of employment states, in particular:
- the personal details of the employer and the employee (national identification number, surname, first name and address);
- the nature of the work to be performed by the employee;
- the start date of the activity;
- the net hourly salary or, where applicable, the fixed net monthly salary.
In view of this simplified declaration procedure through the Joint Social Security Centre, private households hiring employees are automatically exempt from compulsory membership with the Employers' Mutual Insurance Scheme.
Joint Social Security Centre employee registration procedure
Based on the data in the declaration, the CCSS will register the persons employed in the household and complete the rest of the procedure such as:
- calculation of the gross salary: in order to calculate the gross salary, the CCSS will apply the health, pension and long-term care insurance rates as well as a 10 % flat-rate tax. Domestic staff are not responsible for paying taxes. The employer is responsible for paying the 10 % tax on the net salary paid, but the CCSS is responsible for collecting the tax from the employer, to declare it and to pay it to the Luxembourg Inland Revenue (Administration des contributions directes);
- calculating the social contributions to be paid by the employer and collecting said contributions and the withholding tax on a monthly basis;
- the calculation of withholding tax and payment of tax to the Luxembourg Inland Revenue;
- issuing a tax card;
- monthly declaration of working hours and wages.
Checks by the employer and employee of data held by the Joint Social Security Centre
At the end of each half-year period, the Joint Social Security Centre sends the employer and employee a statement stating the average number of hours worked per week and the net pay declared. The gross monthly salary and monthly contributions are indicated on the back of the document. Thus, both the employer and the employee can check the data and report any changes. The number of working hours is multiplied by the ratio 4.33 (i.e. 52 weeks divided by 12 months) and by the hourly salary in order to calculate the monthly salary.
The employer and/or employee can report, in writing, any difference between the declaration and the actual salary paid. The objection must be raised at the latest during the period following the one where the difference occurred. The Joint Social Security Centre will then make the necessary changes.
An employer who does not wish to use the simplified procedure set up with the CCSS to declare their employee's salaries may declare said salaries using MyGuichet.lu.
Deregistration procedure for employees
In the event of the employment contract being terminated, a declaration of end of employment must be submitted to the CCSS. There is no special form for declaring the end of employment for domestic staff.
Consideration of the employee's flat rate of taxation
Flat-rate taxation of the employee
The employee is taxed on a flat-rate basis. The flat-rate tax amounts to 10 % of the net salary, social contributions and long-term care insurance. This tax must be paid by the employer.
In principle, the flat-rate tax is definitive. Under flat-rate taxation, however, employees may end up paying more tax than they would have paid under the normal tax regime. For this reason, employees may ask the Luxembourg Inland Revenue to make a tax adjustment at the end of the tax year. This application can be made:
- either by submitting an annual statement (depending on whether the employee is resident or non-resident);
- or on the basis of taxation by assessment by submitting an income tax return (depending on whether the employee is resident or non-resident).
The account statement issued by the CCSS counts as a valid salary certificate.
Making a declaration concerning domestic staff enables employers to benefit from a maximum fixed-rate tax allowance of EUR 5,400 per year (by submitting a tax return). This standard tax allowance offsets the fact that employers are required to pay a flat-rate of taxation of 10 %.
At the end of the tax year, the CCSS issues employers with a special certificate which documents and grants them the right to an income tax allowance for extraordinary expenses. Employers attach this document to their tax return.
Employees are exempted from being issued with a tax card. If such employees are, however, obliged to submit a tax card, they will then have to contact the Luxembourg Inland Revenue – RTS Tax office in Esch-sur-Alzette, quoting the reference ‘domestic staff’.
The employer must indicate, on the back of the form:
- their Luxembourg national identification number (13-digit number).
- their surname, first name and address;
- the fact that the employee is subject to the 10 % flat-rate tax.
The Joint Social Security Centre awards domestic staff tax credits of EUR 25 per month or EUR 1 per day of registration for partial months
Incapacity for work of domestic staff
The National Health Fund (Caisse nationale de santé – CNS) reimburses employers for any sick leave paid to their domestic staff. The employer is required to advance, on behalf of the CNS, the pecuniary compensation relating to the month during which the incapacity for work occurs and the following month.
In the event of an incapacity for work, the employee is required to inform their employer of the situation. Employees must also notify the CNS of their incapacity for work, either by phone, or by submitting their medical certificate. The CNS sends a special form to the employer who must indicate the hours of sick leave. On the basis of the completed form, the CNS will reimburse the costs.
Employers do not need to continue to pay salaries to employees who are on maternity leave.