Factors influencing type of employment contract

The Living in Luxembourg socioeconomic panel survey, which is carried out annually on a representative sample of residents in Luxembourg, identifies the links between the type of employment contract (open-ended or fixed-term) and factors such as age, professional experience, educational background, economic sector and size of company. Although, in overall terms, most workers resident in Luxembourg are on open-ended contracts, there is considerable variation regarding access to the two types of contract.

The annual Living in Luxembourg socioeconomic panel (Panel Socio-Économique Liewen zu Lëtzebuerg, PSELL-3) survey has revealed that some 89% of employees resident in Luxembourg work on an open-ended employment contract (see below for further details about the survey). This high proportion of open-ended contracts in the labour market is due to the fact that this form of employment is the default employment relationship in Luxembourg. Fixed-term contracts are reserved for temporary work, such as replacements, seasonal work, and urgent or casual work. Thus, only 8% of employees state that they work under a fixed-term contract, while the remaining 3% report other forms of contract or even the absence of any contract.

It should be noted that fixed-term contracts may also be linked to measures arising from employment policy, for example, the contrat d’auxiliaire temporaire, a contract for jobseekers aged under 30 years which cannot be signed for more than one year. The employer is reimbursed 50% of the salary, which corresponds to the minimum wage. Another example of a fixed-term contract is the stage d’insertion, a training period for jobseekers aged under 30 years and with a maximum one year duration; the trainee is paid 80% of the minimum wage, and the employer is again reimbursed 50% of the cost.

Contract type and working hours

More workers on a fixed-term employment contract work part time – 22% compared with 15% of workers on an open-ended contract – which explains why the average number of hours worked a week is slightly higher for open-ended contracts than for fixed-term contracts. In addition, one out of three workers employed on an open-ended contract state that they work overtime, compared with only one out of six workers on a fixed-term contract. As a result, a higher proportion of workers who have an open-ended employment contract (10%) report that they exceed the maximum legal limit of 48 hours a week, compared with 4% of those on fixed-term contracts.

Conversely, only 15% of those on open-ended contracts work less than 30 hours a week, compared with 26% of those with fixed-term contracts. A total of nine out of 10 employees in this situation are women. The survey shows that one out of 10 employees working less than 30 hours a week would like to work more, but cannot find a suitable second job, while one in 30 employees are in this situation for health reasons. Just under one in two employees have chosen part-time work in order to be able to care for children or other people.

Influence of company size and sector

Proportionally fewer employees on open-ended contracts are found in small and medium-sized enterprises (SMEs) – that is, companies with fewer than 50 workers – than in large companies: 86% of employees in SMEs are on open-ended contracts, compared with 93% of those in larger companies. Women are more likely to work in small companies than men are: one in three women are employed in a company with 10 workers or fewer, while only one in six men are in this situation.

Of those sectors employing at least 5% of all employees, the health and social work sector is the one least inclined to use open-ended contracts, while by contrast the transport and communications, construction and financial services sectors employ a very high proportion of staff on such contracts, at 99%, 95% and 94% respectively.

Impact of age and qualifications

Age, the level of qualification and work experience are also factors influencing the type of employment contract. Some 59% of workers under the age of 25 years have open-ended employment contracts, compared with 92% of their older colleagues. Similarly, it turns out that only 40% of employees with less than two years of professional experience have an open-ended contract, compared with 92% of those with more than two years’ experience. A total of 95% of employees with substantial professional experience (at least 30 years) work on open-ended contracts and only 2% of these workers have a fixed-term contract. Incidentally, more men than women have accumulated such experience: 26% of men, compared with 12% of women.

Educational background also appears to be a discriminating factor, since 84% of employees whose education does not go beyond lower secondary level work on open-ended contracts, while 92% of workers who have at least obtained a diploma of higher secondary education hold this form of contract.

Proportion of open-ended contracts, by work experience and education (%)
The majority of workers resident in Luxembourg work under open-ended contracts. However, the lower their level of schooling, and the fewer years of experience they have, the less likely they are to have an open-ended contract.
  Work experience (in years)
Education Up to 2 years 3–29 years 30 years or more All experience combined
Lower secondary or below 24 85 93 84
Higher secondary 45 93 97 92
Post-secondary 53 93 95
All levels combined 40 91 95 89

Source: CEPS/INSTEAD, STATEC, PSELL-3/2004

About the survey

The PSELL-3 survey was launched in 2003 among a representative sample of the population living in Luxembourg, covering 3,500 households amounting to 9,500 individuals. The survey, which addresses a large variety of aspects of living conditions (LU0702029I, LU0702019I), is carried out annually and the data are gradually analysed over the following years. This initiative is part of the statistical programme of the EU Survey on Income and Living Conditions (EU-SILC), and is jointly conducted by the Centre for Population, Poverty and Socioeconomic Policy Studies (Centre d’Études de Populations, de Pauvreté et de Politiques Socio-Économiques)/International Networks for Studies in Technology, Environment, Alternatives, Development (CEPS/Instead) and the National Service for Statistics and Economic Studies in Luxembourg (Service central de la statistique et des études économiques, STATEC).

Odette Wlodarski, Prevent

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