Lexicon

Employment & Labor Law

Severance Pay

Severance pay is a sum due, under Luxembourg law conditions, to an employee dismissed with notice who justifies at least five years of service. It is distinct from the salary paid during the notice period and potential compensation for unfair dismissal. An ordinary resignation does not automatically open the same right.

The number of months retained increases with seniority. Verify the date on which this is assessed and the remuneration serving as the calculation base, rather than mechanically multiplying the last net salary. For an employer with fewer than twenty employees, a regime allows choosing, in the dismissal letter, an extended notice instead of paying the severance pay.

In practice, the exit statement must show each item separately. A sum negotiated in addition to legal rights does not necessarily receive the same treatment. Its tax and social regime depends on its nature and applicable conditions: do not announce a general exemption of all departure-related indemnities.

Official Sources

• ITM — Droit à l’indemnité de départ
• ITM — Indemnité de départ et employeurs de moins de vingt salariés