A Q&A guide to employment and employee benefits law in Luxembourg.
The Q&A gives a high level overview of the key practical issues including: permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; data protection; discrimination and harassment; dismissals; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; pensions; intellectual property; restraint of trade agreements and proposals for reform.
To compare answers across multiple jurisdictions, visit the Employment and Employee Benefits Country Q&A tool.
The Q&A is part of the PLC multi-jurisdictional guide to employment and employee benefits law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employment-mjg.
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
The Labour Code came into effect on 1 September 2006 and was significantly amended on 30 April 2012. It combines all existing legal rules into one document that citizens can easily access. The Labour Code also applies to foreign nationals working in Luxembourg.
Luxembourg nationals working abroad are generally subject to the employment law of the foreign jurisdiction. However, they remain subject to Luxembourg law if on secondment abroad.
There are no age restrictions on managers or company directors.
There are no nationality restrictions on managers or company directors.
Various grants and incentives for employing people are available from the state, such as:
Financial aid for recruiting elderly and long-term unemployed persons (Article L.541-1).
Grants for re-deploying persons who have been made redundant.
Tax reductions on the salary of a long-term unemployed person who has been offered work.
Tax relief in the form of deductions of costs and expenses for income tax purposes are available to Luxembourg resident employers who temporarily employ (either by secondment or recruitment from abroad) highly qualified foreign nationals. The Luxembourg employer must be part of an international group and must employ, or undertake to employ, at least 20 full-time employees in Luxembourg. A circular issued on 31 December 2010 by the Luxembourg tax authority (Administration des Contributions Directes) lays down the precise conditions for the application of the circular. Correspondent reimbursements or any lump sum received from the employer do not constitute part of the employee's taxable income.
For each grant or incentive, the employer has to present a request before the Development of Employment Agency (Agence pour le développement de l’emploi) (ADEM).
To secure a tax reduction on the salary of a long-term unemployed person who has been offered work, the employer has to attach to his request a copy of the employment contract.
In the case of financial aid for recruiting elderly and long-term unemployed persons, the request must be presented, together with a copy of the employment contract, within six months of the start date of the employment of the employee. To obtain the financial aid, the employer has to present a declaration of debt to the ADEM every three months (Article L.541-4 of the Labour Code).
To receive financial aid for redeploying persons who have been made redundant, the request must be presented, together with a copy of the employment contract, within six months of the start date of the employment of the employee. For cross-border employees (frontaliers) the employer must also attach a copy of the E301 attestation as well as an attestation of the competent authority in his home country informing the ADEM what unemployment benefits the unemployed person received in his home country.
Procedure for obtaining approval. Nationals of the European Union, the European Economic Area (EEA) and Switzerland do not need to have a visa to enter or to work in Luxembourg. Citizens from certain other countries in some cases need a visa to work in Luxembourg. The names of the states for which a visa is required in order to enter Luxembourg are listed by the Ministry of Foreign Affairs (for further information see: www.mae.lu/fr/Site-MAE/VISAS-Passeports). If a visa is required the foreign national should apply in person to a diplomatic mission or consulate of Luxembourg or to a diplomatic mission which represents Luxembourg.
Cost. The cost depends on the category of visa but in general the cost is between EUR50 and EUR60 (as at 1 August 2012, US$1 was about EUR0.8). For certain states, the cost is EUR35.
Time frame. The process of obtaining a visa generally takes less than three months.
Procedure for obtaining approval. European nationals (apart from Bulgarian and Romanian nationals who need a work permit until 1 January 2014), EEA nationals and nationals of Switzerland can work in Luxembourg if they obtain a registration card (attestation d’enregistrement) which is given to all persons in possession of an ID card who are engaged under an employment contract or who exercise an independent activity or have sufficient resources. After five years, those nationals can ask for a permanent residence permit (attestation de séjour permanent).
All other foreign nationals require a residence permit for more than three months to work. Since 2008, the work permit and the residence permit are defined in one title, the residence title (titre de séjour). The same generally applies to a foreign national who is legally residing in another EU member state.
Residence permits are granted by the Minister in charge of immigration issues, currently the Minister of Foreign Affairs, for five different categories of professional activities (employee, independent, sportsperson, student, researcher), as well as for family members or other specific reasons. The request must be filed by a person who intends to work in Luxembourg for a period exceeding three months. Depending on the category, there are specific conditions to be met to obtain the residence permit.
If the person resides in a non-EEA country, the residence permit request must be made in the foreign national's country of residence and submitted to the relevant authorities in Luxembourg. After receipt of a temporary authorisation, the person can come to Luxembourg and apply for the permanent residence permit. A person already authorised to reside in another EU country needs to apply from that country for a residence permit in Luxembourg.
An employer who intends to employ a person must file a declaration of employment with ADEM irrespective of that person's nationality. This procedure enables the authorities to verify whether the vacant position could be taken by a registered jobseeker; if this is not the case an employer can employ a person from a non-EU country if the jobseeker is in possession of the requested residence permit for salaried employees.
Cost. A residence permit costs EUR30.
Time frame. The procedure takes between two and three months from the date of submission of the request.
A draft law was deposited on 1 March 2012 which will introduce in the Labour Code a new category related to immigrant workers and the employment of persons in an irregular situation. This introduction in the Labour Code of a new category implies that measures will be taken against the employer if he employs immigrant workers or persons in an irregular situation.
An employee must enter into an individual written employment contract when the employment relationship begins (paragraph 1, Article L.121-4, Labour Code of 1 June 2006, as amended). If the employee is not given a written document, a contractual relationship is still presumed to exist and the employee has a right to receive a written contract from the employer. A fixed-term employment contract must be concluded in writing. If it is not, the contract is deemed an indefinite employment contract as the employer cannot prove otherwise.
An employment contract must contain the following details:
The names of both parties.
The date on which the contract takes effect.
Either:
the place of employment; or
if there is no fixed or main place of employment, a statement that the employee will be employed at various locations or abroad (in this case, the employer's head office or residence must be specified).
The nature of the employment and a description of the tasks that the employee is employed to perform, without prejudice to any subsequent change.
The employee's standard working hours and usual working schedule.
The employee's basic salary, any additional payments, and the frequency of payment.
Paid holiday entitlement or the method of determining this.
The notice period if the employment contract is terminated.
The length of any trial period.
Collective bargaining agreements (CBAs) governing the employee's working conditions.
Any supplementary pension scheme.
Not all terms and conditions of an employment contract need to be expressly agreed. The following sources can imply terms into an employment contract:
Statutory provisions.
CBAs.
Work regulations.
Custom and practice.
Examples of implied terms are the duties of care, confidentiality and loyalty, which apply to the employer as well as the employee.
The Labour Code (Articles L.161-1 to L.166-9) regulates collective relations between employers and employees. A CBA is a contract between trade unions for employees and either:
Trade unions representing employers.
Companies operating in the same or a similar field.
Trade unions are legally defined as professional bodies that defend their members' professional interests, represent them in collective negotiations and seek to improve their working conditions. There are two categories of trade union that can negotiate and sign a CBA:
The trade union that is recognised as the main national body.
Trade unions that represent an important sector of the economy.
CBAs are not common in all industries. They are mainly used in the following sectors:
Banking and insurance.
Building.
Hotel and catering.
Any modification of an essential clause of the employment contract which acts to the employee's detriment must be notified to the employee following the manner and time frame provided in the Labour Code in relation to the dismissal of an employee. The employee can ask the employer for the reasons for the modification, and the employer has an obligation to answer in a more precise manner. The employee can accept or reject the decision of the employer to unilaterally change the contract. In cases where the employee rejects the change, it will be considered as a dismissal (see further Article L.121-7 of the Labour Code), which is then open to legal proceedings.
After receiving a recommendation from the government, the legislature fixes a minimum wage every two years (paragraph 2, Article L.222-2, Labour Code). This relates to the cost-of-living index and varies according to the employee's age and professional qualifications.
Different rules apply to qualified and non-qualified employees, as defined by paragraph 2, Article 222-4 of the Labour Code. The current minimum wage for non-qualified employees aged 18 or above is EUR1,801.49 a month.
Qualified employees aged 18 or above must receive a minimum wage of EUR2,161.78 a month. An official certificate acknowledged by the state is required to prove an employee's qualification.
Employees must not generally work more than eight hours a day or 40 hours a week. CBAs can impose further restrictions on an employee's standard working hours. However, these limits can be exceeded if an employee's average weekly hours over a four-week reference period are not more than 40 or any relevant collectively negotiated limit (Article L.211-17 and L.211-19, Labour Code).
The reference period provided by Articles L.211-6 to L.211-10 is renewed every year and is supposed to be re-evaluated every year.
If the limits on working hours are to be exceeded, the employer must draw up a work organisation plan at least five days before the four-week reference period begins. This plan must set out:
The beginning and end of the reference period.
The days that the company closes, legal holidays, and individual and collective holidays.
Each employee's working hours.
The days off over a 48 subsequent hours period.
In addition, the Labour Minister must authorise overtime and will only do so in exceptional circumstances. Overtime is only allowed for reasons such as:
Preventing the loss of perishable goods.
Carrying out special tasks, such as drawing up inventories and balance sheets.
Every employee working six hours or more must have at least one break which has to be adapted to the nature of the activity (Articles L.211-16, Labour Code). This break can be paid or not, but there can only be one unpaid break in a working day. In a 24-hour time period, the employee needs to have at least 11 consecutive hours of rest. A CBA can stipulate that other rules concerning breaks apply.
Under Article L.211-19 of the Labour Code, shift workers can work more than eight hours a day if the weekly average working time does not exceed 40 hours per week. However, the daily work time cannot exceed ten hours.
Night workers are subject to special rules, especially Articles L.211-14 and L.211-15 of the Labour Code. Their normal working time is eight hours on average, calculated over a period of 24 hours based on a seven-day period.
Shift workers do not have special rest breaks.
After three months' continuous service with the same employer, employees are entitled to paid annual leave of at least 25 working days (five weeks), regardless of their age.
There are ten statutory public holidays a year. These are in addition to the minimum holiday entitlement. If a public holiday falls on a Sunday, it must be replaced by a compensatory day off that employees can take within three months (Article L.232-3, Labour Code). Employees who work on a public holiday receive three times their standard salary for that day. The employer must keep a record of all hours worked (and the corresponding remuneration) on statutory public holidays.
Employees who are ill or injured by an accident must inform their employer on the first day of absence (Article L.121-6, Labour Code), either orally or in writing. They must also provide a medical certificate before the end of the third day of absence. If this procedure is followed, the employer must not dismiss employees or summon them to a preliminary meeting (see Question 17), even if the dismissal is justified by a serious fault on their part that was committed before the absence. This special protection only applies during a certain period (see below), and is not available if the employee's illness or injury is due to voluntary participation in a crime or an offence.
Employees are protected against dismissal for any reason for 26 weeks from the first day of absence (if they are ill for the whole of that period). Dismissals made during this period are invalid and affected employees can claim damages. After the 26-week period expires, the employer can terminate the employment contract.
Civil servants do not have an employment contract, so their working conditions and entitlement to sick leave are fixed under the Administrative Code, which is part of public law.
During a period of sick leave, the employer must pay employees an amount corresponding to their full gross monthly salary until the end of the month that includes the 77th day of incapacity for work (Article L.121-6 §3 point 2, Labour Code). After this period, the employee receives sickness allowance from the Health Insurance Fund (Caisse Nationale de Santé).
The right to receive sick pay applies for 52 weeks within a period of 104 weeks. If employees stop receiving sick pay from the health insurance because their employment contract is terminated and they are not entitled to unemployment benefits, they can claim social security benefits.
The employer recovers some of the sick pay paid from the Employer's Mutual Insurance (Mutualité des employeurs), a social security institution set up for this purpose. The Employer's Mutual Insurance will reimburse up to 80% of the sickness allowance paid by the employer within the 77-day period mentioned above. After this time period, the health insurance pays the employees directly.
Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?
Carers (including those of disabled children and adult dependants)?
Employees can take maternity leave (Articles L.331-1 to L.332- 4, Labour Code). They are not allowed to work during the eight weeks before the expected date of birth (as stated on a medical certificate) or during the eight weeks following childbirth. The period of post-natal leave is extended to 12 weeks for a premature birth or multiple births, and if a mother is breastfeeding her child.
During maternity leave, employees receive their full salary, provided that they have paid social security contributions for at least six months during the year before the maternity leave takes place.
After maternity leave, it is possible to take parental leave (see below, Parental rights).
Employees are entitled to take two days off for paternity leave for the birth of their legitimate or natural child (Article L.233-16, No. 2, Labour Code). During paternity leave, employees receive their full salary.
No provision in relation to surrogacy exists in Luxembourg labour law.
Employees are entitled to take two days off to adopt a child under 16 years of age (Article L.233-16, No. 7, Labour Code), provided they do not take advantage of welcome leave (see below). During these two days off, employees receive their full salary. If two employed spouses want to adopt a child who has not reached the age for attending primary school, either employee can take eight weeks' welcome leave (Article L.234-56, Labour Code), subject to proving the adoption procedure with a court certificate.
Both parents are individually entitled to take six months' parental leave per child if they meet certain conditions (Article L.234- 43, Labour Code). With the consent of the employer the parental leave can also be taken as part-time work (not more than 50% of the regular activity) for a period of 12 months. To obtain parental leave the parent must, among other things:
Raise at least one child under five years old (for whom family allowance is paid) at home.
Devote themselves primarily to the child's upbringing and not engage in any professional activity during the period of parental leave.
Live continuously in Luxembourg or the EU.
Be lawfully and continuously employed in Luxembourg (Article L.234-42, Labour Code).
In addition, employees can only take parental leave if they have worked with the same employer for at least one year before the child's birth. Their monthly working hours must correspond to at least half of the average working hours applicable in the company.
During parental leave, employees are entitled to non-taxable benefits paid by the state amounting to EUR1,778.31 per month (full-time) and EUR889,15 (part-time). This amount is not subject to taxes or social security contributions except for the standard deductions of EUR49.79 for health insurance and EUR18.74 for dependency/care insurance (assurance dépendance) (see Question 26). Since employment contracts are suspended for parental leave, the employer does not have to pay the employees.
Employees are entitled to take two days' leave per year per child if a child under the age of 15 is suffering from a serious illness or is involved in a serious accident (Articles L.234-49 to L.234-51, Labour Code). If the child is disabled, this entitlement to leave applies until the child reaches the age of 18 and is raised to four days per year.
Employees on carers' leave are protected against dismissal. If an employer terminates their employment contract, the dismissal is considered unfair and they are entitled to claim damages (unless a serious reason can be shown to justify the dismissal).
The main benefit relating to a period of continuous employment is increased protection in the case of dismissal. Depending on the employee's uninterrupted period of service, the notice period can be extended from two months to up to six months. In addition, employees may be entitled to severance pay depending on their length of service (see Question 17). The length of continuous employment also plays a role within supplementary pension systems (see Question 28).
If individual employees are transferred to a new entity, they retain their period of continuous employment and their original employment contract. The new employer does not have a right to alter transferred employees' terms and conditions of employment to their detriment. In the event of a transfer to a new entity, employees keep their acquired rights within the supplementary pension system. When they are transferred to another company, their rights may also be transferred to the new pension system.
Where not otherwise provided by the law, Article L.122-10 of the Labour Code guarantees in general the equality of treatment between workers employed for a fixed term and those with a permanent contract.
Agency workers must be paid at least as much as a newly recruited employee with the same or equivalent skills would have earned on a permanent working contract with the client company. Furthermore, Article L.131-15 of the Labour Code obliges the client company to grant to agency workers access to its collective facilities, if any, such as restaurants, means of transport means, and so on.
In any event, workers with a fixed term contract and agency workers are generally entitled to the same rights and benefits as permanent employees, including:
Minimum social salary.
Paid holidays.
Social security and unemployment benefit.
Special leave.
Limits on working hours.
However, agency workers:
Do not have voting rights for the election of workforce delegations in the client company.
Cannot stand for the posts of workforce delegate or worker representative on the client company's joint committee or board of directors.
The same applies to workers with a fixed term contract, except that they have voting rights for the election of the workforce delegation, if they have been with the company for more than six months.
Fixed term contracts generally should not exceed 24 months, renewal included. If the work relation continues after this time period, the contract is deemed to be permanent. Mission contracts for agency workers can be renewed twice for a fixed period in the performance of a project, but they generally cannot exceed 12 months, otherwise the contract will be considered as a contract of unlimited period.
At the end of the contract term, the employer has no obligation to pay any allowance either to agency workers or to workers with a fixed term contract. If the employer decides to terminate the contract before the end of the term, he is obliged to pay the wages still owed until the end of the term but within the limit of the notice period that would have applied if the contract had been signed without any term.
The Luxemburg courts have the power to reclassify an employee misclassified as a temporary or independent worker. In this respect, the classification given by the parties is not binding upon the courts’ appraisal.
Employees' personal data is legally protected (Articles L.261-1 and L.261-2, Labour Code; Law of 2 August 2002 on the Protection of Personal Data, as amended). Before an employer can process personal data, each employee must individually give consent.
Employees have the right to demand that their data be corrected, amended or deleted at any time. An employer that wishes to process personal data must generally notify the National Commission for Data Protection before doing so.
The law of 28 November 2006 prohibits discrimination based on the following grounds (Articles L.251-1 to L.254-1, Labour Code):
Religion, conviction or belief.
Handicap.
Age.
Sexual orientation.
Real or assumed membership or non-membership of an ethnic group.
The discrimination can be direct (being treated less advantageously) or indirect (a neutral practice having a negative effect only on the persons discriminated against). It can concern the recruiting process, promotions, working conditions, activities outside of the job, professional training, continuing education or entry to a worker union or a professional association.
The Labour and Mines Inspectorate (Inspection du Travail et des Mines) is responsible for enforcing compliance with the principle of non-discrimination. Dismissals that violate this principle are void (see Question 18).
Criminal law also prohibits discrimination if it is based on the following grounds (Articles 454 and 455, Penal Code of 16 June 1879, as amended):
Gender.
Sexual orientation.
Health or disability.
Nationality, colour or origin.
Real or assumed membership of an ethnic group, race or religion.
Political or philosophical belief.
Union membership.
If an employer refuses to hire employees, subjects them to detrimental treatment or dismisses them due to any of the above discriminatory grounds, one or both of the following penalties can be imposed:
A fine of between EUR251 and EUR25,000.
A prison sentence from eight days up to two years.
There is no qualifying period of service before an employee can bring a claim.
If employees who have complained about sexual harassment are dismissed or experience other detrimental consequences, the burden of proof lies on the employer to show that the action was not based on the harassment complaint (Articles L.245-1 to L.245-8, Labour Code). In these circumstances, no penal sanction can be imposed on the employer, but the measures taken against the employees are invalid. A victim of sexual harassment can terminate the employment contract and claim damages.
A draft Bill on protection against moral harassment (also known as mobbing) was presented to the Parliament (Chambre des Députés) on 4 July 2002, but as yet, no vote has been taken. Moral harassment includes abusive, repeated non-physical acts, behaviour, intimidation, gestures or unilateral writing, which aim to affect the personality, dignity, physical or psychological integrity of the employee in the workplace, and to create a hostile, intimidating and humiliating working atmosphere (Article 2, draft Bill).
The trade unions OGBL (Onofhängege Gewerkschaftsbond Lëtzebuerg) and LCGB (Lëtzebuerger Chrëschtleche Gewerkschaftsbond) and the employers' association UEL (Union des enterprises luxembourgeoises) have concluded a convention proposing general obligations to prevent harassment and violence at work.
A draft Bill on the enforcement of measures for combating corruption was presented to the Parliament in January 2010 and the corresponding law was adopted on 13 February 2011. Two new Articles have been introduced into the Labour Code. Under this legislation (Article L.271-1, Labour Code), an employee cannot be subject to any retaliatory measures where the employee denounces, or refuses to execute, an action that he considers to be illegal. Dismissals for whistleblowing are void.
A fixed-term contract expires on the date stated in the contract or when a specified event occurs. However, the contract can be terminated earlier if either party has committed a serious fault.
The notice period for terminating an indefinite-term employment contract depends on both:
The employee's length of continuous service.
Whether it is the employer or the employee who wishes to terminate the employment contract.
If the employee terminates the contract, the relevant notice period is:
One month, if the employee has worked with the same employer for less than five years.
Two months, if the employee has worked with the same employer for between five and ten years.
Three months, if the employee has worked with the same employer for at least ten years.
If the employer terminates the contract, the relevant notice period is:
Two months, if the employee has worked with the same employer for less than five years.
Four months, if the employee has worked with the same employer for between five and ten years.
Six months, if the employee has worked with the same employer for at least ten years.
Entitlement to severance pay depends on the employee's length of continuous service with the same employer. The employer must pay employees a severance indemnity. However, an employer is not required to grant severance pay if employees are dismissed due to serious misconduct or are entitled to a personal allowance.
The severance pay for employees who have received a notice of dismissal can amount to a maximum of one year's salary. This payment becomes due when the notice period expires (see above, Notice periods).
See also below, Procedural requirements for dismissal.
An employer must comply with certain rules before making a dismissal. It is not possible to terminate an employment contract with immediate effect, since a notice period must be observed (see above, Notice periods) and this begins to run from either:
The 15th day of the calendar month if the notice has been given before this date.
The first day of the following month if the notice has been given after the date mentioned above.
The legal procedure for making a dismissal involves three steps:
Preliminary meeting. If an employer has a workforce of at least 150 persons, a preliminary meeting must be held before a dismissal is made. When calculating the number of employees in the workforce, all persons must be taken into consideration, even if they are employed in different companies within the group, provided they form an economic and social unit. A preliminary meeting is necessary whether the dismissal is made with or without notice. The employer must send the employee a written summons to the preliminary meeting by registered mail, indicating the date, time, place and purpose of the meeting. However, the employer is not required to indicate the reasons for the dismissal. The letter must explain that the employee has the right to be represented or assisted by either any member of staff or a national trade union representative belonging to the company's staff delegation. At the preliminary meeting, the reasons for the dismissal must be specified and the employee must be given an opportunity to be heard.
Notification of dismissal. A letter of dismissal must not be sent on the same day that the preliminary meeting (see above) takes place. However, it must be sent to the employee no later than eight days after the meeting. The employer is not required to indicate the reasons for dismissal in the letter, but the employee is entitled to request that these reasons be specified.
Communication of the reasons for the dismissal. If the employee requests the reasons for the dismissal, the employer must respond within one month. The reasons must be serious and relate to either the employee's behaviour or professional aptitude, or the organisation of work in the production line or business.
An employee can contest the reasons for the dismissal and file a lawsuit against the employer to claim material and moral damages for wrongful or unfair dismissal. The legal proceedings must be started within three months of the date the employee was notified of the reasons for dismissal. In cases where the employee challenged the reasons within the three-month period by registered letter to the employer, legal proceedings can be started within one year. If the employee is dismissed for a serious reason or does not request the grounds of dismissal in writing, the three-month period starts with the date of dismissal.
The labour court then examines whether the reasons for the dismissal can be considered serious. If the dismissal is found to be unfair or wrongful, the employee can receive material and/or moral damages for unfair dismissal:
Material damages. The aim is to put the employee in the same financial position as he would have been in had he not been dismissed. The court defines a reference period of usually between six to 12 months, depending on the employee's age, qualifications and business sector. The amount of damages is the difference between the employee's actual situation and what his financial situation would have been if the employment contract had been maintained during the reference period. However, the employee has the burden of proving this material damage. No material damages are awarded if the employee finds new employment with a higher wage.
Moral damages. These depend on the employee's personal situation and the manner of dismissal. The average amount granted generally varies between one and two months' salary.
The Luxembourg state can join the parties during the procedure and request the employer to reimburse any unemployment benefit the Employment Fund pays to the employee in the case of unfair dismissal. The parties can also reach an out-of-court settlement.
Employee representatives benefit from special protection against dismissal. Once employees have announced that they are standing as candidates to act as employee representatives, they must not be dismissed for a three-month period. However, the protection does not cover dismissal for a serious reason. In the event of serious misconduct, the employer can order the employee to leave the workplace immediately and request the labour court to terminate the employment contract.
An employer must not terminate an employment contract while the employee is pregnant or during a 12-week period following the birth of the child, subject to the employee informing the employer about the pregnancy by providing a medical certificate (Articles L.337-1 to L.337-6, Labour Code). If there is a serious reason justifying a dismissal, the employer can exclude a pregnant employee from the workplace with immediate effect and at the same time make a request to the labour court to declare that the employment contract has been terminated.
Employees who become ill or are injured benefit from special protection against dismissal (see Question 10). If there is an internal restructuring within the business, employees also have special protection.
Redundancy has two different meanings for the purposes of Luxembourg employment law.
The first meaning is for the purposes of an open-ended employment contract terminated with notice (Article L.124-1 et seq, Labour Code) which relates to an employee who is dismissed with notice as being redundant for reasons arising from the operating needs of the business, establishment or department.
The second meaning concerns collective dismissals (Article L.166-1 et seq, Labour Code), and applies where at least four employees are dismissed during the relevant period as being redundant for economic reasons, when the total number of dismissals on the employer’s initiative for reason not related to the individual workers concerned equals seven or more.
A special procedure must be followed if an employer wishes to make collective redundancies for reasons that are not related to employees' performance at work (Articles L.166-1 to L.166-9, Labour Code). This procedure applies to an employer who intends to make redundant at least seven employees within 30 days, or 15 employees within 90 days. In these cases, the employer must inform the employee representatives in writing by providing certain information, for example:
The reason for the business reorganisation and collective redundancies.
The number and categories of employees affected.
The period of time over which the redundancies will be made.
The selection criteria for making employees redundant.
Details of the method of calculating extra compensation for the affected employees.
The employee representatives can use this information to put forward constructive proposals during negotiations with the employer concerning a social plan (see below). As the first point of the negotiations, all possibilities to avoid collective redundancies must be discussed, such as partial redundancy, reduction of working hours, professional training, temporary transfer of workers or early retirement plans. After this, financial compensation can be negotiated.
In addition, the employer must send a copy of the written information to ADEM, which forwards it to the Labour and Mines Inspectorate (Inspection du Travail et des Mines).
A social plan sets out the social measures agreed between the parties, for example, the employer granting financial assistance to the affected employees. The employer can discharge employees if he does not wish them to continue working during the notice period.
A copy of the signed social plan or a document setting out the parties' disagreement must be sent to the Development of Employment Agency, which will inform the Labour and Mines Inspectorate.
The minimum notice period that must be given to employees affected by collective redundancies is 75 days. This begins to run on the first or 15th day of the month (see Question 17, Procedural requirements for dismissal).
For redundancies of less than seven employees, the general rules on dismissals apply (see Questions 17 and 18). This means that the employer would have to justify with objective and serious reasons the redundancy by explaining the economical considerations that lead him to take the decision, if the employee asks for the reasons for his dismissal.
A salaried employee with an open-ended employment contract can claim redundancy pay if they have worked for at least five consecutive years for the same employer, unless he has been dismissed with immediate effect for reason of serious misconduct. The different amounts depend on the length of employment and can be found in Article L.124-7 of the Labour Code. The following payments apply in respect of the length of employment:
For an employment period of at least five years, the redundancy pay consists of one month's salary.
For a period of at least ten years, it consists of two months' salary.
For 15 years, the amount consists of three months' salary.
For 20 years, the amount consists of six months' salary.
For 25 years, the amount consists of nine months' salary.
For an employment period of at least 30 years, the amount consists of 12 months' salary.
In addition, employees made redundant are entitled to a notice period, which in cases of collective dismissals amounts to at least 75 days. Their salaries must be paid during this time even if the employer discharges them of their work.
Under Article L.426-1 of the Labour Code, in public limited companies employing over 1,000 employees for the last three years, and in public limited companies in which the state have a participation of at least 25%, the administrative or supervisory body should be composed of one third (1/3) of members representing the employees of the company. These members are designated by the staff delegation, or, in the steel industry, by the representatives’ trade unions.
Apart from that, Luxembourg law contains special provisions for European companies (Société Européenne or SE). Under Article L.443-5 of the Labour Code, in a European company, the following provisions govern the participation of the employees in the administrative or supervisory body:
In the case of a European company established by transformation, if the rules of a member state relating to employee participation in the administrative or supervisory body applied before registration, all aspects of employee participation continue to apply to the European company.
If a European company is established by means other than transformation, the employees, its subsidiaries and establishments and/or their representative body have the right to elect, appoint, recommend or oppose the appointment of a number of members of the administrative or supervisory body of the SE proportionally to the number of employees employed in the participating companies concerned before the European company was registered. In any event, this supposes that at least one of the previous companies applied participation rules.
However, if none of the participating companies was governed by participation rules before the registration of the European company, the latter is not required to establish provisions for employee participation.
Private companies with at least 150 employees must establish a works council (Comité mixte d’entreprise) that consists of an equal number of employer and employee representatives (Article L.421-1, Labour Code). Public companies do not need to set up a works council, unless they regularly employ at least 15 employees under service contracts (Article L.411-1, Labour Code). However, depending on the number of their employees, public companies may have to set up a staff delegation (see below).
The works council is involved in decision-making on:
Introducing technical installations to monitor employees' behaviour and performance.
Establishing and modifying general selection criteria for the purposes of recruitment, promotion, transfer and dismissal.
Introducing or modifying measures concerning employees' health and safety.
Establishing or modifying general criteria for employees' appraisals.
Establishing or modifying internal regulations.
Granting bonuses to employees for their suggestions concerning technical improvements.
The works council also has some information and consultation rights concerning decisions that will affect the company's financial position (for example, decisions on introducing, improving or transforming product installations or equipment). The employer must provide the works council with a written report on the company's economic and financial progress twice a year.
Some consultation rights also apply to the staff delegation (Délégation du personnel – see Article L.411-1, Labour Code). Employers in the private or public sector (excluding employees who are governed by a particular statute, such as civil servants and persons treated as civil servants) who regularly employ 15 or more persons (including part-time employees and temporary employees) must set up a staff delegation. The size of the delegation varies according to the number of represented employees. For example, in a workforce of between 15 and 100 employees, there is one delegate for each group of 25 employees.
The staff delegation's main task is to protect and defend the employees' interests regarding:
Working conditions.
Employment security.
Social status.
The staff delegation makes suggestions about improving working conditions and the employees' social situations. It also:
Assists in bringing claims against the employer.
Mediates in disputes between the employer and employees.
Protects the working environment and prevents accidents.
The employer must therefore provide certain information on security, health risks and protective or preventative measures to the staff delegation.
Furthermore, in the case of European Works Council, the members of this council must be informed and consulted of all cross-border issues, and particularly on matters that significantly affect the interests of employees. The information and consultation must relate in particular the following issues:
Structure of the company or the company group.
Substantial changes in the shareholding.
Financial, economic and social situation of the company.
Probable development of the activity, the production and the sales.
Situation and probable development of employment.
Investments.
Substantial changes in the organisation.
Introduction of new working methods.
Transfer and relocation of production.
Mergers.
Collective dismissals.
Professional training policy.
Depending on the facts, the works council has information, consultation and/or co-determination rights if a major transaction takes place. It must be informed about:
The planned date of the transaction.
The reason for the transaction.
The changes it will make that affect employees.
Whether a social plan is envisaged.
Employees' consent is not required for a transfer of the business. However, the seller and buyer must inform the employee representatives in detail about the planned transfer (Article L.127-6, Labour Code). If there are no employee representatives, the employer must inform the employees directly. These rules apply to both share and asset sales.
If an employer fails to comply with its consultation duties, the relevant measure or transaction cannot be set aside, but the employer can be obliged to pay a fine of between EUR251 and EUR15,000 (Article L.417-4, Labour Code).
Employees can inform the Labour and Mines Inspectorate about a failure to consult. The Labour and Mines Inspectorate can launch an investigation into the employer. However, this cannot prevent a proposal from going ahead.
The legal consequences of a business transfer are set out in the provisions of the Labour Code concerning safeguarding employees' rights in the case of a business transfer (Article L.127 et seq). All employees, and rights and duties arising from an employment relationship with the seller that already existed on the date of the transfer, are automatically transferred to the buyer (paragraph 1, Article L.127-3, Labour Code). These rules apply to both share and asset sales.
A business transfer is not regarded as a valid reason for making dismissals (paragraph 1, Article L.127-4, Labour Code). Employees are therefore protected against dismissal on the disposal of a business.
The buyer assumes all rights and obligations arising under the employment relationship with the seller (see above, Automatic transfer of employees). In addition, if a collective agreement remains applicable, the terms of employment can only be modified after the collective agreement expires. If no collective agreement applies, it is possible to harmonise the transferred employees' terms of employment with those of the buyer's other employees, provided that this harmonisation is mutually agreed on between the buyer and each individual employee.
An employer can be liable for the acts of its employees?
A parent company can be liable for the acts of a subsidiary company's employees?
A company can be held civilly liable for the acts of its employees (Article 1384, Civil Code). However, under a Court of Appeal decision, employees are responsible for any damage that they have committed either intentionally or through serious negligence (Court of Appeal, 20 February 1977, Nr. 1341 Faber/Klein). The same principle applies to contractual liability (Article L.121-9, Labour Code).
A parent company cannot generally be held liable for the acts of a subsidiary company's employees.
Articles L.311-1 to L.327-2 of the Labour Code regulates matters relating to health and safety in the workplace. The Labour Code aims to protect employees' physical and mental health.
Employers must be affiliated to an authorised Health and Safety Service. They must take all appropriate health and safety measures, including those aimed at preventing occupational risks, and provide employees with information and training. One or several employees must be allocated responsibility for ensuring that these measures are taken. The Labour and Mines Inspectorate (Inspection du Travail et des Mines) enforces safety rules in the workplace. It also has the following roles:
Providing advice to employers and employees on improving safety in the workplace.
Deciding the conditions under which dangerous industrial activities can be carried out.
Members of the Labour and Mines Inspectorate can enter any workplace without prior notice or authorisation from the employer.
The Labour and Mines Inspectorate can also issue an injunction requiring an employer to eliminate a source of danger to employees. For example, an employer can be ordered to stop work that involves safety risks, or to evacuate the premises.
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
The taxation of individuals is based on the concept of tax domicile (domicile) or of the customary place of abode (séjour habituel) and not on the concept of nationality. Most types of remuneration paid to resident employees are taxable.
Residents in Luxembourg are subject to Luxembourg income tax on their worldwide income (whether it relates to duties performed in Luxembourg or abroad), unless an applicable double taxation treaty provides for tax exemptions in Luxembourg.
Progressive tax rates apply to employment income. These vary from 0% to 39%. The marginal rate can respectively change between a tax rate of 40.56% and a tax rate of 41.34% for taxable income exceeding EUR150,000 for a single taxpayer and EUR300,000 for a couple who are taxed jointly. The applicable rate of tax depends on individuals' personal circumstances (for example, their marital status and number of dependent children). Married couples are taxed jointly.
All employees must be registered with the Social Security Services. The employer has a legal duty to give the names of all national and foreign national employees to the Social Security Services, and contribute to financing the system. The payable contributions are as follows:
Health insurance. Both the employer and employee must each contribute 2.8% and 3.05% (depending on the type of remuneration) of an employee's salary.
Pension insurance. Both the employer and employee must each contribute 8% of an employee's salary. There is a special pension regime for civil servants.
Dependency insurance. Employees must contribute 1.4% of their salaries. The dependency insurance is not tax deductible.
Health at work contribution. The employer must contribute 0.11% of the salary of all its employees.
Accident at work insurance. The employer must pay this insurance (1.15%).
Employer's mutuality insurance. The employer must pay between 0.48% and 2.74%.
The law on the single status for private sector employees (statut unique) came into force on 1 January 2009. Previously a distinction was made between blue-collar and white-collar employees and they were subject to different rates. The law now provides for a single rate (see above, Health insurance). However, during a transitional period, a surcharge is applied to blue-collar employees. The rate of the surcharge is 2.1% in 2009 to 2011 and will be successively decreased in the following years (1% in 2012 and 0.5% in 2013). After 2013, there will be no surcharge to blue-collar employees which will lead to a unified contribution rate for social security from 2014 for all employees (exclusive of accident at work insurance). However, rates may change in the future to ensure the financing of the healthcare system.
In return for their social security contributions, employees have the right to specific benefits, including:
Sickness and maternity benefits (see Question 10).
Occupational illness insurance.
Accident insurance.
Dependency insurance.
Retirement benefits.
Family allowances.
Crisis contribution. The crisis contribution has been discontinued. There are no other taxes levied on employers and employees.
Both the employer and the employee must each contribute 8% of an employee's salary towards pension insurance. There is a special pension regime for civil servants.
For tax purposes, pension contributions are treated as special expenditure, so the following are fully deductible:
Employer's pension contributions.
Employees' pension contributions.
Pension contributions paid by non-employees.
The monthly amount of the state pension is calculated according to the contributions that an employee has paid over the years. The minimum pension is EUR1,566.90 a month for a contribution period of at least 40 years. The pension is capped at EUR7,254.19.
Is linked to the employee's salary?
Is linked to employer and/or employee contributions and investment return on those contributions?
It is not compulsory for employers to provide access, or contribute, to supplementary pension schemes for their employees.
However, an employer can introduce one or several supplementary pension schemes for its employees. They can be either (Article 3, Law of 8 June 1999 on Supplementary Pension Schemes, as subsequently amended):
Internal schemes with determined pension promises, guaranteed by provisions made in the books of the company.
External schemes in the form of pension funds or group insurances.
The company is free to determine the:
Form of the scheme.
Conditions for employees to join the scheme.
Financing of the scheme.
Benefits and their conditions to be allocated.
Rules for modifying the scheme or for its cancellation.
This information must be documented in a specific supplementary pension scheme regulation. This regulation must also contain rules that enable the employees to determine, at any time, the benefits they have acquired.
All employees who fulfil the conditions for participation in the scheme as set out in the scheme regulation automatically become members of the scheme. Employees' contributions as part of the financing of the scheme cannot be imposed on employees who already worked in the company before the introduction of the scheme.
Supplementary pension schemes are only common in some sectors, such as banking and insurance.
See above, Linked to the employee's salary.
The regulatory body that oversees the operation of supplementary pension schemes is the General Inspection of the Social Security (Inspection Général de la Sécurité Sociale).
The employer must deposit and register a supplementary pension scheme regulation and financing plan with the General Inspection of the Social Security within three months after:
First implementing the supplementary pension scheme.
Every modification of that scheme.
The Inspection must regularly check whether the supplementary pension scheme, its regulation and its financing plan comply with the law. To carry out its regulatory function, the Inspection can require the employers to provide information.
Tax reliefs are available to the employer and the employee. For supplementary pension schemes, the tax reliefs for the employer are limited to 20% of an employee's annual ordinary salary.
For employees who subscribed into a supplementary pension scheme before 1 January 2000 some specific supplementary limitations apply. If employees also contribute to supplementary pension schemes, they can deduct up to EUR1,200 per year from their income tax.
In the case of a business transfer, supplementary pension rights (as defined under the law of 8 June 1999 on supplementary pensions) are transferred from the transferor to the transferee, as provided for under Directive 98/50/EC amending Directive 77/187/EEC on the approximation of the laws of the member states relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses. Specific provisions apply if the transferor continues to exist.
If the transferee has its own supplementary pension system, it must grant equivalent rights to the transferred employees.
There are no other provisions for the protection of pension rights on a business transfer.
Employees who are working abroad?
Employees of a foreign subsidiary company?
A pension scheme established by a parent company in Luxembourg is also accessible to employees in different countries. The tax reliefs available depend on the rules of the country in which the employee is taxed.
Supplementary pension schemes can be provided for one company or for a group of companies even if some members of the group are foreign companies. Whether the tax reliefs referred to in Question 30 apply to foreign subsidiaries depends:
For the employer, on whether the subsidiary's pension benefit is subject to Luxembourg corporate tax.
For the employees, on whether they are subject to Luxembourg income tax.
There are two ways to organise pension scheme benefits to prevent the loss of these benefits in the event of the company's insolvency.
The first scenario is to outsource the retirement provisions so that, in the event of the employer's insolvency, they do not form part of the insolvency estate and are therefore still available to the beneficiaries.
If the pension scheme is organised internally, then the company should engage an organisation or an insurance company approved by the Luxembourg state to ensure that, in the event of insolvency, benefits will be paid to the employees.
A convention between Germany and Luxembourg also allows firms operating in Luxembourg to join the PSVaG (Pensions- Sicherungs- Verein Versicherungsverein auf Gegenseitigkeit), a German national union guaranteeing pensions in cases of insolvency. The aim of this union is to protect employees and their pensions by growing the number of members and therefore diminishing the risk.
The beneficiaries can claim their money directly from the PSVaG or the insurance company chosen by the firm.
There are no legal obligations for an employer to grant bonuses to its employees.
On 1 February 2010 the Luxembourg Financial Supervisory Authority (Commission de Surveillance du Secteur Financier (CSSF)) published a circular on guidelines regarding remuneration policies in the Luxembourg financial sector (Ciculaire CSSF 10/437). This circular implements the European Commission Recommendation 2009/384/EC on remuneration policies in the financial services sector and applies to all entities supervised by the CSSF.
The main points of the circular are:
A remuneration policy should be set up.
The remuneration policy should be structured in such a manner that the variable remuneration part is reasonable in comparison to the fixed remuneration part.
The remuneration policy should not induce excessive risk-taking and should be in line with the business strategy and long-term interests of the financial undertaking.
Meanwhile, the CSSF has issued further circulars regarding bonus rules, particularly circular CSSF 11/505 which provides details regarding the applicability of the principle of proportionality in the setting up of remuneration policies in the financial sector.
The principle of proportionality exists on two different levels:
Proportionality taking into account the type of institution and the risk profiles of an undertaking.
Proportionality amongst the different categories of an undertaking's staff whose professional activities have a material impact on its risk profile.
Given the fact that provisions for remuneration policies do not apply in the same way and to the same extent in each undertaking, some institutions apply more sophisticated policies or practices, whereas other institutions meet the requirements in a less burdensome way.
An employee is, in principle, the owner of the copyright of works created in the course of their employment, unless otherwise contractually agreed (Law of 18 April 2001 on Copyright, Neighbouring Rights and Databases, as amended).
Exceptions apply where:
A computer program is created by an employee in the course of employment, where, unless otherwise agreed, the rights are owned by the employer (Article 32§2, Law of 18 April 2001).
A work is created at the initiative of a natural or legal person who edits it, publishes it and discloses it under their direction and name, and in which the personal contributions of the various authors who participated in its production are merged in the overall work. Such directed work is the property, unless proved otherwise, of the natural or legal person under whose name it is disclosed.
Unless otherwise contractually agreed between the employer and employee, inventions made by an employee belong to the employer when created under an employment contract or during studies and research that the employee has been explicitly charged with, and that are either (Article 13 of the Law of 20 July 1992 relating to patents, as amended):
In the field of the activities of the employer.
With the use of the employer's knowledge, technology, date or other means specific to the employer.
All inventions which do not meet these criteria are owned by the employees.
A design created by a worker or an employee in the course of their employment is the property of the employer (Article 3.8§1 of the Benelux Convention on Intellectual Property).
Employees must comply with the duty of good faith and not harm their employer's interests during the employment contract (Article 1134, Civil Code).
An employer can include a non-competition clause in the employment contract. This prohibits employees from carrying out independent activities similar to those of their employer for a certain period after the employment relationship is terminated (Article L.125-8, Labour Code). Its aim is to prevent former employees from harming the employer's interests.
To be enforceable, a non-competition clause must comply with certain conditions. For example:
The employee must earn a gross monthly salary of at least EUR6,817.07 (indice 100) or EUR4,191.53 (indice 737.89) before leaving the company and must not be a minor when signing the clause.
The clause must be in writing and included in the employment contract.
The prohibition can only extend to prohibiting carrying out activities similar to those of the employer, and requiring the employee to exercise their business independently.
The relevant period must not exceed one year.
The prohibition must be restricted geographically, meaning it cannot extend outside Luxembourg.
Employees are not legally entitled to any compensation for complying with a non-competition clause.
Luxembourg employment law is continuously updated (particularly to adapt to European law requirements).
In February 2012, a draft Bill will modify Article L.521-3 of the Labour Code about full unemployment (chômage complet).
In March 2012, a draft Bill will introduce a chapter in the Labour Code about the measures taken in relation to employers using immigrant workers and persons in an irregular situation.
Description. The official website of the Chamber of Deputies, the main legislative body.
Description. The official website of the Ministry of Foreign Affairs.
Description. The official website of the Institute Protecting the Interests of Salaried Employees.
Description. The official website of the Development of Employment Agency.
Description. The official website of the Luxembourg Social Security Institutions.
Description. The official website of the Ministry of Social Security.
Description. The official website of the National Fund for Family Allowances.
Description. The official website of the Inspectorate of Workplaces and Mines.
Description. The Legilex website is a legal portal of the Government of the Grand Duchy of Luxembourg.
Description. Website containing Luxembourg labour law.
T +352 297 298 1
F +352 297 299
E contact@molitorlegal.lu
W www.molitorlegal.lu
Qualified. Luxembourg, 1985
Areas of practice. Labour and pensions; dispute resolution and litigation.
Recent transactions
Global engineering company using engineers from various EU countries who work on specific aspects of buildings throughout the world.
Large transport company re transfer of undertaking implications.
International catering company re transfer of employees and interpretation of application of collective bargaining agreement.
Global leader in automotive safety sensing systems re client's restructuring process.
T +352 297 298 1
F +352 297 299
E contact@molitorlegal.lu
W www.molitorlegal.lu
Qualified. Luxembourg, 1994
Areas of practice. Labour and pensions; dispute resolution and litigation.
Recent transactions
International catering company concerning payment of part-time employees, private use of business equipment, misuse of social media, and new working schedules.
International hypermarket chain re collective bargaining, dismissal of staff representatives, amendments to employment contracts, pension plans and health care issues.
State of Luxembourg with respect to a claim introduced by a community of teaching personnel in reference to their status as government employees.
