Funding an account

Implementing a scheme
Guarantees and third-party involvement

Employee's role
Treatment of rest periods
Cash payments
Outstanding issues


In Luxembourg, the system of time savings accounts has existed for several years, notably in the banking sector. The Law of May 13 2008 on the single status introduced the concept into the Labour Code, where Article L.211-27 refers to such a system. Hence, instead of taking a rest period, employees can credit a proportion of the overtime that they work to their 'account'. The legislature has never defined the framework for such a scheme, but forthcoming laws on the introduction of time savings accounts in the private and public sectors will fill the gap. Indeed, Draft Bills 6233 and 6234 were voted on in December 2010.

In 2004, the Economic and Social Council defined the basics of a time savings account scheme. This has been the basis for outlining a legal framework and inviting contributions from social partners (ie, trade unions and employers' representative organisations). Under this framework, a 'time savings account' is defined as an account that employees can fund with the rights that they have accumulated in the form of untaken paid leave or rest periods, or with part of their remuneration, in order to enjoy future paid leave or absence.


The primary goal of the scheme is to allow employees to benefit from the philosophy of lifelong learning by giving them the opportunity to save paid time - and, in some cases, money - in order to finance a period of leave. This is intended to enable an employee to complete a private project or finance a course of vocational training.


Only permanent staff will be entitled to join the scheme. Workers who are on fixed-term contracts or have yet to complete a trial period will be ineligible, as the scheme is intended to manage time in the long run. Workers on assignment, such as those sent by a temporary work agency, may accrue time savings with their original employer.

The draft bills do not allow the social partners to agree on the systematic exclusion of senior executives from the scope of the time savings account. Although senior executives are excluded from the legal framework on the duration of working hours, which means that the option of funding an account through overtime does not apply, they will be entitled to fund their account in other ways - for example, through public holidays and statutory paid leave.

Funding an account

Bill 6234 covers the introduction of time savings accounts in the private sector. It sets out what it describes as an "exhaustive" list of ways to save time and money on the time savings account, but it also indicates that the social partners may provide for additional items in a collective bargaining agreement. Each employee is entitled to save:

  • a proportion of the period of his or her annual paid leave that exceeds a threshold of 20 days. The 20-day threshold reflects the provisions of EU Directive 2003/88/EC, which requires each EU member state to legislate for a minimum of four weeks' annual paid leave a year. In Luxembourg, the minimum is five weeks a year;
  • additional rest days;
  • additional leave (eg, time granted to disabled workers);
  • a proportion of the amount of his or her salary that exceeds the social minimum wage (as defined by the law), which can be converted into a rest period at the employee's request, provided that it does not exceed 10% of the annual wage;(1)
  • overtime to be compensated by rest periods - one hour of overtime will equate to one-and-a-half hours of rest period;
  • bonuses for Sunday work, converted into rest periods;
  • compensatory rest periods for Sunday work;
  • remuneration and additional salary for working on bank holidays, converted into rest periods; and
  • bonuses for night work where stipulated in the collective bargaining agreement, converted into rest periods.

In the case of Sunday overtime, bank holiday overtime and night work, the relevant allowances may be accrued cumulatively.

Implementing a scheme

In 2004 the Economic and Social Council gave priority to dialogue between employment stakeholders, which it recommended as the exclusive channel for implementing time savings accounts. Under this approach, accounts would be created pursuant to:

  • a national inter-professional agreement, which would apply to any Luxembourg employer; or
  • a collective bargaining agreement, whether within a company or at sector level, with the capacity to be declared generally binding.

In 2011 the legislature has chosen a slightly different path, opting for internal regulations in place of inter-professional agreements.

Internal regulation
Where the scheme is implemented by means of an internal regulation, the draft bill requires only that the staff delegation be given prior notice and the opportunity to express an opinion. Where there is no staff delegation, the eligible employees should be informed directly. As it is part of the internal regulation, a copy of the time savings account plan must be communicated to the employees, along with annual information on their saved credits, their financial counterpart and the transactions registered in the time savings account during the framework period.

Collective bargaining agreement
Where the scheme is implemented by means of a collective bargaining agreement, the draft bill would allow social partners to provide for exemptions in respect of:

  • the selection of the managing third party;
  • the information communicated to the staff;
  • the list of items that may be used to fund the account; and
  • the terms on which accrued rights under the scheme may be exercised.

The draft law proposes that in either case, the instrument that implements the time savings account scheme must provide certain minimum information, identifying:

  • the scheme's beneficiaries;
  • the items that may fund an account;
  • rules for the funding, use and liquidation of an account;
  • rules for the management of time savings account assets;
  • practical means of showing the status of the account and the rights that a participant has accrued;
  • the required period between the first contribution to an account and its total or partial liquidation, provided that this period is less than 12 calendar months;
  • a guarantee scheme in the event of the employer's bankruptcy; and
  • rules on portability (ie, the ability to transfer an account on a change of employer).

Guarantees and third-party involvement

If the scheme is not implemented by means of a collective bargaining agreement, the management of the financial equivalent of the items credited to the account will be endorsed by an insurer under a specific contract with the employer. The scheme will be financed entirely by the employer.

The involvement of a third party is intended to prevent an employee's accrued time savings from being jeopardised by the employer's bankruptcy. Thus, the credits in the account remain strictly separated from the employer's assets.

In practice, when an employee makes use of rights credited to his or her account, he or she will receive payment from the employer, which in turn will be reimbursed by the insurer, at least once a year, on presentation of evidence of payment. In the event of the employer's bankruptcy, the insurer will transfer the money directly to the employee.

If the scheme is implemented by means of a collective bargaining agreement, the social partners are free to choose the most appropriate guarantee system to preserve the credits in the employees' account represent; this may take the form of a bank guarantee or bankruptcy insurance.

Employee's role

The employee has the exclusive right to decide whether to fund an account - and, in theory, when to take paid leave. However, it may be legitimate to limit an employee's freedom on timing on the grounds of the employer's reasonable operational requirements. No employer may compel an employee to fund (or not to fund) an account or to use (or not to use) the credit in his or her account.

Treatment of rest periods

Rest periods saved in a time savings account are regarded as ordinary rest periods for the purposes of compensation and the rules governing illness during leave. Thus, if an employee is ill while using the paid time credited on his or her account, the corresponding period will not be regarded as part of the time savings. Moreover, the employee's absence under the scheme will be counted when calculating his or her length of service and the capitalisation of his or her rights in a complementary pension plan.

Cash payments

The only way for an employer to use his or her credits in a time savings account is by taking paid leave. However, the legislature has proposed a limited number of situations in which an account can be liquidated in the form of a cash payment:

  • on termination of the employment contract on the day that an old-age pension is allocated to the employee (or, at the latest, on the employee's 65th birthday);
  • on automatic termination of the contract;
  • on termination of the contract, unilaterally or by mutual agreement, where the employee is not automatically entitled to transfer his or her account to another employer;
  • on the employee's death; or
  • at the employee's request, if the employer has not entrusted a third party with the management of the assets or obtained insurance or a bank guarantee.

According to the draft legislation, social contributions from employer and employee, as well as income tax, would be payable from the moment that the compensation is effectively paid to the employee, as for an ordinary salary payment.

Outstanding issues

The legislature's aim has been to apply a basic approach and design a framework text. However, the absence of provisions on certain topics - as much as the choices made on others - may well fuel disagreement between the social partners. The following issues may raise uncertainty:

  • How are existing schemes, which are based on collective bargaining agreements, supposed to comply with a legal framework that, on some points, is all the more rigid for its minimalist approach? There are no plans for a transitional period to enable social partners to implement the required amendments at company level.
  • The right to fund an account with a proportion of the annual leave that exceeds the 20-day statutory minimum has been condemned by the Chamber of Employees, which has emphasised that paid leave is a right that safeguards an employee's health and safety at work.
  • A further problem arises in relation to money and the valorisation of time saved with regard to salary increases. The Chamber of Employees has urged the legislature to guarantee that while using the time that he or she has saved, an employee receives the same amount of money that he or she would have received while continuing to work normally.

It remains to be seen whether the parliamentary process and the input of the various stakeholders can provide appropriate solutions to these problems.

For further information on this topic please contact Guy Castegnaro or Ariane Claverie at Castegnaro by telephone (+352 26 86 82 1), fax (+352 26 86 82 82) or email ([email protected] or [email protected]).


(1) The balance of the time savings account may not be negotiated or distrained - this provision addresses the risk of deliberate insolvency by limiting the right to fund an account from salary payments.