Collective bargaining in Luxembourg

Collective agreements must be negotiated between the social partners in accordance with certain formalities and filed with the ITM for approval by the Minister of Labour. There are two types of collective agreements:

• standard collective agreements negotiated between an employer or a group of businesses (or their representatives) and a trade union, which are legally binding between signatories

• collective agreements extended by a grand-ducal regulation and applicable to all employers and employees of the profession concerned

• The most important levels of negotiation are sectoral and company levels. The relative importance of the two levels of agreement varies from sector to sector. Sectoral agreements exist in sectors such as banking, insurance, private security, construction and all related crafts, and the hospital and social sector. These single-industry agreements cover 100% of the workforce and are extended by the Ministry of Labour. However, many sectors have no industry-level agreements. In 2018, 59% of all employees had their terms and conditions of employment regulated by collective bargaining (Statec, 2022a), which is quite high despite the high level of decentralisation of collective bargaining and the weakness of collective bargaining in some sectors. Unless stipulated otherwise in the collective agreement, senior management are not subject to the working and salary conditions established in the collective agreement that applies to the staff. Employees whose salary is significantly higher than the salaries paid to the staff covered by the collective agreement are considered to be senior management. This salary has to be related to authoritative and effective management powers, independence in the organisation of work and flexibility in working hours.

There is no national collective bargaining on wages. However, there is a mechanism for wage indexation. Salaries and wages (including the minimum wage) are adjusted in line with the cost of living. When the consumer price index increases or decreases by 2.5% during the previous quarter, salaries are automatically adjusted by the same proportion. The consumer price index and its impact on the sliding wage scale are published monthly by the national statistics body (the National Institute for Statistics and Economic Studies (Statec)). The employer must increase all wages by 2.5%. Sectoral collective agreements may include salary rates linked to pay grade and a coefficient. At company level, collective agreements on wages are often concluded for 12 to 24 months.

Collective wage bargaining coverage of employees

Sources: Eurofound, European Company Survey 2013/2019 (including private sector companies with establishments with more than 10 employees (NACE codes B–S), the question in the survey was a multiple choice question and multiple responses were possible); Eurostat [earn_ses10_01], [earn_ses14_01], [earn_ses18_01] (including companies with more than 10 employees (NACE codes B–S, excluding O), with a single answer for each local unit); OECD and AIAS, 2021; Statec, 2019.

The latest national data about collective bargaining coverage are based on the EU Structure of Earnings Survey 2018. Based on this survey, Statec estimates that 59% of employees are covered by a collective labour agreement. According to Statec (2022a), a large difference exists between the public sector (100%), education (92%) and social and care activities (75%), and some activities in the private service sector, such as retail (38%), hotel and restaurant activities (21%) and technical and scientific activities (14%). The coverage differs with the size of the company, from 30% (for companies with 10 to 49 employees) to 79% (for companies with over 1,000 employees). The global rate based on the Structure of Earnings Survey includes the public sector. If public sector employees are excluded, the collective bargaining coverage rate stands at 53% in Luxembourg (Statec, 2022a).

Intersectoral agreements are rare and never cover issues such as wages or working time. They mainly implement EU-wide agreements concluded by the social partners, for example on telework or harassment in the workplace.

The most important levels of negotiation are the sectoral and company levels. Sector-level agreements initially apply only to companies that belong to the employer organisations that have signed the agreement, but are often extended by the government to the entire sector. The relative importance of the two levels of agreement varies from sector to sector. Sectoral agreements exist, for example, in sectors such as banking, insurance and private security. However, many sectors have no industry-level agreements.

Levels of collective bargaining, 2022

Articulation

The issue of articulation is quite theoretical in Luxembourg, as where a sectoral collective agreement exists it is extremely rare to find a company with its own company-level collective agreement. Therefore, collective agreements at both levels rarely have to be coordinated. However, if the two levels of collective agreement exist, the principle of favourability towards higher-level agreements applies. Company-level agreements cannot provide poorer employment and wage conditions than sector-level agreements. If collective agreement provisions are worse than the legal minimum requirements, or limit rights provided by a sector-level agreement, they are declared null and void and have no effect.

There are no major bargaining rounds at national level. Collective bargaining on wages exists in some sectors and at company level over various periods. In the banking sector and insurance sector, the social partners generally conclude collective agreements for a period of three years. At company level, collective agreements on wages are often concluded for shorter periods (the law provides that the minimum duration of an agreement is six months and the maximum is three years).

The most important form of wage coordination is the wage indexation mechanism. In April 2006, the social partners and the government decided in the Tripartite Coordination Committee to modulate the application of the wage indexation mechanism for 2006–2009. The modulation postponed the periodic adjustment of wage levels in line with inflation by up to seven months. This was justified by concerns over economic competitiveness following the rapid increase in oil prices. During this period, wages increased by less than general prices. However, wages are normally indexed to changes in the cost of living. Therefore, when the consumer price index falls or rises, they are in principle adjusted in the same proportion. The aim is to preserve the purchasing power of employees. Other than that, there is no coordination of wage bargaining, either between or within bargaining levels.

Sectoral collective agreements initially cover only those companies that belong to the employer organisations that have signed the agreement. However, the social partners at sectoral level nearly always ask the government to extend them to the entire sector. In 2022, two sectoral agreements were declared to be of ‘general obligation’ by the Ministry of Labour and Employment. There are no other voluntary mechanisms of extension or application of the terms of collective agreements.

There is no possibility of derogating from collective agreements in order to pay wages below the collectively agreed level. Derogation is possible only to pay wages above the collectively agreed level. Furthermore, according to the favourability principle, collective agreements must comply with the provisions set out in law.

In order to denounce a collective agreement (always concluded for a fixed term), in part or as a whole, the social partners must request its termination with respect to the notice period established in the collective agreement (a maximum of three months). Then, parties must open new negotiations, which must in any case begin at the latest six weeks before the agreement or the provisions to be renegotiated come to term. The terminated collective agreement stops being valid as soon as a new agreement enters into force or, at the latest, on the first day of the 12th month following the termination request, but the social partners may agree on a new expiry date. If there is no request for the termination of the collective agreement (or some of its provisions) before its end date, it is extended for an undetermined period. It may subsequently be terminated while respecting the notice period set out in the agreement.

According to Article L. 162-11 of the Labour Code, during the period of validity of the collective agreement, the contracting parties must refrain from taking any actions that may potentially compromise their compliance with the agreement. They must also refrain from taking part in any strike or lockout on a subject regulated by the collective agreement.