All questions

Discontinuing employment

i Dismissal

An employment contract entered into for an indefinite period of time may be terminated by either party immediately for gross misconduct, with notice or with the mutual consent of both parties. Only termination with notice and termination with immediate effect for gross misconduct will be defined in this section. The decision to opt for either the termination with immediate effect or the termination with notice will mainly depend on the grounds on which the dismissal is founded.

Dismissal with notice

An employment contract entered into for an indefinite period of time may be terminated by the employer for serious and real cause with a notice period, by giving notice to the employee.

The employee may also terminate the employment contract by giving notice to the employer in accordance with the provisions of the Labour Code.

In case of a dismissal with notice, the reasons for dismissal must be supported by demonstrable and explicit facts, including reasons in relation to:

  1. the employee's aptitude;
  2. the employee's conduct; or
  3. the operating needs of the business, establishment or department.

Furthermore, if requested by the employee within one month of receiving notice of dismissal, the employer must provide him or her with a justification letter that clearly and precisely specifies the reasons for termination. The employer must send this justification letter by registered letter within one month of the employee's request. If an employer fails to provide an employee with the grounds for dismissal within the statutory time frame, the dismissal will be deemed unfair and the employee may be entitled to a compensation for damages.

A settlement arrangement may, however, be agreed upon between the employee and the employer, under which the employee would receive a settlement amount in consideration for his or her waiver of any rights deriving from the employment relationship.

On termination, employees are entitled to a notice period calculated according to their length of service within the company.

Unless the employer and employee have agreed otherwise in the employment contract, notice periods are calculated as follows.

ServiceEmployerEmployee
Less than 5 years2 months1 month
5 to 10 years4 months2 months
10+ years6 months3 months

Unlike laws in other jurisdictions, Luxembourg law provides that notice takes effect only on the first day or the 15th day of the month. Thus, notice given before the 15th of the month takes effect on the 15th of the same month and notice given after the 14th takes effect on the first day of the following month.

Dismissal without notice

Dismissal without notice is possible in the event of gross misconduct by the employee. Gross misconduct is considered conduct that immediately and definitively makes it impossible to continue the employment relationship. The appraisal of this notion is purely factual and rests with the courts, which consider the employee's professional behaviour, level of education, social situation and any other relevant factors to determine his or her responsibility.

Before notifying an employee of his or her dismissal resulting from gross misconduct, the employer may temporarily suspend the employee, with immediate effect and without any particular form. Until the employer provides notification of the dismissal, the payment of the remuneration must be maintained.

If the termination (with immediate effect) is a result of gross misconduct, the dismissal letter must include the specific reasons for termination.

Employees dismissed for gross misconduct are not granted a notice period.

Pre-dismissal interview

Any employer with at least 150 employees wishing to dismiss an employee must, before reaching a decision in this respect, convene the employee concerned to a pre-dismissal interview. Notice should be made by way of a registered letter or by providing the employee with a convening notice letter after having sought proof of receipt thereof. The convening notice letter must provide sufficient information in relation to the purpose of the interview, and mention the date, time and place where the interview should be held. Dismissal with notice or without notice cannot be notified before the expiry of the day following the interview and no later than one week later.

Process for giving notice

In the case of dismissal with notice as well as without notice, the employer must notify the employee of his or her termination by way of a registered letter or by providing the employee with a dismissal letter after having sought proof of receipt thereof.

Severance payment

In addition to the notice period, employees dismissed with notice are entitled to a severance payment calculated according to their length of service. Severance payments are calculated as follows:

  1. from five to 10 years of employment – one month's salary;
  2. from 10 to 15 years of employment – two months' salary;
  3. from 15 to 20 years of employment – three months' salary;
  4. from 20 to 25 years of employment – six months' salary;
  5. from 25 to 30 years of employment – nine months' salary; and
  6. over 30 years of employment – 12 months' salary.

Employees dismissed for gross misconduct are not granted a severance payment.

Protection against dismissalPregnant employees and employees on maternity leave

Under Luxembourg employment law, pregnant employees enjoy protection from dismissal.

Dismissal of pregnant employees is prohibited from the time the employee is medically certified as being pregnant, except where the pregnant employee has committed gross misconduct. Any dismissal notified in breach of this protection will be deemed as null and void. The same protection against dismissal will apply to a woman on maternity leave during the entire maternity leave period, and up to 12 weeks from the delivery.

Employees on sick leave

Employees suffering from a medical disease, a workplace accident or occupational disease benefit from protection from dismissal during the period of the sick leave up to 26 weeks.

A new law that entered into force on 1 September 2015 amended the provisions related to an employee's inability to work, both from the perspective of employment law and social security law.

Payment of an employee on sick leave will cease from the date the National Health Fund of Luxembourg (CNS) notifies the employer to cease such a payment, and can only resume once the decision has been modified as a result of legal recourse. The employer will be informed by the CNS as to whether they should cease any payment of salary to an employee, and if a decision has been reached that should change this. The protection against dismissal of 26 weeks in favour of employees on sick leave may thus cease prematurely under certain conditions.

Employees on parental leave

Employers cannot dismiss an employee on parental leave. Protection against dismissal starts two months before the first day of maternity leave if the employee is on the first parental leave (i.e., the parental leave that immediately follows the maternity leave), and six months before the first day of parental leave if it relates to the second parental leave (i.e., the parental leave taken before the child reaches the age of six).

ii Redundancies

Article L.166-1(1) of the Labour Code defines collective redundancies as 'dismissals effected by an employer for one or more reasons not related to the employees concerned' where the number of redundancies is either: over 30 days, at least seven; or, over 90 days, at least 15.

The statutory procedure regarding collective redundancies as set out in the Labour Code must be followed as soon as an employer wishes to dismiss at least seven employees within 30 days or to dismiss 15 employees within 90 days. If, however, at least four employees are dismissed during the relevant period for a reason unrelated to their behaviour, the employer must also include, when calculating how many employees are involved in the dismissals:

  1. terminations for economic reasons that are made by mutual consent; and
  2. departures by employees who are retiring as a result of the company's economic reasons before the usual retirement date.

This procedure requires the employer to enter into negotiations with employee representatives before proceeding with collective redundancies, in order to come to an agreement relating to the establishment of a redundancy scheme. Before commencing negotiations, the employer must inform the employee representative of the measures envisaged by providing him or her in writing with the information legally required.

A written notification of the envisaged collective redundancies must be provided by the employer to the Employment Administration. The notification is sent by the Employment Administration to the Labour and Mines Inspectorate.

Upon the employer and the employee representatives reaching an agreement, the redundancy scheme is signed. After the signature of the redundancy scheme, the employer can notify the termination to each of the employees concerned.

If no agreement is reached between the parties within 15 days of the beginning of the negotiations, signed minutes of the negotiations are sent to the Employment Administration. Within three days of the signature of these minutes, the employer and the employee representatives must jointly refer the matter to the National Conciliation Body.

The members of the parity committee shall be appointed to consider the issues. Unless the parity committee has deliberated, the employer shall not be entitled to notify the dismissals on an individual basis to each of the employees concerned.

Collectively dismissed employees have the same rights as employees dismissed on an individual basis, but the statutory rights on collective dismissal are extended. The dismissal will be qualified as unfair on the same basis as the one applicable to individual dismissals.

Collectively dismissed employees may also negotiate with the employer to reach an amicable settlement arrangement.