Definition of overtime and triggering thresholds in Luxembourg
When does a working hour become overtime?
In Luxembourg, the normal working time for a full-time employee is 8 hours per day and 40 hours per week. Overtime hours are therefore, in the legal sense, only those worked beyond the 8th hour in a day or the 40th hour in a week. This has an important practical consequence: if an employment contract provides for 35 hours per week, the hours worked between the 36th and the 40th hour remain “normal” working hours (possibly increased under a collective bargaining agreement), but do not automatically constitute overtime within the meaning of the Labour Code.
In practice, the classic risk is to assume that “it is included in the salary”. Except in very specific situations (in particular certain senior executives meeting strict criteria), such a clause does not neutralise the rights attached to overtime. During peak activity periods (logistics before the holidays, accounting closings, urgent construction works), it is therefore essential to anticipate at the planning stage whether thresholds will be exceeded, as this triggers compensation rules and, in some cases, formalities vis-à-vis the ITM.
Maximum limits that must never be exceeded
Overtime is subject to caps designed to protect employees’ health and prevent structural reliance on “overwork”. In practice, employers must monitor three levels:
Daily cap: total working time may not normally exceed 10 hours per day (8 hours + 2 overtime hours).
Weekly cap: total working time may not normally exceed 48 hours per week (40 hours + 8 overtime hours).
Annual quota: overtime is in principle limited to 150 hours per employee per year; beyond this threshold, additional conditions and formalities apply.
A frequent case in the hospitality sector illustrates the risk: a head chef works 52 hours per week during the high season. Even if the employee is willing and even if the activity “requires” it, the company is exposed to an infringement finding (repeated weekly excesses, annual quota exceeded), with a request for regularisation and sanctions. Best practice consists in tracking an overtime counter per employee (weekly and annual) and arbitrating early: temporary reinforcement, reorganisation of schedules, or the appropriate procedure where exceptional recourse can be justified.
Compensation arrangements and precise calculation of premiums
Compensatory rest or increased pay: the two compensation methods
The principle to remember is simple: compensatory rest is the preferred option. In practice, one overtime hour entitles the employee to 1.5 hours of paid compensatory rest (1 hour + 30 minutes). If the organisation genuinely makes recovery impossible within a reasonable timeframe (continuous activity, temporary understaffing, objectively demonstrable operational constraints), or if the employee leaves the company before having taken the rest, the employer must switch to increased pay.
In this case, each overtime hour must be paid at a minimum of 140% of the hourly wage (100% + 40%). A collective bargaining agreement may provide for more; in that case, the contractual rate must be applied. In practice, an agency or service company that “keeps it simple” by paying at the normal rate exposes itself to a retroactive adjustment for the missing premium and, above all, to an unfavourable assessment of its practices in the event of an ITM inspection (as the error becomes systemic).
Calculation of the hourly wage and accumulation of premiums
In Luxembourg, the hourly wage is traditionally calculated by dividing the gross monthly salary by a flat rate of 173 hours. Example: EUR 4,000 / 173 = EUR 23.12; an overtime hour paid at 140% therefore amounts to EUR 23.12 × 1.40 = EUR 32.37.
The difficulty arises when overtime coincides with specific regimes, notably Sunday work and public holidays. Sunday work entitles the employee to a 70% premium and to compensatory rest depending on the hours worked; if, in addition, those hours are overtime, the premiums are cumulative (logic: you pay the hour, then apply the supplements linked to the situation). For statutory public holidays, specific premium rules also apply and may be combined with overtime premiums; it is precisely on these cumulative effects that employers most often make mistakes (they apply a single supplement instead of correctly adding the components).
Concretely, if a bakery requires an employee to work on a public holiday when the employee has already exceeded 40 hours in the week, the employer must calculate: (1) the base hourly wage, (2) the premium linked to the public holiday, (3) the “overtime” premium — then check whether compensatory rest must be granted as a priority. In practice, securing this calculation requires proper payroll configuration (separate pay items) and HR/payroll validation during high-risk periods (holidays, inventories, closings).
The 5 common mistakes that cost employers dearly
Mistake no. 1: Failure to notify the ITM in advance and failure to keep the mandatory register
The ITM expects full traceability from employers: why overtime was necessary, which employees are concerned, over what period, and how it was compensated. In practice, the absence of a register (or an incomplete register) is an ideal entry point for an in-depth inspection: if the inspector cannot verify compliance with caps and compensation, the system will be deemed uncontrolled. ITM formalities (notification/authorisation depending on the case) must be anticipated as soon as the use of overtime becomes recurrent or foreseeable.
Mistake no. 2: Incorrect application of the premium rate or total absence of a premium
Two errors dominate: (1) paying at the normal rate on the assumption that “it’s included”, (2) applying incorrect cumulative premiums (Sunday, public holiday) or an incorrect calculation base. In real life, this is often a configuration error (poorly defined pay item, missing cumulative rule) or an “emergency” decision that is never corrected afterwards. The risk is twofold: wage back-pay and a negative signal in the event of an inspection, as the ITM interprets the absence of a premium as non-compliance, not as a simple oversight.
Mistake no. 3: Incorrect tax and social security reporting on payslips
The tax and social security treatment of overtime includes specific features: part of the supplements linked to overtime benefit from a favourable regime, subject to conditions, and the presentation on the payslip must be consistent. Poorly itemised payroll may deprive the employee of the expected benefit and expose the employer to adjustments during inspections. Best practice: separate pay items, documented calculation rules, and periodic payroll/HR reviews (especially if you change payroll providers or tools).
Mistake no. 4: Failure to comply with the principle of equal treatment between employees
Even under pressure, the company must allocate overtime in an objectively justifiable manner: specific skills, availability, scheduling constraints, formalised volunteering, etc. Systematically imposing overtime on the same individuals without justification creates social risk (complaints, turnover, conflicts) and may become a point of contention during an inspection if it reveals a structurally understaffed organisation. In highly seasonal sectors, prevention lies in a clear policy: rotation, regulated volunteering, and transparent criteria.
Mistake no. 5: Exceeding the annual quota without authorisation and systematic reliance on overtime
As soon as overtime becomes “normal”, it is no longer exceptional: the ITM may consider that the company is offsetting permanent understaffing with overtime. In a typical scenario (industrial maintenance), the company accumulates: no register, overtime over 18 months, annual quota exceeded, premiums incorrectly applied. The final cost rarely stems from a single issue; it is the cumulative effect (wage back-pay + interest + fines + process overhaul) that makes the bill explode. Prevention here means setting alert thresholds (e.g. 80% of the annual quota) and triggering an action plan: reinforcement, reorganisation, or completion of the necessary formalities before entering the red zone.
Conclusion
Overtime in Luxembourg can be secured with three reflexes: (1) measure (reliable register, monitored caps), (2) compensate correctly (priority to compensatory rest or payment at a minimum of 140%, including Sunday/public holiday cumulations), (3) document (reasons, ITM procedures, consistent payroll). ITM adjustments rarely sanction a single isolated “extra hour”; they mainly sanction organisations without traceability, repeated excesses, or non-compliant remuneration. An audit of your practices and robust payroll configuration are often sufficient to eliminate most of the risk.
