So, your payslip shows all these deductions, but what are they for, where are they going and what do you get in return? Laura Foulds, Managing Director of Analie Tax & Consulting, has put together this simple guide to Luxembourg social security; what you pay and the benefits.
What You Pay
Employers, employees and independent workers are all requiredto pay Luxembourg social security which is made up of various elements:
Pension: the majority of your social security is paid towards the state pension (8% for employees and employers and 16% for independent workers).
Sickness: 2.8%/3.05% for employees and employers (depending on nature of remuneration) and 5.6% for independent workers.
Dependence insurance: 1.4% for employees and independent workers. This is not paid by employers.
Mutual insurance: 0.47% – 2.63% for employers and optional for independent workers.
Accident: 1.1% for independent workers and employers.
Health at work: 0.11% for employers
Contributions (excluding dependence insurance) are capped at an annual ceiling (€115,261.56 at 1/1/2014) which increases periodically with the cost of living index and are deductible for tax purposes. Dependence insurance contributions are uncapped and not deductible.
Parental leave: Each eligible parent can take up to 6 months of full time leave or 12 months half time leave from employment to stay at home with a child under the age of 5. The benefit paid is €1,778.31 per month (full time leave) or €889.15 per month (part time leave). It is tax free and only subject to certain social security contributions. The leave period can be extended in the case of multiple births, but it cannot be taken in different periods.
Childbirth allowance: A childbirth allowance of €1,740.09 is paid in 3 equal installments (prenatal, birth and postnatal).
Standard allowances: Monthly allowances paid for each child up to the age of 18 (27 in certain cases) and no age limit in case of disability). The amount paid varies per child depending on the number of children in the household from €185.60 – €361.82 per month per child. In case of disability, there is no age limit for the standard allowance and an additional allowance of €185.60 may be available.
Education allowance: Monthly allowance of €485.01 paid where a parent is not employed, but at home raising children up to 2 years old. There are some qualifying conditions and the allowance can be reduced by 50% in case of part time working or other cases.
School allowances: These are paid at the start of each school year from primary school age and, again, amounts vary depending on the age of the child and the number of children in the household from €113.40 – €323.34 per child.
Child tax credit: This is not strictly a social security benefit, but is paid when children qualify for family allowances. An amount of €76.88 per month is payable for each child and, if not received directly, can be claimed on the tax return in some cases.
For further details on family benefits (in French) click here.
Retirement is normally at age 65, but can be earlier in certain conditions. To qualify for a state pension you must have 120 months of insurance, although months in other qualifying states can count towards this threshold. The pension paid is made up from a basic flat rate amount (which increases periodically with the cost of living index) and an earnings related amounts. The basic rate is accrued at 1/40th per year of insurance and the earnings related amount is based on the salary declared during the period of activity. Under certain conditions, a disability pension can be paid where retirement age is not yet reached. Upon death of an insured party, a surviving spouse/partner and child can receive a portion of the deceased pension entitlement although certain conditions must be met.
These are paid to individuals who are resident in Luxembourg, unemployed voluntarily, aged 16-64 and not receiving a pension, been employed for at least 26 weeks in the previous year and are enrolled in the job agency and willing to accept employment. The benefit is 80%/85% of the average earnings in the previous 3 months and the payments are subject to limits. The benefits are paid for 12 months, although this can be extended in some cases.
Employees are entitled to sick leave and salary payments continue up to the end of the month in which the 77th day of sickness falls. Cash sickness benefits are based on salary entitlement are and are generally paid for up to 52 weeks.
Insured persons can claim reimbursement for qualifying medical expenses. This includes medical and dental treatments, medicines, hospital stays etc. Some payments (e.g. for blood/laboratory tests) are settled directly with the state, but other costs should be reclaimed from the CNS. The rate of reimbursement varies between 0% and 100%.
A person who is dependent on others for essential daily activities can benefit from fully funded care assistance up to 24.5 hours per week, which can be increased slightly in special cases.
Maternity benefits are available for female employees who have had paid work for at least 6 months in the previous year. Maternity benefits are paid for the 8 weeks before the birth, and 8 weeks after the birth, although this can be extended to 12 weeks post-birth for cases of premature/multiple births or where the mother is breastfeeding.
For accidents/diseases incurred in the workplace, it is possible to obtain cash and benefit in kind payments and also survivor benefits for surviving spouse/partner/children in the case of death.
For more information on social security payments and benefits in Luxembourg (in French) click here.
This is a general guide and is not intended to cover specific situations. Social security is complicated and payments/benefits can change so this guide should not replace personal consultation. If you have any questions regarding your social security or would like more information on a specific point, please contact Laura Foulds at Analie Tax & Consulting.
Feature photo: Images_of_Monday/flickr (file)
 In cases where individuals work in Luxembourg and another EU member state/country with which Luxembourg has a social security treaty or are posted by their employer for a fixed term assignment, Luxembourg social security may not be due. Specific advice should be sought in these cases.