Understanding Collective Agreements and Identifying the One Applicable to Your Company
What Is a Collective Bargaining Agreement and How Does It Become Mandatory?
A collective bargaining agreement (CBA) is a written agreement negotiated between representative trade unions (OGBL, LCGB) and employers’ organisations within a specific economic sector. It establishes a minimum conventional framework that complements and enhances the provisions of the Luxembourg Labour Code, taking into account the needs and specific characteristics of each sector: organisation of working time adapted to operational constraints (continuous-fire factories, fixed office hours, leisure professions working on normally non-working days), sector-specific bonuses reflecting hardship or risk, and pay scales that take into account professional qualifications specific to each trade.
A collective bargaining agreement becomes mandatory for all employers in the relevant sector when it is declared generally binding by Grand-Ducal regulation, in accordance with Article L.164-8 of the Labour Code. This declaration of general binding effect is published in the Official Journal of the Grand Duchy of Luxembourg and makes the agreement applicable to all employers and employees in the targeted economic branch, whether or not they are members of the signatory organisations. Currently, around 55% to 59% of Luxembourg employees are covered by a collective agreement, a rate that varies considerably by sector: close to 100% in the public sector and 87% in health and social care, but only 12% to 21% in Horeca and 38% in retail trade.
How to Determine Whether Your Company Is Subject to a Collective Bargaining Agreement?
Practical case no. 1: Marc runs a construction company
Marc has just set up a SARL specialising in façade renovation. He holds a business permit in the construction sector and employs eight workers. From the very first day of activity, his company automatically falls within the scope of the collective bargaining agreement for construction and civil engineering, which has been declared generally binding. Marc must therefore apply the sector’s minimum pay scales (with classifications B1, C1, D1, E1, F1), comply with mandatory collective holidays in summer (15 working days starting from the last Friday of July) and winter (10 working days plus public holidays), pay the year-end bonus provided for by the agreement (2% of annual gross salary), and grant 28 days of annual leave to his employees (instead of the statutory 26 days).
Practical case no. 2: Sophie manages a restaurant
Sophie operates a gourmet restaurant in Luxembourg City with 12 employees. Contrary to what she might think, the Horeca sector does not currently have a sectoral collective agreement declared generally binding (with the exception of collective catering, which obtained its own agreement in 2024). Sophie is therefore subject only to the provisions of the Labour Code, but must still comply with Horeca-specific rules on working time (greater flexibility, maximum split shifts of two hours, reference periods adapted according to company size). She cannot require her employees to take their annual leave between 15 June and 15 September, which is the peak season in the sector.
Determining the applicable agreement is based on your company’s main activity. If several collective agreements appear applicable within the same company (for example, a company that carries out both cleaning and maintenance), it is necessary to check whether there are clearly separate business divisions. If so, each division applies the agreement corresponding to its activity. If not, the entire company must apply the collective agreement corresponding to its main activity, i.e. the one generating the highest turnover or employment.
Main Sectoral Collective Agreements and Their Practical Specificities
The Construction and Civil Engineering Sector: A Highly Structured Agreement with Mandatory Collective Leave
The collective bargaining agreement for construction and civil engineering covers around 20,000 employees in Luxembourg and is one of the most comprehensive and restrictive agreements for employers. The new agreement negotiated in December 2024 for 2025 introduces several significant improvements. Employees now benefit from 28 days of annual leave (previously 27), i.e. two days more than the statutory minimum. Hourly wages in the B1 career level (skilled workers with at least six years’ experience) were increased by EUR 0.30 per hour as from 1 January 2025.
One of the most striking features of this agreement is the obligation to comply with collective leave at fixed dates. Any construction company operating in Luxembourg must close for 15 working days in summer starting from the last Friday of July (including the public holiday of 15 August), and for 10 working days in winter (plus the public holidays of 25–26 December and 1 January). These holidays are mandatory not only for Luxembourg-based companies, but also for external service providers acting as main contractors or subcontractors. Derogations are possible for urgent works, but must be requested at least two months before the start of the collective leave from the Labour and Mines Inspectorate (ITM), with mandatory copies to the OGBL and LCGB unions.
The agreement also provides for a year-end bonus equivalent to 2% of the annual gross salary, calculated on the basis of hours actually worked (excluding paid leave and public holidays), and paid with the December payroll to employees with at least one year of service. An additional allowance of EUR 0.50 per hour is due for dirty, unhealthy or dangerous work, as well as for the transport of dangerous goods (ADR). Holiday compensation is paid in the form of a salary supplement of 12.21%, which also takes into account paid public holidays. In the event of termination of the contract by the employee, the notice period is only 15 days (compared with a minimum of two months in other sectors), reflecting the tradition of mobility in the construction industry.
Collective Catering: A Recent Agreement Transforming the Catering Sector
After 20 years of discussions and three years of intense negotiations, the collective catering sector finally obtained its first sectoral collective agreement, signed in April 2024 and effective from 1 May 2024 for a three-year period (until 30 April 2027). This agreement applies to all Luxembourg or foreign companies in the collective catering sector operating in the Grand Duchy, including non-profit associations and any organisation with collective catering within its scope. More than 3,000 employees now benefit from improved and harmonised working conditions.
The agreement provides for linear wage increases of 0.8% on 1 January 2025 and 0.7% on 1 January 2026 for all employees earning a monthly gross salary between the social minimum wage for unskilled employees and that for skilled employees. Automatic adjustments are also предусмотрed each time the social minimum wage for unskilled employees is revised by the Luxembourg government, ensuring that sector wages keep pace with the cost of living. Employees with 10 years of continuous service are granted one additional day of leave, recognising loyalty and experience.
One of the most appreciated provisions by employees is the obligation for the employer to provide a free meal during the working day to all employees in the catering sector, provided their working schedule coincides with the start of the lunch break taken in the restaurant and they are employed in a restaurant or kitchen. This benefit applies from the employee’s first day of service and represents a significant benefit in kind. The agreement also allows for the introduction of an annual reference period for working time in structures where activity fluctuates according to seasons or the school calendar (school canteens, company restaurants), enabling better adaptation to operational constraints while ensuring compliance with statutory working time.
Less-Covered Sectors: Retail and Traditional Horeca
The situation is striking: in the retail sector, only 38% of employees are covered by a collective agreement. In traditional Horeca (hotels, restaurants, cafés outside collective catering), the rate is only 12% to 21%. These two of the country’s largest sectors therefore significantly lower the overall collective agreement coverage rate in Luxembourg, which reaches only 53% in the private sector, well below the 80% target set by a European directive.
Practical case no. 3: Claire runs a ready-to-wear boutique
Claire employs five workers in her clothing store located in a shopping centre in Luxembourg. In the absence of an extended sectoral collective agreement in retail, she applies only the provisions of the Labour Code: social minimum wage (skilled or unskilled depending on functions), 26 days of annual leave, and compliance with the statutory 40-hour working week. She has no obligation to pay a year-end bonus (13th month) or specific bonuses, unless she has created a company practice through repeated and unregulated payments. To prevent such a practice from becoming established and enforceable, it is recommended that Claire formalise any bonus practices in writing and clearly inform her employees of their rights.
Practical case no. 4: Thomas manages a hotel-restaurant
Thomas operates a Horeca establishment with 25 employees. Although he is not subject to a sectoral collective agreement, he must comply with Horeca-specific Labour Code rules regarding the organisation of working time. As his company employs between 15 and 49 employees, he may introduce a reference period of up to eight weeks or two months for working time flexibility, allowing him to adapt schedules to activity fluctuations (weekends, tourist seasons, events). He must draw up a Work Organisation Plan (POT) in order to apply this flexibility. Breaks between two working periods may not exceed two hours, unless the employee agrees in writing. He cannot require employees to take their leave between 15 June and 15 September, the peak season in the sector.
Your Concrete Obligations and the Risks of Non-Compliance
Key Obligations for Any Employer Subject to a Collective Agreement
When your company falls within the scope of a collective agreement declared generally binding, several obligations apply immediately, even if you are not a member of the signatory employers’ organisation. The primary obligation is to effectively apply all provisions of the agreement: minimum pay scales according to professional classifications, payment of mandatory bonuses (year-end bonus, hardship bonuses, seniority bonuses), compliance with night work premiums (minimum 15% of remuneration, or more if provided for by the agreement), granting of additional leave days provided by the agreement, and compliance with mandatory collective leave where applicable.
You must explicitly mention the application of the collective agreement in your employees’ employment contracts. This is a mandatory contractual clause. For example: “This employment contract is governed by the Labour Code, as well as by the provisions of the collective bargaining agreement applicable to the company (attached).” It is recommended to provide each new employee with a copy of the collective agreement or, at least, to make it available and inform them that a copy can be obtained upon request. The agreement must also be displayed within the company or made permanently available so that employees can consult their rights at any time.
The principle of favourability is a fundamental rule in collective bargaining matters: in the event of conflict between several standards (Labour Code, collective agreement, individual employment contract, company practice), the provision most favourable to the employee always applies. In practice, this means that if your collective agreement provides for 28 days of annual leave but you have contractually granted 30 days to an employee, you must maintain the 30 days. Conversely, if you previously granted only 26 days (the statutory minimum) and a new agreement enters into force providing for 28 days, you must immediately increase all contracts to at least 28 days.
Practical case no. 5: Jean discovers he must apply a collective agreement
Jean has been running an industrial cleaning company with 15 employees for five years. He has just learned during an ITM inspection that his sector is subject to a generally binding collective agreement that he had not been applying. The consequences are severe: he must immediately regularise the situation by applying the agreement’s pay scales (which are higher than the social minimum wage he had been paying), retroactively pay salary differences and unpaid bonuses since the agreement entered into force (with a 10-year limitation period for wage claims), amend all employment contracts, and faces administrative or even criminal sanctions for non-compliance. The total cost can quickly reach several tens of thousands of euros.
Sanctions for Non-Compliance and How to Check Your Compliance
Failure to comply with a collective agreement declared generally binding exposes the employer to several cumulative sanctions. On the administrative and criminal level, the ITM may identify infringements during inspections and draw up reports forwarded to the Public Prosecutor. Sanctions may include administrative fines or criminal proceedings in the most serious cases or in the event of repeat offences. Labour inspectors particularly verify correct application of pay scales, effective payment of bonuses, compliance with professional classifications, and conformity of working hours.
On the civil level, employees may directly claim application of the collective agreement before the labour courts (Labour Tribunal), without having to prove employer fault: it is sufficient to demonstrate that the company falls within the scope of the agreement and that it is not being applied. Employees may thus obtain retroactive payment of salary differences, unpaid bonuses, compensatory indemnities for leave not granted, together with statutory interest. The limitation period for wage claims is 10 years, which can represent very substantial amounts if non-compliance has lasted for several years.
To verify your compliance, several steps are recommended. Regularly consult the website of the Labour and Mines Inspectorate (ITM), which publishes collective agreements in force and their updates. The Official Journal of the Grand Duchy of Luxembourg also publishes all declarations of general binding effect. Contact your sectoral employers’ organisation (Groupement des Entrepreneurs for construction, FEDIL for industry, HORESCA for Horeca, etc.), which can inform you about applicable agreements. In case of doubt, do not hesitate to consult a chartered accountant specialising in Luxembourg labour law or an employment lawyer.
At PCG, we support Luxembourg employers in identifying the collective agreements applicable to their sector and ensuring compliance with HR practices. We verify correct application of pay scales, calculate mandatory bonuses under collective agreements, adapt your employment contracts and payroll slips, and advise you on sector-specific requirements. Our expertise protects you from costly errors and enables you to manage your collective bargaining obligations with peace of mind.
Conclusion
Sectoral collective bargaining agreements are a cornerstone of Luxembourg labour law and complement the Labour Code by adapting its rules to the specific realities and constraints of each economic sector. Correctly identifying the agreement applicable to your company, understanding its provisions and applying them rigorously are not mere administrative formalities, but legal obligations whose non-compliance can be extremely costly.
Whether you operate in construction with its mandatory collective leave, in collective catering with the obligation to provide a free meal, in retail or Horeca without an extended sectoral agreement but with specific Labour Code rules, each situation requires a precise analysis of your main activity and rigorous application of the applicable rules. The principle of favourability guarantees employees the automatic application of the most advantageous provision, which requires constant vigilance whenever there are changes to collective agreements, legislation or contracts.
Our social department at PCG has in-depth expertise in Luxembourg collective agreements and their frequent developments (annual negotiations, amendments, new declarations of general binding effect). We help you identify your obligations, bring your HR practices into compliance, correctly calculate salaries and bonuses according to professional classifications, and legally secure your personnel management. Do not wait for an ITM inspection or an employee claim to check your compliance: anticipate and protect your company by relying on our experts.
