Termination of Employment Contracts in Luxembourg

1. Termination of employment contracts

  • Mutual agreement
  • Resignation by the employee
  • Dismissal during trial period
  • Dismissal with notice for real and serious cause based on the employee’s attitude
  • Dismissal for gross misconduct (faute grave)
  • Redundancy
  • Closure of business
  • Retirement
  • Employee’s work incapacity
  • Death of one party to the contract

2. Collective Dismissals

The collective redundancy procedure must be applied by an employer who intends to dismiss, for reasons that have nothing to do with the employee’s attitude at work, at least 7 employees over a period of 30 days or at least 15 employees over a period of 90 days.

3. Individual Dismissals

(i) Dismissal with notice

A preliminary interview to discuss the reasons for the planned dismissal with the employee is required for employers who employ 150 persons or more. This invitation has to be sent to the employee by registered mail or handed to him together with an acknowledgement of receipt.

The length of the notice period depends on the employee’s length of service, from 2 to 6 months of notice for the employer and half of the period for the employee.

(ii) Dismissal with immediate effect

The employer may terminate the employment contract with immediate effect if the employee’s actions or behaviour qualify as gross misconduct (faute grave).

a. Is severance pay required?

Employers must pay a legal severance indemnity to any employee dismissed with notice with at least 5 years of service in the company. Entitlement to severance pay depends on the employee’s length of continuous service with the same employer. The severance pay for employees who have received a notice of dismissal can amount to a maximum of one year’s salary. This payment becomes due when the notice period expires. The severance pay is not applicable in case of termination for gross misconduct.

4. Separation Agreements

a. Is a Separation Agreement required or considered best practice?

A lot of settlement agreements are concluded in Luxembourg in order to avoid a court claim. The settlement agreement shall serve to create a secure legal basis between the parties in terms of their claims.

b. What are the standard provisions of a Separation Agreement?

The standard provisions are that settlement agreements are to be concluded in writing and to reach an agreement with mutual concessions made by each party. The mutual concessions should be detailed comprehensively and precisely.

c. Does the age of the employee make a difference?

No, all employees may conclude a settlement agreement irrespective of their age.

d. Are there additional provisions to consider?

No, any other provisions are normally freely negotiable and included by mutual consent between the employer and the employee.

5. Remedies for employee seeking to challenge wrongful termination

If an employee considers his termination as unfair, he can introduce a claim for moral and material damages to cover the financial loss he suffered with the Luxembourg labour courts.

For more information on these articles or any other issues involving labour and employment matters in Luxembourg, please contact Christian Jungers, Partner at KLEYR | GRASSO ( at
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