Dismissal with notice – Mandatory steps and formal requirements
Dismissal with notice is the standard way to terminate an open-ended employment contract in Luxembourg. Unlike dismissal for gross misconduct, which takes immediate effect, dismissal with notice requires the employer to comply with specific formalities and a notice period whose length varies depending on the employee’s length of service.
The preliminary meeting: mandatory for companies with 150 employees or more
Pursuant to Article L.124-2 of the Luxembourg Labour Code, any company employing at least 150 employees must formally invite the employee to a preliminary meeting before deciding to dismiss them. The invitation must be sent by registered letter or delivered in writing against a duly certified receipt, clearly stating the purpose of the meeting as well as its date, time and place. A copy of this invitation must systematically be sent to the establishment’s main staff delegation where one exists, or failing that to the Labour and Mines Inspectorate (ITM).
The meeting may take place no earlier than the second working business day following the sending of the invitation, so as to give the employee time to prepare their defence. At the meeting, the employee may be assisted by another employee of the company or by a representative of a trade union organisation (but not by a lawyer). The employer may also be assisted. The purpose of the meeting is to inform the employee that dismissal is being considered and to allow them to present their observations before any final decision is taken.
Failure to comply with this preliminary meeting procedure in a company employing 150 employees or more constitutes a formal irregularity that may expose the employer to the payment of an indemnity to the employee of up to one month’s salary. After the meeting, the employer remains free to maintain or withdraw its decision to dismiss the employee.
For companies with fewer than 150 employees, the preliminary meeting is not a legal obligation. The employer may nevertheless choose to organise one voluntarily, but in that case, failure to do so does not constitute an irregularity subject to sanctions.
Notification of dismissal and start of the notice period
Once the decision to dismiss has been taken, the employer must notify the employee by registered letter with acknowledgement of receipt or by hand delivery against signature. In companies that have held a preliminary meeting, this notification must be sent no earlier than the day after the preliminary meeting, and no later than 8 days after it.
The dismissal letter must specify the effective date and the length of the notice period. In Luxembourg, the employer is not required by law to state the reasons for dismissal in the letter itself. However, the employee has the right to obtain the reasons: they may request them in writing within one month of the notification of dismissal. The employer then has one month to respond, setting out the real and serious reasons underlying its decision.
The notice period starts according to strict rules: if the notification of dismissal is made before the 15th of the month, the notice period begins on the 15th of the current month. If the notification is made after the 15th of the month, the notice period begins on the first day of the following month. The length of the notice period depends on the employee’s length of service at the time of notification:
– Less than 5 years’ service: 2 months’ notice
– Between 5 and less than 10 years’ service: 4 months’ notice
– 10 years’ service or more: 6 months’ notice
The notice period is a fixed period and its end date is not extended in the event of illness, accident or leave. The employer may release the employee from working all or part of the notice period, but must then pay the employee their full remuneration and benefits for the entire unworked notice period (excluding expenses incurred by work such as meal or travel allowances).
Severance pay – Precise calculation and employer obligations
In addition to complying with the notice period, an employer who dismisses an employee with notice must also, under certain conditions, pay a severance indemnity. This indemnity is a public-order entitlement provided for by Article L.124-7 of the Labour Code and is fully exempt from income tax and social security contributions.
Conditions for entitlement to severance pay
Severance pay is only due if the employee has completed at least 5 years of continuous service with the same employer by the date the notice period expires (whether or not it is worked). This indemnity is not paid in the following cases:
– Dismissal for gross misconduct (dismissal with immediate effect)
– Resignation by the employee
– Termination of the contract by mutual agreement
– Employee entitled to claim a standard old-age pension
It is important to note that the length of service used to determine entitlement to the severance pay and its amount is assessed at the expiry date of the notice period, not at the date of notification of dismissal. Thus, an employee dismissed with 4 years and 10 months of service but whose 2-month notice period expires after they cross the 5-year threshold is indeed entitled to a severance indemnity of one month’s salary.
Length of service is not calculated solely by reference to the years of service within the company carrying out the dismissal, but also, where applicable, by reference to years of service performed within a group of companies, provided there has been no interruption in the contractual relationship between the employee and the various group entities.
Statutory severance scale based on length of service
The amount of the severance indemnity depends on the employee’s length of service at the expiry date of the notice period:
– Between 5 and less than 10 years: 1 month’s salary
– Between 10 and less than 15 years: 2 months’ salary
– Between 15 and less than 20 years: 3 months’ salary
– Between 20 and less than 25 years: 6 months’ salary
– Between 25 and less than 30 years: 9 months’ salary
– 30 years or more: 12 months’ salary
These amounts are mandatory statutory minima. Any collective agreement or employment contract providing for lower amounts would be null and void. However, collective agreements may provide for more favourable severance terms.
Calculation base for the indemnity
Severance pay is calculated on the basis of the salaries and wages actually paid to the employee during the 12 months immediately preceding the month in which termination is notified (and not the month in which the notice period expires). For example, if dismissal is notified on 13 June 2025 and the notice period expires on 14 October 2025, the indemnity will be calculated on the average salary received between June 2024 and May 2025.
Included in the calculation:
– Basic salary
– Regular bonuses and allowances
– Cash sickness benefits
– Maternity leave benefits
Excluded from the calculation:
– Overtime pay
– Exceptional bonuses/gratuities
– Expense reimbursements (meals, travel, etc.)
– Parental leave allowances
For employees who have worked both full-time and part-time in the same company, the indemnity is calculated proportionally to the periods worked under each arrangement.
The employer must pay the severance indemnity when the employee actually leaves work, i.e. at the expiry of the notice period.
Specific rule for companies with fewer than 20 employees
Employers with fewer than 20 employees have a statutory option: in the dismissal letter, they may choose either to pay the severance indemnity according to the statutory scale or to extend the employee’s notice period. If the employer opts to extend the notice period, the durations become:
– Between 5 and less than 10 years: 3 months’ notice (instead of 4 months + 1 month’s severance)
– Between 10 and less than 15 years: 6 months’ notice (instead of 6 months + 2 months’ severance)
– Between 15 and less than 20 years: 9 months’ notice (instead of 6 months + 3 months’ severance)
– Between 20 and less than 25 years: 12 months’ notice (instead of 6 months + 6 months’ severance)
This option must be expressly stated in the dismissal letter. Failing a clear statement, the employer remains liable for the severance indemnity in addition to the normal notice period.
The 5 mistakes that lead to labour litigation
Despite the apparent clarity of Luxembourg’s dismissal rules, many employers make mistakes that expose them to costly disputes before the Labour Tribunal. Below are the five most frequent and risky mistakes.
Mistake #1: No preliminary meeting in a company with 150 employees or more
As noted above, the preliminary meeting is a legal obligation for companies employing at least 150 employees. Omitting this step, even inadvertently, is a procedural defect that can cost up to one month’s salary as an indemnity to the employee. To determine whether your company reaches this threshold, you must take into account all persons employed across the various companies within a group considered as a single economic and social entity.
How to avoid it: Establish a clear internal dismissal procedure that systematically reminds HR of the preliminary meeting obligation. Document each step precisely: proof of sending the invitation, copy to the staff delegation or the ITM, minutes of the meeting.
Mistake #2: Insufficient, vague or incorrect reasons for dismissal
Even though the employer is not required to state the reasons in the dismissal letter itself, it must be able to communicate them to the employee if requested within one month of notification. The reasons must be real, serious, specific and verifiable. A dismissal based on vague grounds (“loss of trust”, “unsuitability for the role”) without concrete factual elements will be considered unfair by the courts.
Valid grounds for dismissal with notice may include:
– Personal grounds: proven and documented professional inadequacy, medically certified physical unfitness, repeated absences seriously disrupting the business, inappropriate behaviour (provided it can be demonstrated)
– Grounds not inherent to the person: business reorganisation, economic difficulties, position elimination, merger or restructuring
How to avoid it: Build a documented file before launching the dismissal process. In the case of professional inadequacy, gather tangible evidence: prior written warnings, performance reviews, concrete examples of shortcomings. In the case of economic grounds, prepare documents evidencing financial difficulties or the need for reorganisation.
Mistake #3: Dismissal during a legally protected period
Certain categories of employees benefit from special protection against dismissal. Full and substitute staff delegates, equality delegates and health and safety delegates cannot be dismissed, nor even summoned to a preliminary meeting, during their mandate and for the 12 months that follow. Any dismissal procedure initiated during this period would be null and void by operation of law.
Likewise, an employee on sick leave cannot be dismissed during the first 26 weeks of incapacity for work, unless the employer can demonstrate that the dismissal is based on reasons unrelated to the illness (for example, a reorganisation decided before the sick leave). Pregnant employees and employees on parental leave also benefit from enhanced protection: their dismissal is only possible with prior authorisation from the Minister of Labour.
How to avoid it: Before starting any dismissal procedure, systematically verify the employee’s status. Check the register of staff delegates, review recent sickness absences, and ensure no protected situation applies. When in doubt, consult a legal adviser specialised in Luxembourg labour law.
Mistake #4: Incorrect calculation of severance pay and notice
Errors in calculating notice periods and severance pay are frequent, in particular regarding:
– The exact determination of length of service (and the date on which it must be assessed)
– The calculation of the average salary over the last 12 months (elements to include or exclude)
– The notice start date (before or after the 15th of the month)
– Forgetting severance pay where the employee crosses the 5-year threshold during the notice period
Underpaying the amounts due exposes the employer to having to pay the balance with interest, as well as potential damages for the prejudice suffered. Conversely, overpaying out of excessive caution represents an unnecessary cost for the company.
How to avoid it: Use a precise calculation grid and have it checked by your chartered accountant or HR adviser before notifying the dismissal. Pay particular attention to borderline cases (employees close to 5, 10, 15, 20, 25 or 30 years of service). Keep documentation supporting your calculations.
Mistake #5: Failure to comply with deadlines and failure to provide reasons upon the employee’s request
An employer who fails to comply with statutory deadlines is exposed to sanctions. If the employer does not provide the reasons for dismissal within one month of the employee’s written request, the employee may bring a claim before the Labour Tribunal alleging unfair dismissal. Likewise, if the employer does not notify the dismissal within 8 days of the preliminary meeting (in companies with 150 employees or more), it may be ordered to pay an indemnity for a procedural defect.
In addition, the employee has a period of 3 months from notification of dismissal (or from receipt of the reasons if requested) to bring proceedings before the Labour Tribunal and challenge the dismissal. This period may be interrupted by sending a written complaint to the employer, which extends the limitation period for contestation.
How to avoid it: Implement a rigorous deadline tracking system. When an employee requests the reasons, respond within one month by registered letter, setting out the grounds clearly, precisely and factually. Keep a copy of all letters with proof of sending and receipt.
Conclusion
Dismissing an employee in Luxembourg is a legal act with significant consequences that requires a thorough command of Luxembourg labour law. The financial stakes can be substantial: a dismissal found to be unfair may expose the employer to damages that can amount to several months or even years of salary, depending on the prejudice suffered by the employee and their length of service.
Beyond the purely financial aspects, labour litigation also entails costs in time, energy and reputation for the company. This is why it is essential to secure every step of the procedure: strict compliance with the mandatory preliminary meeting for companies with 150 employees or more, compliant written notification, accurate calculation of notice and severance pay, and clear communication of real and serious reasons.
At PCG, our social department supports Luxembourg employers in managing contract terminations, from preparing the file to the final notification. We help you build a robust case, calculate precisely the amounts due, and draft legal documents compliant with the Labour Code. Our expertise protects you from costly mistakes and enables you to manage dismissals with confidence and full legal compliance.
