Special serie COVID-19 - n°1 Financial support for businesses: focus on short-time work (“chômage partiel”)

In the context of the COVID-19 outbreak, most companies are currently facing unprecedented legal issues within their organisations. As a result, they have to adapt significantly their way of working to go through this unique time in the best possible and efficient manner. In order to assist you in this task, we have identified several hot topics, which we will present in a separate newsletter, to be published over the coming days and weeks, where we will provide you with practical hints to approach the situation efficiently.
This issue will focus on short-time work.
Many businesses are affected by the COVID-19 outbreak, either due to the mandatory closing of all shops and stores deemed as being non-essential for society or further to the confinement measures and teleworking drastically reducing people’s displacements.
The Luxembourg government has decided to take exceptional measures to support companies. In addition to the already existing set of financial assistance, additional measures have been and will still be adopted, from direct financial aid notably to SME’s and independents to the postponement of the deadline to pay certain taxes in order to limit cash flow issues.
As part of these measures, the regime of short-time work (“chômage partiel”) due to a situation of force majeure, has been made easier and adapted to the current crisis.
Which sectors and companies are eligible to short-time work?
Several schemes of short-time work exist, with different eligibility conditions. The current COVID-19 crisis is deemed to be a case of force majeure, allowing companies to apply for the related short-time work scheme.
Such scheme covers the situation where the activity of the company as a whole, or of certain departments, is stopped or significantly reduced due to:

  • supplier of raw materials no being longer able to supply the full volume required as a result of the coronavirus;
  • substantial drop in orders from customers or users as a result of the coronavirus; or
  • staff absences as a result of external decisions linked to the coronavirus.

All sectors of the economy may apply for the short-time work provided the causes invoked are directly related to the coronavirus.
Companies that have had to or still have to cease all or part of their activities following a government decision, such as all shops and stores which are not deemed essential, are exceptionally directly eligible for short-time working, as of the effective date of the government decision.

What are the prerequisites to apply for short-time work?
Short-time work may be used provided the company has first applied own measures and steps to maintain a normal level of occupation in the company. The application form invites applicants to explain the measures that have been implemented, citing among others teleworking arrangement, processional training or individual or collective holidays.
The latter point raises the question as to whether the company may request its employees to take holidays, time-off to compensate excess hours in the framework of a mobile working scheme (“horaire mobile”) or compensation days for overtime. From a strict legal perspective, the employer may not force its employees to take holidays or time-off, except for holidays accrued from previous years, and which would be lost if not taken.
On the other hand, it may be inappropriate for the company, which considers applying for the short-time work, to accept employees’ requests to cancel holidays previously requested and agreed on the ground that they cannot travel as initially planned, if there is no work to do. Likewise, maintaining significant balances of excess hours in the mobile working scheme while placing people on short-time work is not consistent.
In the common interest of preserving employment through these difficult times, employer and employees would be well advised to find a suitable arrangement in this respect, calling on everyone’s sense of responsibility.
Which employees are eligible to short-time work?
Eligible employees are persons with a permanent or fixed-term employment contract, who are fit for work and under the age of 68, who do not receive an old-age or disability pension, who are normally employed at a place of work on Luxembourg territory and who are insured as employees with the Luxembourg social security (cross-border workers are therefore also eligible). Exceptionally in the context of the Covid-19 outbreak, apprentices are also eligible.
The following workers are excluded:

  • Temporary workers
  • Employees on sick leave
  • Employees on notice period
  • Employees benefiting from the special leave for family reasons
  • Employees who are still fully occupied, even if teleworking.

Short-time work may therefore be used as a complement to other measures, such as the special family leave due to coronavirus outbreak, and applied only for those employees who are not fully occupied or not occupied at all and do not fall under another measure.
Are redundancies possible when implementing short-time work?
The purpose of the short-time work scheme is the avoid redundancies. Therefore, the company applying for short-time work must commit not to make employees redundant.
The Labour Code does not specify the period of time during which the company must refrain from dismissing for economic reasons. The application form refers only to the period of implementation of short-time work for circumstances of force majeure, i.e. prohibition of redundancies would only apply for the month of short-time work, extended as the case may be. Redundancies at a time close to a period of the short-time work should however be considered carefully.
Dismissals for individual reasons (i.e. linked to the performance or conduct of the employee) remain nevertheless possible.
What is the procedure and timing for application?
The company must send a written application to the Economic Committee (“Comité de conjoncture”) attached to the Ministry of the Economy. A special form has been issued in relation with the coronavirus outbreak.
Prior to applying for short-time work, the staff delegation, if any, must be informed and consulted, as well as the trade unions having signed the collective labour agreement, if any. The form must be countersigned by the president of the staff delegation (or its representative) or by all the employees concerned for companies that do not have a staff delegation.
The usual statutory deadline is waived for applications in relation with the coronavirus outbreak. Therefore, there is no deadline for making an initial application. The authorization granted only covers one month of short-time work.  Consequently, after the initial application, a new one shall be made, if necessary, according to the normal deadline, i.e. no later than the 12th of the month preceding the month for which short-time work is requested.
It is also worthwhile noting that the company may file a first application as a precautionary measure to anticipate a reduction in its activity, even if it still unsure whether it will occur and to what extent. If eventually employees have been fully occupied during the given month, the Employment Administration (“Agence pour le Développement de l’Emploi - ADEM”) should simply be informed, without any other consequence.
The specific form can be found under the following links (in French language only):
How are employees compensated during short-time work?
If the company’s application is approved, employees shall be entitled to receive, for the hours not worked, a compensation indemnity amounting to 80% of their normal salary, with a maximum of 2.5 times the minimum social wage for an unskilled employee (i.e. max. EUR 5,354.98 at the 834.76 index applicable as from 1st January 2020). The indemnity is paid by the employer and reimbursed by the Employment Fund (“Fonds pour l'Emploi”).
For businesses concerned by a mandatory closure imposed by the Government, an online system for claiming reimbursement for the hours unemployed is currently being developed and will be available in the coming days on the ADEM website.
Short-time work is limited to 1,022 hours per year and per employee.
What if the difficulties are not resolved after the end of the confinement?
If despite the measures that have been adopted, the company experiences serious difficulties, it may be necessary to initiate discussions with the staff representatives regarding the implementation of an employment safeguarding plan (“plan de maintien dans l’emploi”).
Such plan allows combining various instruments designed to adapt the workforce while keeping jobs. It may include, but are not limited to, the following measures: reduction in the number of the temporary staff or fixed-term contracts, short-time working (as the case may be under a different scheme than that for force majeure), adjustments of working hours, early retirement, support for career changes, job sharing, etc.
In case the negotiations are successful, the employment safeguarding plan must be recorded in a signed agreement approved by the social partners (and by trade unions that represent the sector at national level if the business is covered by a collective agreement). The plan must be communicated to the Economic Committee and approved by the Ministry of Labour and Employment so that the business can benefit from certain additional advantages (reimbursements and subsidies in various situations).