On the path to relocating to the EU from Britain, many firms are finding the EU's legislative framework a little obscure. This is no surprise, considering that each country has its own employment legislation with varying factors and interpretations. On the island, labour laws are mainly regulated by acts and common laws, whereas in Luxembourg employment laws are incorporated into the Labour Code. Employment legislation sets the framework and rules that govern the relationship between employee and employer: it details the main requirements for work conditions that every firm must meet, as well as the contract clauses that stakeholders must respect. Ultimately, such legislation can constitute a competitive advantage by ensuring a firm's agility and flexibility.
Following our first article about the employee lifecycle in Luxembourg, this article will dive into the specificities of Luxembourg's employment legislation.
Is every firm governed by a collective bargaining agreement (CBA)?
No. A collective bargaining agreement is specific to a company or a sector, so it depends on the field in which your firm is operating. CBAs fall within the public domain, so, if a firm operates in a sector with a CBA, it has no choice but to adhere to it. There are CBAs in 28 fields in Luxembourg, with a 29th currently in negotiation between representatives of employees (union) and employers of the banking sector (A.B.B.L). CBAs include specific packages, leaves of absence, and various allowances; they offer more favourable working conditions than the Labour Code.
Is a permanent contract a reference contract?
Yes. Permanent contracts (CDIs) remain the norm over fixed-term contracts (CDDs). However, that there are two contract types reveals the flexibility for firms in fitting their workforce to their needs—even during the busy season. The flexibility extends further as well, to work durations, with both full-time and part-time contracts.
Within Luxembourg's framework, a CDD cannot be renewed more than twice for the same person, and its total duration, including the renewal, cannot exceed 24 months. If it does, it will automatically be turned into a permanent contract. Beyond the CDI and the CDD, employers have the possibility to hire people through other types of contracts such as temporary contracts, apprenticeship contracts, or internship agreements.
Do companies have to fix a probation period in the employment contract?
In Luxembourg, the employment contract can include a probation period, but it's not compulsory. A probation period for a permanent contract must respect a legal duration of between 2 weeks and 12 months. In most cases, Luxembourg employers apply a 6-month probation period for their qualified employees. To limit any prejudice that could be caused by the contract termination, both parties have to respect a notice period which depends on the initial probation period mentioned in the contract (e.g. a notice period of 24 days for a contract that has a 6-month probation period).
Do employment contracts have to contain clauses on the duration of work?
Yes. In Luxembourg labour law, work duration is supervised. Concretely speaking, there is a maximum of 8 hours per day and 40 hours per week on a full-time basis. Within certain limits, overtime is possible—up to a maximum (in total working time) of 10 hours per day and 48 hours per week. This surplus can be remunerated in payment or in time off.
Are annual and illness leaves regulated by the labour code?
Yes. In Luxembourg each employee is entitled to 25 paid days off and 10 public holidays. (This can be different for companies under CBAs that offer more favourable conditions). On top of this holiday time, Luxembourg law allows employees to take time off for special professional or personal reasons (e.g. weddings). Some details on maternity, parental, and illness leaves:
- In Luxembourg, maternity leave starts 8 weeks before the due date and continues 8 weeks after the date of delivery, and can be extended by 4 weeks if the mother breast-feeds. During this period, the salary of the employee is maintained by the employer who then receives a refund from the health insurance institution.
- There is also parental leave, which can only be taken after maternity leave and before the child's 6th birthday. Each parent can request full- or part-time leave in agreement with the employer. During parental leave, the parent is entitled to a monthly allowance (up to €3,205) depending on his/her income, which replaces the salary and is granted by the Caisse pour l'avenir des enfants or CAE).
- Concerning illness leave, the Luxembourgish employer must continue to pay the employee without any delay.
Is employee representation mandatory in every firm?
No. The UK does not have a formal legal mechanism for workplace representation. Nor, unlike some other European countries including Belgium, does Luxembourg. However, in Luxembourg, those working in a firm with more than 15 employees can have representatives at work who are directly elected by employees. Their role can be summarised as "safeguarding and defending the interests" of the employees. The representatives get special time off that must be granted by their firm for this purpose.
Do both parties have to respect a notice period in cases of contract termination?
Like in the other European countries, employment contract termination is regulated by labour law. In Luxembourg, a notice period must be respected when one of the parties decides to end the employment relationship. Depending on the situation, this period can vary between 3 days and 3 months. Below is a non-exhaustive list of cases related to contract termination:
- An employer who dismisses an employee for a reason other than serious misconduct must grant a notice period and severance pay if the employee has been employed in the business for 5 years or more. The format of the final interview may vary with regards to the size of the firm.
- In cases of lower activity, or in difficult economic circumstances, the employer has the right to terminate the employment contract according to a specific procedure.
- In the context of an employee offence, the employer has the possibility to dismiss an employee without any probation period and without any compensation.
- If the employee initiates contract termination, he/she needs to respect a notice period that depends on his/her seniority within the firm (1 month for employees with fewer than 5 years of seniority; 2 months for those with 5-10 years of seniority; 3 months for those with 15+ years).
The legislation also recognises contract termination that follows a mutual agreement between employer and employee.
For companies interested in relocating to the EU, employment legislation is a key aspect. It governs the employer-employee relationship from different angles in mostly advantageous ways. And even if the EU tends towards harmonising legislation across Europe, each Member State has still retained its own specificity—Luxembourg being no exception. Stay tuned for our next article, which will dive into local remuneration practices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.