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How to properly dismiss an employee with notice
In this guide, we will explain how and when to dismiss employees under Grand Duchy law, when the immediate dismissal rule applies and when the procedure must be carried out with prior notice, as well as which employees are entitled to severance pay.
In Luxembourg, an employer can dismiss a person immediately for serious misconduct, or gradually and with notice in all other cases. The second scenario is more common and less severe than immediate dismissal for serious offences, so in this guide we will look specifically at cases of dismissal with notice.
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Prepare for the end of an employment relationship
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Prepare for the end of an employment relationship
Give notice of termination
Review the employee's work contract, the terms of the probationary period, the specified notice period for terminating the employment relationship, and other termination provisions.
Key terms relating to dismissal
There are a number of important issues to consider when terminating an employee. In the absence of gross misconduct on the part of the employee, the following principles apply:
- An employee with a permanent contract can only be dismissed with notice;
- An employee on a fixed-term contract cannot be dismissed without compensation for the salary he or she would have received for the period up to the end of the contract. However, it is important to note that the compensation is calculated on the basis of the salary that would have been paid if the employee had a permanent contract and would have been due for the notice period.
- You cannot give notice to an employee on maternity or parental leave.
- Special rules apply to staff representatives and their deputies, as well as equal opportunity and health and safety representatives. They cannot be dismissed during their entire term of office, i.e. for a period of 5 years, nor can they be called for an interview prior to dismissal. Nor can they be dismissed during the first 6 months after the expiry or termination of their term of office. Also, if such employees are standing for election, they cannot be dismissed within 3 months prior to the election.
- You may not make mass layoffs unless a mass layoff procedure has been initiated. A mass dismissal is defined as the dismissal of at least seven employees within 30 days or at least 15 employees within 90 days for reasons other than personal.
- Employees of companies with 150 or more employees cannot be given immediate notice of dismissal. In this case, you must give the employee a clear timeframe: no earlier than the day after the pre-termination interview and no later than 8 days after the pre-termination interview. However, if the company has fewer than 150 employees, the employer may notify the employee of the dismissal immediately.
- The length of the notice period depends on the employee's seniority at the time of notice and ranges from 2 to 6 months.
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Possible reasons for dismissal
Reasons for termination with notice can be divided into two groups: those directly related to the employee (personal reasons) and those related to the operational needs of the company (economic reasons).
Personal reasons
Employee is unsuitable for the job
For example, they perform their duties poorly and/or focus solely on quantitative indicators. Or the employee is absent frequently and/or for long periods of time for reasons unrelated to the job.
Unacceptable employee behavior
This may include persistent tardiness, events in the employee's personal life that affect the work process, or unacceptable attitudes toward the employer, co-workers, or customers.
Prolonged illness
If an employee's absence from work has been so long that it has begun to cause serious problems for the employer's business, the employer has the right to terminate the employee's employment either upon the employee's return from sick leave or after the expiration of the 26-week period during which the employee is protected from dismissal for disability.
An employee may be dismissed only after the facts of the labor discipline violation have been established. Otherwise, the dismissal may be considered unfair.
Reasons related to business needs
These are purely economic reasons involving the employer's desire to restructure the business and eliminate certain jobs. However, in order to prove an economic basis for the dismissal, the employer must actually prove two important points:
Justification for the restructuring
This could include financial distress, keeping the business competitive in the event of a downturn, and similar reasons.
The impact of the action taken on the employee's performance
The employer must demonstrate in a clear and transparent manner that the restructuring directly affects the employee's job and prevents the employee from leaving the company.
In the case of dismissal for economic reasons, the employer is free to choose which employees to reduce and has the right not to fail to justify his choice. The employer is not obliged to transfer the dismissed employee from one department to another within the enterprise. However, such employees have a priority right to re-employment.
Dismissal on trial period
The employment relationship usually begins with a trial period: during this period, both parties - employer and employee - can terminate the employment contract quickly and without compensation.
However, the notice period, which depends on the length of the initial probationary period specified in the employment contract, must still be observed.
- If the duration is specified in weeks, the principle applies: as many days' notice as there are weeks in the trial. So 5 weeks is 5 days notice, 10 weeks is 10 days notice, and 20 weeks is 20 days notice.
- If the probationary period is expressed in months, the procedure is different: 4 days for each contractual month of the probationary period. The notice period must be a minimum of 15 days and a maximum of 1 month.
Things to consider
- Employment may not be terminated during the first two weeks of the probationary period without the employee's consent, except in cases of serious misconduct.
- The notice period cannot end after the probationary period has expired.
- If the employee is on sick leave, the employer cannot terminate the contract during the probationary period. In this case, the probationary period is extended by the duration of the sick leave, but not more than 1 month. At the end of this period, if the employee is still on sick leave, the employer has the right to terminate the contract.
- If the employee is on probation and is pregnant, the employment contract may not be terminated between the date of the pregnancy certificate and the end of the protection period.
- Notice of termination during the probationary period must be given in the same manner as for any other termination: in writing, either by registered letter or personally delivered to the employee against signature.
How to terminate employment during trial period in Luxembourg
After the interview, the employer has the right to decide whether to dismiss the employee or not. If it is decided to proceed with the dismissal procedure, the employer must send notices.
For companies with less than 15 employees, it is sufficient to send a notice of dismissal only to the employee, even if it is for economic reasons. Companies with 15 or more employees must also notify the Economic Committee of the Ministry of the Economy.
The employer must notify the employee of the termination, and must do so in writing in one of two legal ways:
The letter must meet the following requirements
- State that the employee is being terminated with notice;
- Outline the notice period to which the employee is entitled based on length of service;
- Indicate the period of release from employment, if applicable to this termination;
- Send the notice to the employee's home address. If the employee changes his or her address during employment without notifying the employer, and the letter is received at the original address, the notice will be considered valid.
The notice of termination letter should be written in language that the employee can understand.
Documents
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Example of a notice of termination of employment
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Example of a notice of termination of employment
DownloadThe employer is not obliged to state the reasons for dismissal in the notice, but the employee may submit a request for clarification. To do so, the employee must submit the request in writing:
The employer must respond to the employee in accordance with the following requirements if the employer receives such a request:
When notifying an employee, there are a few important things to know:
Start of notice period
It does not matter when an employee receives a termination letter. The notice period is treated the same for everyone.
- If the employer sends the notice of termination before the 15th of the month, the notice period starts on the 15th of the month.
- If the notice is sent by the employer between the 15th and the last day of the month, the notice period starts on the first day of the following month.
The beginning of the notice period is defined as the date on which the notice is sent by registered mail or delivered to the employee against a receipt.
If the employer sends a registered letter on September 3, the notice period starts on September 15, and if it is sent on September 23, it starts on October 1.
Length of the notice period
The notice period is a fixed period. It cannot be extended in case of illness, accident or leave. The length of the notice period depends on the employee's seniority at the time the notice is given.
Notice period
- If the employee has been with the company for less than 5 years, the notice period is 2 months;
- If the employee has been with the company for between 5 and 10 years, the notice period is 4 months;
- If the employee has been with the company for 10 years or more, the notice period is 6 months.
Release from work
An employer may, at its discretion, grant an employee a full or partial release from work during the notice period. To do so, the employer must meet two conditions:
Provide the employee with written notice of the release from work, either in the termination letter or in a subsequent letter
Continue to pay the employee's full salary and all eligible benefits, except for work-related expenses (e.g., meal allowances, travel expenses, etc.), and provide the employee with a salary increase, if applicable.
Time off to look for another job and unused vacation leave
A terminated employee who continues to work during the notice period may request time off to look for another job during the notice period.
However, the employer cannot force the employee to take leave during the notice period. It is up to the employee to decide, and the employer may choose to pay compensation in lieu of unused vacation.
If an employee wishes to take leave before the end of the notice period, the employee must make a request to the employer. Depending on the circumstances, the employer may approve or deny the request if the employee's services are needed. In this case, the employee must continue to work until the end of the notice period and the employer must compensate the employee for the unused vacation time.
Severance pay
Severance pay is not subject to income tax or social security contributions. Any employee who has worked for the company for 5 years or more and is dismissed with notice is entitled to severance pay. It is paid at the end of the notice period, regardless of whether the employee has worked during that period.
The amount of severance pay depends on the employee's length of service on the last day of the notice period. It is important to note that for companies with fewer than 20 employees, severance pay may be replaced by an extension of the notice period. If the employee has worked both full-time and part-time, the severance pay is calculated in proportion to the different periods.
Severance pay is calculated on the basis of the salary actually paid to the employee in the 12 months preceding the termination. This calculation takes into account sick pay, bonuses, etc., but not bonuses paid, overtime pay, etc.
Thus, if an employer fires an employee who has worked 2 years full-time and 4 years part-time for 10 hours at a salary of 900 euros, the employer can either pay severance pay or opt for extended notice without severance pay.
If you pay a bonus, the calculation is done as follows:
- Calculate your total years of service with the company: 6 years
- From the total length of service, determine the length of full-time service: 1/3
- Determine the duration of part-time work from the total work experience: 2/3
- We take into account that the salary for part-time work is 900 euros for 10 hours per week, so if we consider full-time work, it is 3600 euros for 40 hours per week
- We calculate the benefit taking into account the total length of service of the employee: in case of full-time employment - 1/3 of 3600 euro (1200 Euro) and in case of part-time employment - 2/3 of 900 euro (600 euro).
The total amount of severance pay without 6 years of experience is 1800 euro.
However, the length of service must also be taken into account (download the table below or look on the guichet). The employee has worked for the company for 6 years and is entitled to a payment of one salary: 1800 x 1 = 1800 euros.
If this way is not suitable, the employer can opt for an extended notice period of 5 months, but without severance pay.
Documents
PDF
Severance pay and notice periods based on years of service
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Severance pay and notice periods based on years of service
DownloadHandle the termination of an employee's employment with due professionalism, taking into account the impact on the employee's future career and well-being. Keep all important documents related to the process, including meeting minutes, letters, correspondence, etc. In this way, by complying with legal requirements, you will be able to properly terminate an employee in Luxembourg, minimize legal risks and ensure the transparency of the process for all parties involved.
Frequently Asked Questions (FAQ)
How to give notice to an employee in Luxembourg
This depends on the number of employees in the company. If the company has 150 or more employees, a pre-dismissal interview and a letter of dismissal are required. The letter must state that the employee is being dismissed with notice, details of the notice period, etc. In a company with less than 150 employees, a letter of dismissal is sufficient; in such a company, the employer may conduct an interview, but is not legally obliged to do so.
What is the notice period in Luxembourg
The notice period is a fixed period. It cannot be extended in case of illness, accident or leave. The notice period depends on the employee's seniority at the time the notice is received. If the employee has been with the company for less than 5 years, the notice period is 2 months; if the employee has been with the company for between 5 and 10 years, the notice period is 4 months; if the employee has been with the company for 10 years or more, the notice period is 6 months.
Who is entitled to severance pay in Luxembourg
Severance pay is not subject to income tax or social security contributions. Any employee who has worked for the company for 5 years or more and is dismissed with notice is entitled to severance pay.
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Source: guichet.public.lu, guichet.public.lu
We took photos from these sources: The Jopwell Collection для Unsplash
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