Luxembourg’s new young employee bonus (2025): what young professionals need to know

On January 1, 2025, Luxembourg introduced a new fiscal measure called the young employee bonus to support young workers under the age of 30 at the start of their careers. The aim of this bonus is to give young professionals a financial boost as they enter working life. In practical terms, the measure allows qualifying employees to receive a special bonus from their employer that is largely tax-free, with 75% of the bonus amount exempt from income tax.

Who is eligible for the bonus?

Not every young worker automatically qualifies - there are specific eligibility criteria for receiving the young employee bonus. To benefit from this measure, an employee must meet all of the following conditions:

• Be under 30 years of age at the start of the tax year;
• Hold their first permanent employment contract (CDI) with an employer established in Luxembourg, or abroad but with a permanent establishment in Luxembourg;
• Remain with the same employer for as long as they wish to benefit from the bonus, with a maximum limit of five years.

It’s important to note that the bonus is aimed at those truly at the beginning of their careers. For instance, if you had a permanent job in Luxembourg previously, you would not be eligible, as it would not be your first CDI. Similarly, after five years with the same employer (even if you are still under 30), the bonus eligibility ends. Additionally, once you reach 30 (on January 1 of a given year), you can no longer receive the bonus for that year onward.

For more details, read the full document here.

Employer participation: voluntary, not mandatory

One key aspect of the young employee bonus is that it is not automatically granted — employers are not obliged to pay this bonus. The law enables the bonus and its tax advantage, but the decision to actually offer a young employee bonus is at the discretion of the employer. In practical terms, this means your employer can choose whether or not to implement this bonus scheme in your workplace.

Why would an employer pay it? Offering such a bonus can be an incentive to attract and retain young talent, since it effectively gives the employee more net income for the same gross cost. However, because it’s voluntary, some employers might opt not to provide it, or might provide a smaller bonus. Young employees should check with their HR department or employer to see if this benefit is being offered.

The Young Employee Bonus is a promising new initiative in Luxembourg that encourages employers to invest in young talent and helps young professionals launch their careers with a bit of extra financial cushion. By offering a substantial tax exemption on bonus income, the measure boosts the net earnings of eligible employees during a time in their lives when incomes are typically lower and expenses can be high.

If you are under 30 and starting your first permanent job in Luxembourg, it’s certainly worth discussing this program with your employer. The combination of eligibility conditions, income-based limits, and adjustments ensures that the benefit is well-targeted and fairly administered. All in all, the young employee bonus serves as a “helping hand” for young workers, easing their tax burden and supporting them in building a stable financial foundation for the future.