In Luxembourg an employer pays about 12.7% to 14.8% on top of gross salary, capped at five times the minimum wage, with no 13th month. In the Netherlands employer premiums of about 17% to 23%, a mandatory 8% holiday allowance and usually a pension bring the total to 25% to 40% above salary. A foreign company can start without a local entity, but local staff can create a permanent establishment.
How hiring actually works, step by step
Most founders think of hiring as a salary decision. In Luxembourg and the Netherlands it is first a registration decision. Before the first payslip, the employer must exist in the local social security and payroll systems: in Luxembourg with the Centre commun de la sécurité sociale, in the Netherlands with the Belastingdienst as a payroll tax withholder. Only then can wages be paid, tax withheld and contributions declared each month.
A foreign company can do this without opening a local subsidiary. It registers as a foreign employer, appoints a payroll provider and runs local payroll from abroad. That is perfectly legal and often the right first step for one remote employee. It becomes awkward when that employee signs contracts with customers, manages a team or represents the company locally, because the foreign company may then have a permanent establishment and owe local corporate tax on part of its profit.
The local company route costs more to set up but settles those questions. The employee works for a Luxembourg S.à r.l. or a Dutch B.V., which invoices the parent or customers, files its own returns and can sponsor work permits. For a team of two or more, or for anyone in sales, this is usually the cleaner option.
Hiring your first employee in Luxembourg or the Netherlands
About 13% to 15%
Employer social security, capped at five times the minimum wage; no 13th month.
About 25% to 40%
Premiums, 8% holiday allowance and usually a pension.
EUR 2,771 / EUR 14.99 an hour
Luxembourg monthly from June 2026; Dutch hourly from July 2026.
26 / 20 days
Statutory minimums in Luxembourg and the Netherlands.
| Luxembourg | Netherlands | |
|---|---|---|
| Employer contributions | Pension 8%, health 3.05%, accident 0.75%, occupational health 0.14%, mutual insurance 0.72% to 2.84% | Unemployment 2.74% or 7.74%, disability 6.27% or 7.63%, health 6.10%, childcare 0.50%, return-to-work about 1.5% |
| Ceiling | EUR 13,856.63 a month | EUR 79,409 a year |
| Mandatory extras | Wage indexation | 8% holiday allowance; pension in most sectors |
| Registration | CCSS employer number | Payroll tax number with the Belastingdienst |
| Without a local company | Foreign employer registration or employer of record | Same |
Own company, foreign employer or employer of record
- Local company. Cleanest for a team that sells or manages locally; avoids permanent establishment questions and supports permits.
- Foreign employer on local payroll. Your foreign company registers and runs local payroll; fine for one remote employee who does not conclude contracts.
- Employer of record. A provider employs the person for you; fastest start, highest monthly cost, less control.
- Contractors. Only for genuinely independent work; both countries reclassify disguised employment.
In Luxembourg the payroll is cheap and the salaries are high. In the Netherlands the salaries are lower and everything around them is not.
Why the Netherlands costs more on paper and less in salaries
Luxembourg has some of the highest gross salaries in Europe but relatively light employer charges: around 13% to 15%, and no contributions above five times the minimum wage. There is no mandatory 13th month, although many employers pay one. Wages are automatically indexed when inflation passes a threshold, which matters for budgeting.
The Netherlands works the other way round. Gross salaries are lower, but the employer adds several premiums, a statutory 8% holiday allowance and, in most sectors, a pension contribution set by a collective agreement. The result is that the total cost of a Dutch employee is often 25% to 40% above the gross salary on the contract.
A developer on EUR 60,000 gross costs roughly EUR 68,000 a year to a Luxembourg employer. In the Netherlands the same contract costs roughly EUR 76,000 before pension, and about EUR 82,000 with a 10% sector pension. The Dutch employee, however, would often accept a lower gross salary than in Luxembourg, so compare offers, not just percentages.
Employer cost in Luxembourg and the Netherlands
Indicative 2026 figures; Luxembourg mutual insurance at class II, Dutch disability at the small-employer rate.
What does an employee really cost?
Enter the gross salary. You see the employer cost in Luxembourg and the Netherlands side by side.
Capped; no 13th month.
Premiums, holiday pay, pension.
Foreign employer or employer of record.
Local staff can make you taxable.
Hiring in Luxembourg and the Netherlands: frequent questions
How much does an employee cost in Luxembourg?
About 12.7% to 14.8% on top of gross salary in employer social security contributions, capped at five times the minimum wage. There is no mandatory 13th month.
How much does an employee cost in the Netherlands?
About 17% to 23% in employer premiums on salary up to EUR 79,409, plus a mandatory 8% holiday allowance and, in most sectors, a pension contribution. Total cost is often 25% to 40% above gross salary.
Can a foreign company hire in Luxembourg or the Netherlands without a local entity?
Yes. It can register as a foreign employer and run local payroll, or use an employer of record. A local company becomes the better choice when the team grows or the employee sells locally.
What is the minimum wage in 2026?
Luxembourg: EUR 2,771.33 a month for unskilled workers aged 18 and over from June 2026, 20% more for skilled workers. The Netherlands: EUR 14.99 an hour from July 2026 for employees aged 21 and over.
Does hiring an employee create a permanent establishment?
It can. An employee who concludes contracts or runs the business locally can make a foreign company taxable there, which is one reason to use a local company.