Applying for unemployment benefits when self-employed

SITUATION: CORONAVIRUS / COVID-19

ADEM has simplified their procedure for registration and application for unemployment benefits with ADEM. Workers who lose their job due to the consequences of the COVID-19 pandemic are requested to complete the online form made available on ADEM's website: https://adem.public.lu/en/support/inscription.html.

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SITUATION: CORONAVIRUS / COVID-19

In the context of the COVID-19 crisis, different measures have been implemented in favour of job seekers and businesses having concluded employment reintegration or initiation contracts.

In case of involuntary cessation of the professional activity, the person out of work can, in certain conditions, receive unemployment benefits to compensate for the loss of their main or only source of income. The person concerned thus becomes an unemployed person receiving unemployment benefits.

Social security contributions and taxes are deducted from full unemployment benefits.

Who is concerned

Self-employed persons registered as jobseekers with the National Employment Agency (ADEM) and residing in Luxembourg may, under certain conditions, receive unemployment benefits.

Full unemployment benefits may be claimed by self-employed workers who have had to discontinue their activity:

  • because of economic and financial difficulties;
  • for medical reasons;
  • due to the actions of a third party;
  • for reasons of force majeure.

Self-employed persons with a temporary incapacity for work (sick leave) during the cessation of their activity do not immediately receive unemployment benefits, as they will be paid sickness benefits until their incapacity for work ends.

In case of sickness or maternity during the benefit period, the right to unemployment benefit is unaffected.

Prerequisites

General terms and conditions

In order to be entitled to full unemployment benefit, the self-employed worker must:

  • be resident in Luxembourg at the time of cessation of activity;
  • be aged between 16 and 64 years;
  • be fit for work, available for the labour market and be ready to accept any suitable job (according to criteria of pay, physical and mental fitness, daily commute, family situation, working conditions, etc.);
  • be registered as a jobseeker with the ADEM and file an application for full unemployment benefit;
  • must have been affiliated for at least 2 years with the social security institutions in Luxembourg;
  • have worked as a self-employed person for at least 6 months before filing a claim for compensation with the ADEM.

Additional conditions in the event of an intention to start or take over a business

The unemployed person who wishes to start or take over a business is also subject to specific conditions:

  • he has never held shares in that business;
  • he will hold the majority of the capital following the creation or the takeover of the business.

The application for approval to create or take over a business must be submitted at the latest before the end of the 6th month of unemployment benefits, and must be accompanied by:

  • a business plan;
  • a financing plan;
  • a certificate from the Ministry of the Economy stating that the unemployed person meets the conditions for the issue of a business permit.

Note that the condition of being ready to accept any proposed job is not applicable for a period of 6 months if the job seeker has requested and received ADEM's approval to prepare the creation or takeover of a business.

Preliminary steps

The application for unemployment benefits has to be submitted after the registration as a jobseeker with the National Employment Agency (Agence pour le développement de l'emploi – ADEM).

How to proceed

Filing an application for full unemployment benefits

Once registered as a jobseeker with the ADEM, the applicant must report to the Full Unemployment Benefit Department at the ADEM within 2 weeks.

The relevant agent at ADEM will provide the jobseeker with a number of forms to fill in, in particular:

  • a application form for full unemployment benefits; and
  • a declaration of income.

Supporting documents

Depending on the specific situation of the applicant, they should submit:

  • a detailed explanatory letter on:
    • the reasons for the termination of the activities indicated in the application; and
    • the nature of the business, its name and address;
  • a document proving the cancellation of the ministerial approval (e.g. parental assistant);
  • proof of deregistration from the CCSS;
  • a copy of the constitutional documents / statutes (including the latest amendments);
  • a balance sheet of the previous financial year;
  • a certificate from the CCSS with the contributions paid during the last 2 years (payment certificate);
  • an income certificate from the CCSS for the last 2 years;
  • a CCSS account statement / annual adjustment for the previous year;
  • a copy of the lease contract or of the termination of the lease;
  • a copy of the deed of sale of the business;
  • in the event of termination of the activity for health reasons: a detailed and recent medical certificate;
  • a copy of the bankruptcy judgment or its publication in the newspaper;
  • a copy of the declaration of cessation of payment (bankruptcy);
  • a copy of the bailiff's writ of foreclosure/enforcement;
  • a copy of the cooperation contract and its termination.

Once all the necessary supporting documents have been collected, the relevant ADEM officer will process the application and manage the dossier.

Amount of benefits

In case of admission to full unemployment benefit, a self-employed worker is entitled to:

  • a benefit corresponding to 80 % of the income which, during the past 2 financial years, was used as the contribution base for the pension fund, provided the person has met their obligation for social contribution payments; or
  • 80 % of the social minimum wage for unskilled workers if the person has not fulfilled their obligation to pay social security contributions.

The benefit can amount to 85 % if the unemployed person has one or more dependent children.

In the context of a divorce, neither the establishment of a child's residence with the unemployed person nor child maintenance payments are criteria for being awarded the 85 % rate.

The minimum amount of the benefit is 80 % of the social minimum wage for unskilled workers. It cannot be any higher than 2.5 times the social minimum wage.

That cap is lowered as the benefit continues to be paid over time. Thus, if the duration of unemployment exceeds 182 calendar days in one year, the cap on unemployment benefits is lowered to 2 times the social minimum wage.

Unemployment benefits are adjusted according to changes in the cost of living (index).

However, the former self-employed worker whose unemployment benefit is based on provisional contribution bases while waiting for the establishment of the definitive earned income may, if necessary, request an adjustment of the benefit after recalculation of the definitive social contributions by the CCSS.

Period of benefit entitlement

In principle, the duration of the compensation of the self-employed person is 365 calendar days.

Any unemployed person meeting the conditions for admission may be entitled to benefits for a maximum of 12 months. In certain cases, though, it is possible to obtain an extension by filing an application with the referring guidance counsellor:

  • unemployed person over 50 years of age having worked for 30 years:+ 12 months;
  • unemployed person over 50 years of age having worked for 25 years:+ 9 months;
  • unemployed person over 50 years of age having worked for 20 years:+ 6 months;
  • unemployed person difficult to place in employment (notably those over 55 years of age):+ 6 months;
  • unemployed person having been assigned to internships or courses:+ 6 months;
  • unemployed person having been assigned to public service works: for a period of time which is equal to the effective duration of the public service works carried out during the period of benefit payments;
  • unemployed having completed professionalisation training: if no subsequent recruitment is taking place, the right to full employment benefits is extended for a period corresponding to the effective duration of the professionalisation training.

Compensation will cease to be paid:

  • when the set limits for the duration of payment are reached;
  • when one or more conditions for granting the benefit are no longer fulfilled;
  • when the recipient exceeds the age limit of 65;

The unemployment benefit is suspended if the beneficiary:

  • is receiving an occupational bridging allowance, or;
  • has requested and obtained an exemption from the obligation to report to ADEM for a maximum period of 25 working days.

Requirements

In order to receive unemployment benefits, the unemployed persons in receipt of benefit must:

  • come in person:
    • on the days and times indicated by ADEM's referring guidance counsellor; or
    • at least once a month to the ADEM, if no appointment is scheduled;
  • immediately inform the referring guidance counsellor of any change in their personal status.
Unemployed persons in receipt of benefits may be exempted from going to see their counsellor for a maximum duration of 25 working days a year, which is at a rate of 1/12th per month of registration as a jobseeker. The job seeker in receipt of benefits must request this exemption from the ADEM.

Change of status during the period of unemployment

In specific situations, such as illness, travel abroad, absence for personal reasons, training, or the acceptance of a part-time or temporary job, the unemployed person in receipt of benefit must inform the relevant guidance counsellor at the ADEM, observing the following requirements:

  • in case of incapacity for work: the unemployed person receiving benefits must provide a certificate of incapacity;
  • in case of stay abroad or absence: an application for leave must be signed and validated before the departure;
  • if the unemployed person receiving benefits is in partial or temporary employment: they must provide a copy of the temporary assignment contract;
  • during a training course: the unemployed person receiving benefits must provide the training course registration certificate.

If the period of temporary occupation is between one week and 4 calendar months, the file is put on hold and then reactivated at the end of the temporary period. The jobseeker must inform the guidance counsellor of the temporary position and, whenever possible, provide a copy of the assignment contract.

Sanctions

The director of the ADEM may decide to temporarily or permanently withdraw the full unemployment benefit:

  • if the recipient turns down an appropriate job without a valid reason;
  • if the recipient refuses to take part in internships, courses or public service works assigned by the ADEM without a valid reason;
  • if the unemployed person makes no effort to actively seek an appropriate job.

Moreover, if the unemployed person in receipt of benefit does not present himself at ADEM and has no valid excuse, sanctions can be applied, ranging from 7 days of loss of benefits to 30 days in case of recidivism, and even up to the permanent suspension of unemployment benefits.

If the unemployed person in receipt of benefit has provided false information or misrepresentations in order to receive unemployment benefits, said benefits may have to be repaid to ADEM.

Who to contact

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