EMCC European Monitoring Centre on Change

Tackling the recession: Luxembourg

  • Observatory: EMCC
  • Topic:
  • Published on: 12 July 2009

o. Wlodarski

Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

The government, working with the social partners within the tripartite coordination committee, has devised a crisis support plan entitled ‘Combating the effects of the crisis – preparing for the post-crisis period’. It contains a number of measures intended to help companies in difficulty, making particular use of State guarantees for loans. It also introduces a number of adaptations or temporary measures to facilitate access to schemes intended to keep workers in employment, such as short-time working and temporary manpower lending – tools which in most cases already existed before the crisis.

1. Measures taken by government to assist businesses and protect jobs

Support to businesses

What formal or legal arrangements (such as job subsidies, bank guarantees, loans or special credit facilities) are in place in your country for supporting firms which are at risk of having to reduce employment? (Please include only measures which are aimed principally at maintaining employment as opposed to those which are aimed, for example, at increasing competitiveness or supporting investment.)

State guarantee for loans

A bill is currently being drawn up relating to the introduction of a temporary State guarantee scheme in order to rescue companies in difficulty. The State guarantee can be applied to cover the partial repayment (capital and interest) of loans provided by lending bodies to companies in difficulty. Such companies are defined in terms of their inability to put a stop to losses which would, without outside intervention from the authorities, lead to almost certain financial collapse in the short or medium term. The field of application excludes companies which were already in difficulty before 1 July 2008 and those which are subject to monitoring from the Financial Sector Supervisory Commission (CSSF) or from the Insurance Commission (CAA). The competent ministers are responsible for assessing applications on the basis of the structural importance of the company concerned for the national or regional economy or its importance as a driver of national economic development. Moreover, the company must have made prior efforts to obtain other sources of financing or guarantee.

Short-time working

The aim of the short-time working scheme is to give financial assistance to companies experiencing temporary difficulties so that they come through this period without carrying out redundancies (or with limited redundancies). In concrete terms, subsidies may be allocated to employers who, rather than carrying out redundancies due to the recession, undertake to maintain the employment relationship with their personnel and to pay them compensation for lost salary. The compensation, which corresponds to the first 16 hours of lost working time per calendar month, is paid by the employer. The employment fund steps in from the 17th hour of lost working time, paying 80% of the gross hourly pay received by the worker. The amount of time off work under short-time working arrangements may not exceed 50% of the normal monthly hours worked. This measure may be used when all other possibilities within the company have been exhausted:

-reduction of the use of agency-supplied temporary workers

-time off in lieu of overtime

-use of remaining holiday entitlement

-internal redeployment.

Authorisation is granted by the Committee for the Economy (a tripartite body set up within the Ministry for the Economy).

There are various short-time working regimes:

  • Short-time working for economic reasons: There must be economic difficulties in a sector which has been declared to be in a state of crisis by the Government Council. The Committee for the Economy checks the sector’s situation and the company’s individual situation. Moreover, the committee must avoid creating situations of unfair competition. The companies concerned may not make any workers redundant for economic reasons during the period of application of the short-time working scheme.
  • Short-time working due to an economic dependency link: This applies when the applicant company is in a position of serious dependence on one or more companies already benefiting from the short-time working scheme in Luxembourg. The benefits are then the same as in the regime of short-time working for economic reasons. The company concerned may not make any workers redundant for economic reasons during the period of application of the short-time working scheme.
  • Short-time working on structural grounds: This applies to companies facing structural difficulties, to facilitate adaptation and enable them to maintain employment at a satisfactory level. The procedure is the same as for the other short-time working regimes. The Committee for the Economy’s assessment will relate to the company’s individual situation. In this case, the difficulties encountered are not purely due to widespread economic recession.

Article 115.10 of the law on income tax

This measure removes from the scope of income tax the payment of goodwill redundancy payments made in connection with the total or partial closure of a company resulting in mass redundancy, or goodwill severance pay agreed under the terms of a redundancy scheme. The application of this measure is subject to the approval of the Committee for the Economy.

The job retention plan

The purpose of the job retention plan is to manage on an anticipatory basis the effects of restructuring measures being planned by companies. It is intended to help find alternative solutions within a context of social dialogue so that employees under threat of redundancy do not face unemployment.

The job retention plan is determined in the form of an agreement between the social partners. It must be recommended by the Committee for the Economy and approved by the Minister for Work and Employment.

The job retention plan as stipulated in Article L.513-3 (1) of the Labour Code sets out a number of instruments which are intended to make it possible to make changes to the workforce of companies in difficulty while keeping employees in work. The instruments in question are as follows:

  • the application of the legislation on short-time working;
  • possible changes to the number of hours worked, including the use of a longer or shorter reference period;
  • voluntary part-time working;
  • use of time-saving accounts;
  • reductions in the number of working hours which do not fall within the scope of the legislation on short-time working, stipulating where applicable participation in continuing training and/or retraining during working hours which have been freed up;
  • possibilities for training or retraining enabling the redeployment of workers within the company;
  • possibilities for training, continuing training or retraining enabling the redeployment of workers in another company, where applicable within the same business sector;
  • the application of the legislation on temporary manpower loans;
  • personal support for career changes, where applicable involving the use of external experts;
  • application of legislation on early retirement for company restructuring;
  • the period of application of the job retention plan;
  • principles and procedures governing the implementation and monitoring of the job retention plan.

The job retention plan may involve one or more of these instruments, or even integrate other elements which are not specifically listed.

Some instruments are more favourable when they are used within the context of a job retention plan. Thus the level of contribution to the costs of early retirement for company restructuring may be set at below 30% in the context of a job retention plan, whereas otherwise it must be higher than 30%.

Are the arrangements or measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession? Please give an indication of the number of firms receiving support of this kind and the number of jobs protected as well as the source of funding.

Only the first measure mentioned (the State guarantee) is a new one directly linked with the current recession. The other measures were already in place. However, certain of them will be adapted, such as short-time working, which is to be extended (under the law passed on 22 January 2009 (not yet published but applied retroactively as from 1 January 2009))


1) For employees working half-time (less than or equal to 20 hours per week), the employer only pays for the first 8 hours.

2) For 2009 only, the State will pay for the first 16 hours (or the first 8 hours in the case of half-time work) in situations of short-time working on economic grounds, on grounds of economic dependence and circumstances beyond the company’s control, and in cases of short-time working on structural grounds only if an authorised job retention plan has been entered into beforehand.

3) For 2009 only, flexibility has been introduced via a maximum reference period of 12 months. This makes it possible to apply a reference period during which the company can adjust the use of short-time working, including exceeding 50% per employee (NB this measure does not apply to short-time working on structural grounds). The total period of unemployment per employee may not exceed the equivalent of 6 months of lay-off time calculated over a reference period of 12 months.

On 1 January 2009, the eligibility period counter was reset to zero for every company. For example, a company which had already used the short-time working scheme on economic grounds for two months will be able to use this scheme for six months in 2009 (and not just four months).

Moreover, the level of compensation for employees affected by a short-time working measure will be raised from 80% to 90%, provided the employees concerned take part in a training measure during the period of time off work.

Do the measures apply generally across the economy or are they specific to particular sectors or regions? Please indicate the sectors and/or regions concerned.

There is no sectoral or regional criterion.

Is there government support available for companies which introduce short-time working arrangements, give a temporary period of leave to workers or implement similar measures to enable workers to retain their jobs where there is insufficient work for them to do? If so, please give an indication of the extent of the support concerned and the number of companies, and the workers they employ, receiving support.

See the information above. In January 2009, the Committee received 76 demands. 62 were approved. 6.969 workers were concerned by the measure. The cost for the Employment fund was 208.000 € in September 2008. It was evaluated to 9 millions € in 2009. For April 2009, 149 applications were submitted by companies, 119 of which were accepted. In total, these applications related to around 10,000 workers. Of the applications, 100 are regarded as being directly linked to the state of the economy (55 relate to sectors in crisis, while 45 are associated with specific companies in difficulty).

Are there are plans or proposals to introduce measures of the various kinds indicated above in order to assist businesses and protect jobs? If so, please describe them briefly.

See the information above.

Support to workers

What formal or legal measures (such as partial unemployment benefit or similar kinds of social transfer) are in place in your country to support workers who have been put on to short-time working by employers or who have been given temporary leave with reduced rates of pay (i.e. who still formally have jobs but who are either not working or working reduced hours)? Please describe the measures concerned and indicate the scale of support provided. Please also give any figures available for the number of workers receiving payments of this kind as well as the source of funding.

See the information above. The adaptation of the regime of short-time working is estimated to 10,7 millions € by month in the governmental plan against recession.

Are the measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession?

See the information above.

Has the coverage of the social benefit system which provides income support to workers who lose their jobs been widened in the present recession in order to ensure that those concerned are protected (such as, for example, through a relaxation of the rules and regulations governing the payment of unemployment benefits or other forms of social transfer or through an extension to workers not previously entitled to support)?

No changes to unemployment benefits have been made. However, the possibility exists of increasing the compensation in the event of short-time working from 80 to 90%. Moreover, the economic recovery plan stipulates the introduction of a system whereby temporary manpower lending is eligible for reemployment support. In the context of a temporary manpower loan, the employer may face a difference between the actual wage cost it incurs and the reimbursement paid to it by the user company. In order to overcome this obstacle, there are plans to use the reemployment support instrument in order to cover any difference between salary and reimbursement. The reemployment support represents 90% of the most recent salary, up to a limit of 3.5 times the minimum social wage (this was increased by 2% on 1 January 2009 as a measure to boost purchasing power). It may be paid for four years.

Are there any plans or proposals to provide income support for those working short-time or on temporary leave? If so, please describe them briefly.

See information above

2. Action taken by companies to maintain workers in employment

What action, if any, has been taken by companies during the present downturn to keep workers in jobs in situations where the work for them has declined? Please describe briefly cases where companies have introduced short-time working (such as fewer hours per days or fewer days per week), temporary periods of leave or other means of maintaining people in jobs.

No general picture is available of companies’ practices. In the best scenario, companies use the instruments offered by the legal framework.

How extensive has such action been in terms of the number of companies and workers concerned and the sectors in which it has occurred?

The annual report of the Ministry for the Economy indicates that for 2008, the Committee for the Economy received 93 short-time working applications, compared with 38 in 2007. Of the 93 applications, 75 were approved. 60 of the 75 approved applications were submitted in November and December 2008.

In 2008, the Committee for the Economy also approved 17 applications for tax exemption for goodwill redundancy compensation under the terms of Article 115 (10) L.I.R. relating to the eligibility of 357 employees in the companies concerned.

During 2008, the Committee for the Economy also issued 11 formal opinions relating to the legal arrangements for early retirement for company restructuring. 104 employees were affected by early retirement for company restructuring during the period in question.

Have particular types of company (e.g. multinationals or domestically-owned firms) or firms in particular sectors been more prepared to take this kind of action than others?

No information

Has the action in question typically entailed a reduction in pay? If so, please give an indication of the typical extent of this.

No information beyond that provided in part 1 of the questionnaire.

To what extent has this kind of action been accompanied by the provision of training or education to the workers concerned – i.e. how far have companies taken advantage of the lack of work to improve the skills of their work force?

The government’s idea is to get companies and those on short-time working schemes to benefit from the slack period. To encourage training, the economic recovery plan stipulates an increase in short-time working compensation from the current 80% of the salary to 90%. (See information provided earlier.) However, this plan has not been finalised, as numerous questions have not yet been resolved: What types of training? Organised by who (companies, the State, institutes)? Will courses already attended be taken into account? The search for answers to these questions before finalising a scheme is still being undertaken by the authorities. The concern is to integrate as many individual initiatives as possible, though without accepting training courses uncritically. On the side of the trade unions, there are fears that companies may take advantage of the future measure to get technical training courses on the scheme which would resemble normal work but would be paid for at a lower rate by the State (e.g. machine maintenance ‘training’).

3. Joint action taken by companies and trade unions to maintain jobs

How far has the kind of action described in Section 2 above been the subject of collective agreements between companies and trade unions? Please give summary details of the content of some of the most important collective agreements.

The job retention plan (see description in Part 1) and the measures that it contains are defined in all cases during negotiations between the social partners at company level. In the course of 2008, two job retention plans were approved by the Committee for the Economy.

Moreover, on 19 December 2008, the Minister for the Economy and Foreign Trade and the Minister for Work and Employment signed a tripartite agreement with trade union and management representatives at ArcelorMittal setting out measures to prevent redundancies in return for a 2009-2011investment programme. In this context, three further job retention plans were also approved.

To what extent has other action been taken under collective agreements to reduce business operating costs so as to avoid job losses? Has there been an increase in instances of trade unions, or worker representatives, agreeing to accept cuts in pay, or to work longer hours without additional pay, in order to maintain employment levels? If so, please give an indication of the extent of such agreements and describe briefly typical cases.

Some of the measures taken in the context of a job retention plan can in fact have an impact on the salaries of the people concerned, as well as on the company’s costs. But there is nothing in the collective labour agreements which actually stipulates cost-cutting.

Are such agreements more prevalent in some sectors than others?

What other forms of action have trade unions taken, apart from strikes and other action designed to put pressure on employers, in order to try to prevent job losses and maintain employment levels? How effective has such action been?

The trade unions always demand that a job retention plan be negotiated (see details in Part 1)

4. Measures to provide income support

To what extent do collective agreements include provision for higher rates of compensation in the event of workers being made redundant than they are entitled to under national legislation? How far do collective agreements providing more generous compensation than the statutory amount vary between sectors?

No information.

Has there been an increase in the number of collective agreements which include such provision during the present downturn?

No information.

To what extent are redundancies being concentrated on older workers, i.e. taking the form of early retirement, in the present downturn? Is there any evidence that the use of early retirement as a means of effecting reductions in employment has increased in importance during the present downturn?

In 2008, 104 workers were affected by early retirement for company restructuring, compared with just 27 in 2007.

5. Lessons from research studies

Have any studies been undertaken in the past in your country on the effectiveness of attempts made in previous periods of recession to maintain employment levels similar to those covered here? If so, please outline the studies concerned and their main findings.

There are no studies on this subject.

If partial unemployment benefit, short-time working or similar schemes which provide income support to those working short hours are a permanent part of the social security system in your country, please briefly describe any studies which been undertaken on their effects and the main conclusions to emerge from them.

There are no studies on this subject.

o. Wlodarski, Prevent

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