Before explaining the main provisions concerning the benefits to employees within the framework of unemployment insurance in Luxembourg, it should be noted that in the event of loss of employment, cross-border workers are covered by the unemployment authorities of their country of residence. (See “What does EU legislation say about unemployment?”)
The following persons who have lost their jobs are eligible for unemployment benefit:
a person who has been employed full time by an employer;
persons who have been employed part-time, provided that they have worked at least 16 hours per week for the same employer (this condition does not apply if a person working part-time has been hired to fill a position that has been partially vacated by another worker eligible for phased early retirement);
employees who were employed by more than one employer, provided that the weekly duration of the job they lost was at least 16 hours and that the remaining monthly income is less than 150% of the minimum social wage (SSM) (see Social parameters).
What are the eligibility requirements?
Unemployment benefit is not automatically granted to persons who lose their job. If such persons seek benefits, they must meet several conditions cumulatively.
Loss of employment requirement
The law requires that the person be involuntarily unemployed, i.e. that the loss of employment occurred beyond their control.
No unemployment compensation is due:
in the event of unjustified abandonment of the last position, unless the abandonment is due to exceptional, valid and convincing reasons
in the event of dismissal for serious reasons
Accordingly, no unemployment compensation is due for resignations or terminations by mutually signed agreements by an employer and an employee. Only those who are dismissed with notice can receive unemployment compensation.
However, in the event of dismissal for serious reasons, resignation due to sexual harassment or serious reasons arising from an employer’s action or fault, the job seeker may, by simple request, ask the Chief Magistrate of the competent Labour Tribunal to authorise a provisional award of full unemployment benefits pending a final judicial decision on the legality or validity of the dismissal or resignation.
To do so, you must be registered as a job seeker and have previously brought the dispute concerning your dismissal or resignation before the competent Labour Tribunal.
The Chief Magistrate of the Labour Tribunal shall issue an order which may be appealed, within 40 days of its notification, to the president of the Court of Appeals. The Chief Magistrate of the Labour Tribunal shall determine the period of time for which the provisional award of unemployment benefit is authorised, up to a maximum of 182 calendar days. Unemployed persons may apply for an extension of provisional unemployment benefits, but the total duration of such an authorisation may not exceed 365 calendar days.
A judgment or ruling declaring the dismissal of an employee to be unfair or justifying the termination of the employment contract by the employee on the grounds of sexual harassment or on serious grounds arising from the employer’s action or fault, shall order the employer to reimburse all unemployment benefits paid to the employee and to the public employment services for foreign persons to the Employment Fund pursuant to Regulation No. 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems for the period(s) covered by the wages or benefits that the employer is obliged to pay pursuant to the judgment or ruling. The same shall apply to a judgment or ruling ordering the employer to pay wages or allowances in the event of failure to observe the period of notice, or in the event of early termination of a fixed-term contract.
The amount of the unemployment benefit that the employer is ordered to repay to the Employment Fund is deducted from the wages or compensation that the employer is ordered to pay to the employee pursuant to the judgment or ruling.
A judgment or ruling declaring an employee’s dismissal justified or an employee’s resignation unjustified on the grounds of sexual harassment or serious reasons arising from the employer’s act or fault shall order the employee to reimburse, all or part of the unemployment benefits paid by way of provision to the Employment Fund, if necessary, in instalments.
An employee may request a partial remission or a staggering of the reimbursement to the State of unemployment benefits received in advance. However, such a reimbursement facility must be expressly requested by the employee and the judge cannot substitute himself for the employee in deciding ex officio on a reduction of the amount to be reimbursed.
In cases of dismissal with notice of an employee, any judgement or ruling declaring the dismissal to be unfair orders employers to reimburse the unemployment benefits paid to employees to the Employment Fund, for the period or periods covered by wages or allowances which the employer is obliged to pay pursuant to the judgement or ruling.
Where an employee’s action for dismissal on serious grounds, resignation on grounds of sexual harassment or serious grounds arising from the employer’s act or fault is not completed due to withdrawal of a petition, the employee is obliged to reimburse unemployment benefits to the Employment Fund. If the withdrawal is the result of a settlement between the employee and the employer, half of the unemployment benefit is to be reimbursed by the employee and half by the employer.
Registration for benefits requirement
In order to receive unemployment benefit in Luxembourg, you must first register as a jobseeker with the National Employment Agency (ADEM) and then apply as soon as possible (within two weeks at the latest) to the ADEM’s Unemployment Benefits Department.
It is not conceivable to provide benefits without registration when the primary objective in the area unemployment is for workers to find a new job as quickly as possible.
The residence requirement
Only those who reside in Luxembourg and who have lost their last job there can receive unemployment benefits.
This means that persons working in Luxembourg but living in France must register for unemployment in France and receive unemployment benefits from that country (see “What does EU unemployment law say?“).
It should be noted that “residence” is not to be confused with “nationality”. It is not only Luxembourgers who can be compensated in case of unemployment, but also foreigners who reside on Luxembourg territory.
With respect to this condition, it should be noted that:
in the case of a permanent employment contract, the condition of residence on Luxembourg territory is assessed at the time of notification of dismissal
in the case of a fixed-term employment relationship, this condition must be met no later than six months before the end of the contract.
Age requirement
Unemployment benefits are paid to those who are at least 16 and not more than 64 years of age (the statutory old-age pension age is 65).
Fitness for work requirement
Generally speaking, anyone who registers with ADEM must be available for work (i.e. not ill) and be willing to accept any suitable job.
The criteria for suitable employment are defined by the Grand Ducal Regulation dated 25 August 1983. These criteria relate to the level of remuneration, professional aptitude, physical and psychological aptitude, daily commute, family situation, working conditions, a possible promise to hire document and working conditions.
The worker must also be fit for work. A person is considered unfit for work if his or her capacity to work is reduced to at least 2/3 of the normal capacity of a worker due to physical or intellectual impairment.
The principle is as follows: the persons concerned must have been employed in Luxembourg, either full-time or part-time, for at least 26 weeks during the 12 months preceding their registration as a job seeker.
This principle is modified in the case of workers who have been incapacitated for work. If the 12-month reference period includes periods of incapacity for work or periods of reduced capacity for work (at least 50%), it is extended by a period equal to that of the incapacity for work or reduced capacity for work. An extension is also provided for if there are periods of custody, military service or unemployment benefits during the 12-month reference period.
Unemployment benefits are intended to provide temporary financial relief to people who are looking for work.
Unemployment benefit is therefore only paid for a certain number of months, with the understanding that certain categories of persons are granted an extension due to their particular situation.
The normal case
Any unemployed person who meets the eligibility requirements may receive unemployment benefit for a maximum of 365 days in any 24-month period.
In other words, if an initial benefit period ends after 365 days, for example, the person concerned is entitled to receive benefits again after a period of 12 months following the end of the first period, if the 26-week probationary period condition is met (see above). The reference period then begins at the end of the first benefit period.
It should be noted that the principle of proportionality for the duration of compensation means that the period of compensation may not exceed the time actually worked under a fixed-term or indefinite contract. For example, a person who is unemployed after a fixed-term contract of six months is entitled to unemployment benefit for a maximum of six months (the maximum benefit period remains 365 days in a reference period of 24 months).
For certain categories of unemployed persons, the duration of benefits may be extended at their request.
These include:
unemployed persons aged 50 or over who have worked for 30 years;
unemployed persons aged 50 or over who have worked for 25 years;
unemployed persons aged 50 or over who have worked for 20 years;
hard-to-place unemployed (i.e. unemployed persons 55 years or older, unemployed persons 50 years or older with a work disability of 15% and unemployed persons with a work disability of 30%).
Unemployed person aged ≥ 50 years having worked for 30 years
+ 12 months
Unemployed person aged ≥ 50 years having worked for 25 years
+ 9 months
Unemployed person aged ≥ 50 years having worked for 20 years
+ 6 months
Hard-to-place unemployed
up to 182 additional days, upon authorization of the Director of ADEM
The entitlement to full unemployment benefits of an unemployed person engaged in work internships and training courses may be maintained for a period of up to six months, starting from the expiry of the entitlement to full unemployment benefits.
The entitlement to full unemployment benefits of an unemployed person assigned to a public service task is extended by a period equal to the actual duration of the assignment to that task.
The right to full unemployment benefits of an unemployed person who has been dismissed by an enterprise and who had partial unemployment benefits for at least six months at the time of dismissal, and of an unemployed person who has lost their job as a result of an employer’s cessation of business, is maintained for a period of not more than six months, starting from the expiry of the right to full unemployment benefits.
The right to the “pro-rated” unemployment benefits in the event of replacement of an employee admitted to progressive early retirement is maintained for the duration of the early retirement of the employee concerned.
When full unemployment benefits are extended, the 24-month reference period is extended by a period equal to the maximum period for which the compensation extension is granted.
Termination of unemployment compensation
Unemployment compensation ceases to be paid in the following cases:
the compensation period ends;
one of the eligibility conditions is no longer met;
a person has reached the age limit of 65;
the person refuses a suitable job without justification;
the person refuses to participate in training courses, courses or work of public utility assigned by ADEM without justification.
It should be noted that there is a penalty for jobseekers who do not comply with the obligation to appear at ADEM offices as required. Failure to comply with this obligation is sanctioned by the loss of the right to benefits for 7 calendar days, or up to 30 calendar days in the event of a repeat offence.
Jobseekers who fail to attend three consecutive appointments lose their right to unemployment benefits for the entire outstanding period of eligibility.
If unemployed persons receiving unemployment benefits fail to comply with the obligations laid down in the cooperation agreement (see below) with ADEM, in particular with regard to the efforts to be made in their active search for a suitable job, the Agency may decide either to temporarily withdraw the unemployment benefits for a period of between five days and three months, or to withdraw it definitively.
The refusal of a suitable job or an active employment measure proposed by ADEM by the unemployed person receiving benefit before it can be refused or full unemployment benefits can be withdrawn, gives rise to contentious proceedings between the placement staff and the jobseeker.
However, it is subject to a double limitation resulting from a limit and from a reduction in the event of gainful employment.
In principle unemployment benefits amount to 80% of an employee’s previous gross salary.
If the unemployed person has one or more dependent children, the rate is increased to 85%.
A special rule is provided for when the employee, having been employed full-time or part-time, registers as a claimant for a part-time job of shorter duration than his or her former job. In this case, the unemployment benefit is adjusted in proportion to the duration of the part-time job applied for.
Example
Mr Martin has just lost his full-time job (40 hours) with the company “Antreprise”, for which he received a gross salary of €2,200 per month. Due to family constraints, he has decided to take on a part-time job of 30 hours per week in the future. He registered as a part-time jobseeker with ADEM. The unemployment benefits he can receive re calculated as follows:
Theoretical compensation for the full-time job he lost: 80% of €2,200 = €1,760 gross per month
The benefit he will ultimately receive as a part-time jobseeker: (€1,760 / 40) x 30 = €1,320 gross per month
Ceilings
While the unemployment benefit is in principle 80% of the previous gross salary, it is capped at a maximum of 2.5 times the SSM (see Social parameters).
The ceiling is reduced as compensation continues. This is known as a degressive ceiling:
after six months of unemployment: the ceiling is reduced to 200% of the SSM
after 12 months: the ceiling is reduced to 150% of the SSM; this concerns unemployed people who can obtain an extension of benefits beyond the 12 months (unemployed people who are difficult to place, unemployed people aged 50 or over who have worked for 30 years, etc.). – see above).
Note: in compensating workers who have been employed part-time or workers who work for several employers, the maximum amounts that can be paid are reduced, taking into account the length of work performed.
Reduction in unemployment benefits
An unemployed person receiving benefits must declare any income from regular or occasional paid employment while receiving benefits to ADEM.
Such income is in principle compatible with unemployment benefits, provided that it does not exceed 10% of the maximum amounts of the reference salary.
In the event of an excess, the portion of income exceeding the 10 % ceiling is deducted from unemployment benefits.
Note: rights acquired under a time savings account are not taken into account for the determining the income concerned.
Example
Mr Schmit, who is single, has been unemployed for two months. Since his previous gross salary was €2,500 per month, he receives 80% of €2,500 = €2,000 as unemployment benefits.
A company offered him office work for a few hours a week. This activity would earn Mr Schmit €400 gross per month. This income has an impact on the unemployment benefit to be paid to Mr Schmit in the future. The calculation is as follows:
allowed income: 10% of €2,500 = €250 difference between the income received and the authorised income: €400 – €250 = €150 unemployment benefit to be paid to Mr Schmit: €2,000 – 150 = €1,850 per month.
In addition, unemployed persons receiving unemployment benefits must declare any other income of any kind to the public employment offices. If this income exceeds the ceiling of 1.5 times the SSM (see Social parameters), the portion of this income exceeding this ceiling will be deducted from full unemployment benefits.
On what basis are benefits calculated?
The amount of unemployment benefits is calculated on the basis of the gross salary actually received by workers during the three months preceding the month of unemployment.
This reference period may be extended up to a maximum of six months if the average base pay during the three-month reference period was significantly lower or higher than the average annual pay received by an employee.
The term “base pay” here refers to the salary itself (or, where applicable, to sick pay) as well as current bonuses and supplements. However, it does not include overtime pay, bonuses or any allowance for incidental expenses incurred.
Please note that if, during the three-month reference period a worker’s salary has been reduced due to partial unemployment or unemployment due to winter weather, this loss is taken into account in determining the amount of unemployment benefits.
Under measures to reduce working hours and wages due to periods of partial unemployment or following measures provided for as part of an employment retention plan approved by the Minister for Employment, the amount of full unemployment benefits is determined on the basis of the gross salary actually earned by unemployed persons during the three months preceding the period of partial unemployment or the acceptance of the measure provided for in the employment retention plan. The same applies to an employee who is using acquired rights from a time savings account for which the amount of full unemployment benefits is determined on the basis of the gross salary actually received during the three months preceding the period in question.
What are the specific conditions of youth unemployment?
Beneficiaries
Young people who are unemployed at the end of their full-time training, are domiciled in Luxembourg and under 21 years of age on the day of their registration as jobseekers, may also receive unemployment benefits without having meet eligibility conditions involving minimum periods of employment – see above.
The age limit is raised to:
23 years of age for unemployed persons with a certificate of education for successfully completing at least five years of secondary or technical secondary education or education recognised as equivalent by the Minister of National Education, when they can prove that they have continued their studies in one or more specialised establishments as part of an uninterrupted full-time course;
25 years of age for unemployed persons with a secondary or technical secondary school diploma or a technician’s diploma, or a diploma or certificate of studies recognized as equivalent by the Minister of National Education, when they can prove that they have continued their studies in one or more higher education university or non-university establishments as part of an uninterrupted full-time course of study lasting less than four years;
28 years of age for unemployed persons who have completed at least four years of uninterrupted full-time education at one or more university or non-university higher education institutions.
These provisions apply:
to a young person who has completed a specified course of study;
to a young person who gives up his or her studies during the course of the training;
to a young person who has already held a job without meeting the period requirements;
young trainees and apprentices who are unemployed at the end of their training, either because of the termination of the traineeship or apprenticeship contract by the employer or by mutual agreement, or because of an interruption of the training in progress.
However, no compensation is payable where unemployment results from unjustified abandonment of a post, dismissal for serious reasons or termination of the apprenticeship or traineeship contract for serious reasons.
Unemployed young people are only exempt from the period requirement if they register as jobseekers within 12 months of completing their training.
The waiting period
For young unemployed persons, unemployment benefits start after 39 weeks of registration as a job seeker.
However, for young people who have completed more than nine years of schooling or who have completed vocational training courses or internships for jobseekers registered with ADEM, this period is reduced to 26 weeks.
Should a person withdraw from studies during the course of a study year, the waiting period does not begin until the end of the school year.
The level of the allowance
The allowance is set at 70% of the SSM (see Social Parameters) that would accrue to a young person with a normal occupation as an unskilled worker.
For teenagers aged 16 or 17 who do not have proof of having passed an apprenticeship examination, the allowance is set at 40% of the SSM.
Cependant, en cas de renonciation aux études au cours d’une année d’études, la période de stage prévue ne prend cours qu’à la fin de l’année scolaire.
Le niveau de l’indemnité
L’indemnité est fixée à 70 % du SSM (voir Paramètres sociaux) qui reviendrait au jeune en cas d’occupation normale comme travailleur non qualifié.
Cependant, pour les adolescents âgés de 16 ou de 17 ans qui ne justifient pas avoir passé avec succès un examen de fin d’apprentissage, l’indemnité est fixée à 40 % du SSM.
A cooperation agreement to be concluded between the National Employment Agency (ADEM) and the job seeker sets out the rights and obligations of both parties during the job search period.
Signing and termination of the agreement
The agreement, which is an integral part of job seekers’ individual integration programmes starting on the day they register with ADEM, is offered as soon as possible after the job seeker’s first meeting with their advisor.
It is extended to young jobseekers under 30 years of age by the end of their third month of registration, and to older jobseekers by the end of their sixth month of registration.
The agreement shall be concluded by the Director of ADEM, or a delegated official, and the jobseekers covered by the agreement, or their legal representative.
The agreement shall take effect as soon as it is concluded. The duration of the agreement is one year from the date of signature, extendable if necessary.
The agreement shall end if the beneficiary of the agreement takes up employment.
If the beneficiary re-enrols with ADEM after a period of no more than six months following the end of the agreement due to taking up employment, a new agreement is offered to the jobseeker, taking over the terms of the old agreement and making specific reference to it, without the need for that person to go through the personalised support service process again.
Content of the agreement
The agreement shall contain a general part detailing the procedures governing the relationship between the two parties, and a specific part focusing on the individual profile and requirements of applicants which sets out their integration or reintegration plan to the extent possible.
The content of the agreement, which specifies the obligations of both the State and the jobseeker, is flexible and can be adapted in the light of changes in the jobseeker’s professional qualifications, employability and requirements of the labour market.
The agreement includes ADEM’s general recommendations to the jobseeker on how to actively seek employment, as well as the assistance ADEM can offer the jobseeker for integration or reintegration into the labour market.
These aids include providing tools for consulting job offers, the use of a structure that hosts, advises, provides and creates interaction between job-seekers and ADEM staff, the publication of the job-seeker’s profile in the press free of charge, and the free use of ADEM services.
The agreement lays down the obligations of jobseekers, which relate in particular to the action to be taken on ADEM’s initiatives and to the jobseekers’ own efforts, to be proven by any legally established means, in their search for work. Job seekers must use all means at their disposal to find a job. They must keep the placement officers informed of any change in their professional situation and of their own efforts.
The agreement shall include a specific section on the jobseeker’s current job search situation at the time the agreement is concluded. In the first phase, which must not exceed two months, particular account shall be taken of jobseekers’ professional aspirations and skills, and of their own initiatives in searching for employment.
In the specific part, account is also taken of any restrictions on rapid integration or reintegration into the labour market. The agreement shall also state the targeted measures offered individually to jobseekers in its specific part to increase their employability in practice. These measures may include job-search or motivation workshops, skills assessments, vocational integration assessments, contacts with social workers, training, language courses, etc.
Penalties
The general part of the agreement shall mention the penalties incurred by jobseekers for failure to comply with their obligations, as well as the remedies available to them.
It should be remembered that if unemployed persons receiving unemployment benefits fail to comply with the obligations laid down in the cooperation agreement, particularly with regard to the efforts to be made to actively seek suitable employment, ADEM may decide either to temporarily withdraw the unemployment benefits for a period of between five days and three months, or to withdraw it definitively.
In the case of jobseekers without benefits who do not comply with the obligations laid down in the cooperation agreement, particularly with regard to their own efforts to actively seek suitable employment, ADEM may suspend the claimant’s file for two months. In the event of a repeat offence, the suspension may be extended to 26 weeks.
The decision of the Director of ADEM may be appealed to a Special Review Board. The decision of this Commission may, in turn, be appealed to the Social Security Arbitration Tribunal. It does not have suspensive effect.
What is the social security situation of the unemployed?
During the period when unemployment benefits are paid, unemployed persons continue to be covered by social security.
Indeed, the legislation clearly states that unemployment benefits are subject to social security charges generally assessed in respect of wages, it being understood that the State assumes those charges paid by employers. This means that contributions for health insurance, pension insurance and the dependency contributions are deducted from unemployment benefits.
There is, however, one particularity: as far as health insurance is concerned, only the contribution rate for health care is taken into account, since unemployed persons are not entitled to cash benefits in the event of illness (sickness benefit).
If an illness occurs during a benefit period, the unemployed persons concerned continue to receive their unemployment benefits.
What does EU law say about unemployment?
The European Union (EU) provisions on the coordination of social security schemes have been in place for almost 40 years. They have been revised, improved and extended many times. They are currently contained in Regulation No 883/2004 of the European Parliament and of the Council dated 29 April 2004 on the coordination of social security systems and Regulation No 987/2009 dated 16 September 2009 laying down the procedure for implementing it.
EU legislation allows all EU citizens, whether employed, self-employed, retired, civil servants, students or non-working, to retain their social benefit rights when moving within the Union.
With regard to unemployment benefits, the competent institution of a Member State shall take account of periods of insurance, employment or self-employment and consider them as if they had been completed under the legislation it applies.
There are two basic principles regarding full unemployment benefits:
Exporting unemployment benefits to another Member State in order to find a job there
Unemployed persons may go to another Member State to look for work while maintaining their entitlement to unemployment benefit for three months. This period may be extended by the competent administrations or institutions up to a maximum of six months. If unemployed persons do not return before the end of this period, they lose all entitlement to benefits.
Entitlement to unemployment benefits for workers who, during their last employment, were resident in a Member State other than the competent State (cross-border workers)
As regards entitlement to unemployment benefits for workers who were resident in a Member State other than the competent State during their last period of employment, European legislation allows unemployed cross-border workers to also make themselves available to the employment services of the last State where they worked.
A person at full unemployment who, during his last activity as an employed or self-employed person, resided in a Member State other than the competent Member State (where he worked) and who continues to reside in the same Member State (or returns to it) registers with the employment services of the State of residence and may, in addition, make himself available to the employment services of the Member State in which he pursued his last activity as an employed or self-employed person.
In this case, unemployed persons are subject to the control organised in their State of residence and comply with the legal dispositions of that State. If they choose to also register as a jobseeker in the Member State where they last exercised an activity as an employed or self-employed person, they must also comply with the obligations applicable in that State.
As regards the payment of compensation to “unemployed cross-border workers”, they receive unemployment benefits from the institution of the place of residence in accordance with the provisions of the legislation of the State of residence, as if they had been subject to that legislation during his last paid or self-employed activity.
This means that cross-border workers who have lost their last job in Luxembourg can use the services offered by ADEM, but not receive unemployment benefits.
However, there is the special case for cross-border workers who, immediately after the end of a full-time employment relationship with an employer in an EU Member State, are employed on a part-time basis by another employer in that same State. This person then has the status of a “partially unemployed” cross-border worker and can obtain any benefits provided in the Member State of employment (Not: the term “partial unemployment” used here, in the sense of European legislation, does not refer to partial unemployment as understood in Luxembourg law, but to the situation of an employee who has lost a full-time job and has found a part-time job).
In specific terms, in order to receive unemployment benefits in the country of residence, cross-border workers must:
send this completed certificate to the ADEM job retention service, which will send a “U1 form”, drawn up on the basis of the certificate, to the competent institution in the country of residence;
consult the administration of the country of residence for further steps.