Luxembourg

The rules on severance pay in detail

In the case of dismissal with notice (i.e. not with immediate effect for serious misconduct) the duration of the notice period depends on the employee’s length of service with the employer:

Length of service Notice required
Less than 5 years 2 months
5 to 9 years 4 months
10 years or more 6 months

 

During the notice period, the employee is entitled to full salary, even if released from working by the employer during this period. The employer must also continue to provide all benefits that the employee would have received if they had worked, including bonuses if these are not discretionary, commission, company car (if the employee was also entitled to use it for private purposes), and so forth.

The right to a severance payment and the amount of it depends on the type of dismissal and the length of service of the employee with the employer. Employees are only entitled to a severance payment if dismissed with notice (i.e. not with immediate effect for serious misconduct), after at least five years’ service with the employer:

Length of service Severance pay
Less than 5 years No severance pay
5 to 9 years 1  month's gross salary
10 to14 years   2  months’ gross salary
15 to 19 years 3  months’ gross salary
20 to 24 years  6 months’ gross salary
25 to 29 years 9 months’ gross salary
30 years and more 12 months’ gross salary

 

  • The notice period must be taken into consideration when determining the employee’s length of service.  
  • Severance pay is calculated based on the gross salary actually received by the employee during the last 12 months prior to the month in which notification of termination is given.  
  • The amount becomes payable when the employee actually leaves the employer.
  • Employees who have been granted pre-retirement pension are not entitled to severance pay. 
  • Severance pay is generally tax-exempted and not subject to social security contributions.
  • Employers with fewer than 20 employees in Luxembourg may choose to extend the notice period in the dismissal letter instead of paying severance. 
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Author: CASTEGNARO

Date: December 2018

 

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