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Business termination

How to properly conduct a mass layoff

A step-by-step guide for businesses on how to conduct collective redundancies. How it differs from regular staff changes, why it is necessary and what rules apply.

Last time updated
08.05.24

A collective redundancy is a procedure for dismissing a large number of employees in a short period of time. Usually it is 7 or more employees within 30 days or 15 or more employees within 90 days.

Introduction to the procedure

Collective dismissal is neither a whim nor a privilege. It is a compulsory measure that is only permissible in exceptional circumstances. Dismissals under the procedure must not be linked to the identity of the employee, i.e. affect his or her personal or professional qualities.

The most common causes of collective redundancy are:

  • Economic.
  • Restructuring and/or reorganisation that results in job cuts, liquidation or bankruptcy.

If your company falls within these criteria, then the procedure can begin.

An important stage of collective redundancies is negotiations with the social partners. These are trade unions, a delegation of employees or the company's employees themselves, if the workforce is small.

The timetable for the collective reduction procedure can be summarised as follows:

Beginning of negotiations

  • Before D day — notification of staff about redundancies
  • D day — start of negotiations

If there is an agreement between the social partners

  • D day+15 — signing a redundance plan
  • D day+16 — redundance plan implementation

In case of disagreements between the social partners

  • D day+15 — signing of a certificate of non-conformity
  • D day+18 — Referral to the National Conciliation Service (Office national de conciliation - ONC)
  • D day+20 — ONC convenes joint committee
  • D day+23 — Meeting of the Joint Conciliation Commission
  • D day+38 — conclusion of negotiations

In the case of a final agreement between the social partners

  • D day+39 — implementation of a redundancy plan

In case of failure of negotiations between the social partners

  • D day+39 — individual dismissal procedure.

It is important to understand that collective redundancy is not simply the dismissal of a large number of employees. This is a full-fledged mechanism obliging the employer to comply with certain social agreements and norms. For example, try to avoid layoffs and limit yourself to other forms of job release.

Beginning of the procedure

Collective redundancies cannot be carried out discreetly. This is strictly monitored by professional organisations, as well as ADEM and the Labour and Mine Inspectorate. They are the ones who need to be informed.

The notification must take place at least 75 days before the start of the procedure. The Minister of Labour may exceptionally increase the minimum period to 90 days or reduce it to a lower value within the framework of the law.

The first thing to do is to notify staff representatives. This may be the employee delegation if the company has more than 15 employees, or the employees themselves if there are 15 or fewer. The written notification must include: 

Motives
The reason for the collective redundancy must be detailed and justified.
Employee data
It is necessary to specify the number and categories of employees to be made redundant.
Total number of employees
Indicate the number of full-time employees normally employed by the company.
Timeline
The length of time during which layoffs will take place.
Criteria
Parameters that influenced the choice of employees being laid off.
Method of calculation of compensation
This is necessary in the event that employees receive more than the statutory allowance OR no allowance at all.
Show all

The next instance will be ADEM, which must also be informed. To do this, simply send the agency all the information gathered above, as well as a copy of the written notification to the staff.

The last formality at this stage is to provide the workers' delegation or the workers themselves with a copy of the notice sent to ADEM. Negotiations can then begin.

Negotiations with employee representatives are not a mere formality. They are primarily aimed at possibly preventing dismissals or mitigating the consequences in one of the following ways:

  • Internal redeployment of the company's employees;
  • Professional retraining;
  • Reintegration in the labour market;
  • Increased severance pay.

If a company has an employment retention scheme approved by the Minister of Labour within 6 months prior to the start of negotiations, the company cannot renegotiate the measures set out in the document. Only the option of financial compensation is available to it.

There are two possible outcomes from the negotiations:

Agreement between the parties
Disagreement between the parties

If an agreement between the parties has been signed, the employer has the right to proceed with the dismissal of employees.

Collective redundancies are not permitted:
  • Before the reduction plan is drawn up and signed off on;
  • Before the ONC committee report is signed off if negotiations fail twice.

In order to fire employees, you'll have to:

  • Notify each employee concerned of the redundancy individually in writing: by registered letter or in person
  • Remove all dismissed employees from the register of the Social Security Centre;
  • Request a tax exemption, if applicable;
  • Follow all prescribed steps from the discharge plan.

Tax exemption

Employees are eligible to receive an exemption for severance pay if:

  • Collective redundancies involve the complete or partial closure of a business;
  • If severance pay is spelled out in the termination plan.

To obtain a tax exemption, the request must be sent to the Economic Committee. This can be done by:

Employer

A list of all affected employees and their national insurance numbers, as well as a copy of the reduction plan or a copy of the notice sent to ADEM must be provided.

The employee himself

Also his/her legal representatives or trade union. In this case, the application is made individually and the company is not involved in any way.

If the Economic Committee approves the request, the Luxembourg Tax Administration (Administration des contributions directes - ACD) can authorise the tax exemption.

faq

Frequently Asked Questions (FAQ)

Can I conduct a collective redundancy in one day?

Can employees be dismissed without severance pay?

What to do if negotiations fail?

We took photos from these sources: Anna Shvets on Pixels

Authors: Aleksandr
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