European Trade Union Institute, ETUI.

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Labour market reforms in Luxembourg: summary

Unlike many European countries, Luxembourg has implemented few labour market reforms in recent years. Although its unemployment rate has increased, especially among older workers, in order to improve the employment situation it has focused not on reforming its labour law but on improving the public employment service and vocational training.

  • In December 2013 the parties forming the new government coalition – the Liberals, the Socialists and the Greens – adopted a coalition programme containing several social projects, notably modernisation of the public employment service (ADEM), implementation of the ‘youth guarantee’ and reform of parental leave. The document also dealt with two highly sensitive issues: the automatic indexation of wages and the flexibility of working time.
  • The government opted to maintain the principle of automatic indexation of wages, pensions, incomes and other payments and sums generally adapted in line with inflation, in spite of the demands by employers’ organisations to put an end to this mechanism, which would make Luxembourg’s businesses less competitive.
  • However, the government reserved the right, if the crisis persisted and after consultation of the social partners, to make adaptations. In other words, it agreed to adjust indexation temporarily between 2012 and 2014. The automatic mechanism was reintroduced for 2015, but as inflation was very low no adjustments were made.
  • An agreement between the government and the employers’ organisations in January 2015 also paved the way for discussions on the flexibility of working time. Nevertheless, during a tripartite meeting of the government and the social partners on 18 February 2016 the parties failed to reach agreement. The employers wanted more flexibility by extending the reference period during which they could adjust working time from one month to four months. This demand was unacceptable to the trade unions, who wanted to see a reduction in working time through the introduction of a sixth week of paid leave.
  • Therefore, on 27 April 2016 the government submitted a proposal to the social partners for consultation. According to this proposal, companies could extend the reference period from one to four months as part of the information and consultation procedure. In return, employees should obtain additional leave, e.g. 3.5 days if the reference period is between three and four months. Moreover, if the reference period exceeds one month, the maximum number of hours worked per month should not exceed by more than 12.5 % the normal number of hours worked (legal or conventional), or 10 % in the case of a reference period of more than three months. Beyond that, the hours worked would be treated as overtime. This legislative proposal has now become law.