‘Time savings account’ for Luxembourg private sector workers

In December 2010, draft bill 6234 for the implementation of a ‘time savings account’ in the private sector was approved by Luxembourg’s Council of Government. Although this instrument is already familiar to Luxembourg’s social partners through collective bargaining – notably in the banking sector – its insertion into the country’s labour code will undeniably confer a new dimension to labour relations. The Chamber of Employees has already criticised the move.

How the time savings account will be funded

According to the preamble to draft bill 6234, the time savings account or leave bank is intended to foster a proactive ‘social State’ as well as promote lifelong learning among employees by giving them the opportunity to save paid time – and in some cases, money – in order to finance leave to pursue a personal project or vocational training scheme.

The time savings account will be funded by:

• the portion of annual paid leave which exceeds 20 days if it was not taken within the calendar year;

• the days that correspond to additional rest;

• the portion of salary which exceeds the social minimum wage as defined by the law and is converted into rest period at the request of the employee, provided that it does not exceed 10% of the annual wage;

• overtime performed by the employee and compensated for with an hour and a half’s pay or rest period for every hour of overtime;

• salary supplement for Sunday work converted into rest periods;

• compensatory rest for Sunday work;

• the remuneration and additional salary for effective working hours performed on bank holidays converted into rest periods;

• the salary supplement for night work as provided for by the collective bargaining agreement and converted into rest periods.

The collective bargaining process that governs the time savings plan should be able to deviate from this list. However, the Legislator wants to limit its intervention to the minimum by implementing a framework of guiding principles upon which social partners must build up the operational mechanisms.

Minimalist intervention by the Legislator

At first sight, this position seems to be in line with the stand of the Economic and Social Council (CES) which insisted on the central role of social partners when issues related to the organisation of work are at stake (see the CES advice of 23 July 2004; in French, 472.32Kb PDF).

The CES stated that the implementation of a time savings account should be done through a framework deriving from social dialogue; whether through a national interprofessional agreement applicable to any Luxembourg employer, or a collective bargaining agreement reached at sectoral or company level likely to lead to a generally binding declaration.

However, the Legislator bypassed the principle of an interprofessional agreement reached at national level by introducing the opportunity for the employer to implement the time savings account through an internal regulation, with the requirement for prior notification to be given to the staff delegation as the sole constraint.

To sum up, the employer would have the choice between whether to negotiate a collective bargaining agreement or to design the time savings plan unilaterally through internal regulation.

Criticisms from social partners

The Luxembourg Chamber of Employees (CSL) said that the idea of a time savings account reflects a contemptuous attitude towards social partners and collective bargaining. This is all the more so because the prior notice given to staff representatives (when it is given) would be nothing more than a formal process (see the CSL’s advice of 16 February 2011).

The CSL also questions the proposal to fund the time savings account with a part of the employee’s annual paid leave, which is regarded as being essential for employees’ health and safety at work. Last but not least comes the question of money, and how time saved is valued in when an employee’s wage increases. The Chamber requires that while using the time saved on the time savings account, the employee might be paid as he or she would have kept working normally.

Another significant provision is the obligation for the employer to choose between two options for the management of the rights stemming from the time savings account. The employer would either entrust this task to an insurance firm or, if a collective bargaining agreement allows the employer to manage the accounts itself, it would have an obligation to provide an instrument of insurance or guarantee to protect the employee’s rights from a potential bankruptcy.

Although employer organisations have not yet taken an official stand on this point, it is questionable whether they will welcome a third party in a field which has so far been handled exclusively by bilateral social dialogue. This question is all the more relevant owing to the fact that the employer will be responsible for all the related expenses.

Furthermore, it is not known how existing time savings accounts stemming from sectoral or individual collective bargaining agreements are going to blend into the minimalist but rigid legal framework.

It will be a challenge for the parliamentary process to provide acceptable answers within a reasonable timeframe.

Guy Castegnaro & Ariane Claverie

Castegnaro Cabinet d'avocats, member of Ius Laboris