The rules on severance pay in detail

An employee is entitled to severance pay only if dismissed with notice (i.e. not with immediate effect for serious misconduct). Severance pay is 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. It is calculated as follows:

Length of service Notice required

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 following principles apply to the calculation and payment of severance pay:

  • The notice period must be taken into consideration when determining the employee’s length of service.  
  • The amount becomes payable when the employee actually leaves the employer.
  • Employees who have been granted a 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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Date: December 2019