Applying for early retirement due to corporate restructuring
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Early retirement due to corporate restructuring is a social programme. Employers may resort to its use when winding up a business or to avoid dismissals due to job cuts as part of a restructuring programme, or job transformations further to technological changes.
The law allows for early retirement due to corporate restructuring for businesses that have been declared bankrupt, businesses placed under controlled management, and companies undergoing compulsory liquidation.
Early retirement should not be confused with early old-age pension: old-age pension falls within the scope of pension insurance, while early retirement, limited to a term of 3 years, is a mechanism to prevent unemployment. Early retirement is therefore considered as years of insurance contributions that count toward the old-age pension.
Who is concerned
In certain conditions, if a business closes, or to avoid dismissals due to job cuts as part of a restructuring programme, or job transformations further to technological changes, the employer may apply for approval for their staff to be allowed to take early retirement due to corporate restructuring, through an agreement entered into with the Minister for Employment.
Early retirement due to corporate restructuring, therefore, is reserved for the employees of a business which has been authorised to implement the measure under an agreement between the employer and the Minister of Labour (Ministre du Travail), after consultation with the Economic Committee.
Agreements on early retirement due to corporate restructuring are generally for a period of one year.
However, for businesses which have entered into a job protection plan or redundancy plan, the duration of validity of the individual early retirement agreement may be equal to the period of validity of that plan.
For more information, please contact the Early Retirement Office at the Ministry of Labour (ministère du Travail):
- by phone:
- 247 86 116;
- 247 86 189;
- by fax :
- 247 86 325.
- 247 86 325.
Prerequisites
To qualify for early retirement due to corporate restructuring, the employee must:
- be at least 57 years of age;
- have been employed in the business in question for at least 5 years. If the business has been declared bankrupt or placed in compulsory liquidation, the minimum number of years of employment in the business is reduced to one year;
- be eligible to receive an old-age pension, or an early old-age pension, no later than 3 years after taking early retirement;
- on penalty of losing the right to the early retirement allowance, undertake not to engage in a paid activity which, on a monthly basis, exceeds half the applicable social minimum wage in a calendar year.
Persons in receipt of unemployment benefits paid by ADEM may be eligible for early retirement due to corporate restructuring on condition that their last employer was eligible for the programme and that they lost their job as a result of:
- collective redundancy; or
- dismissal for reasons not related to the individual themselves; or
- bankruptcy on the part of the employer; or
- liquidation of the employer.
Deadlines
An employer applying for approval to implement early retirement due to corporate restructuring is required to file the application with the Minister for Employment no later than 15 days before the Economic Committee meets.
The secretariat of the Economic Committee will investigate the company's eligibility for the early retirement programme.
A copy of the application may be sent directly to the secretariat of the Economic Committee.
Individual applications for approval for early retirement due to corporate restructuring submitted after the signing of the aforementioned agreement must be sent by the employer to the Ministry, preferably before the planned date of early retirement.
How to proceed
Filing an application
To qualify for early retirement due to corporate restructuring, the employee must file an application with their employer.
Along with the application, they must submit their pension entitlement certificate, issued by the National Pension Insurance Fund (Caisse nationale d'assurance pension), stating the dates on which the worker becomes eligible for old-age pension or early old-age pension.
If early retirement is accepted, the end of the normal working relationship is documented in a declaration of departure issued by the employer and sent to the Joint Social Security Centre (Centre commun de la sécurité sociale - CCSS). In this declaration, the employer cites "early retirement" as the reason for the worker's departure.
The employer then needs to register the worker with the CCSS anew as a worker having taken early retirement (new incoming declaration).
Amount of allowance
The monthly allowance for early retirement is calculated on the basis of the gross annual salary (both fixed and variable) which the employee actually received over the course of the 12 months immediately prior to the start of their early retirement benefit.
The following must be included in the reference pay used to calculate the monthly benefit:
- sick pay;
- standard incentives and extras;
- compensatory allowance for internal redeployment;
- Temporary re-employment support (up to 48 months following re-employment);
- loss of earnings by the employee over the reference period owing to partial unemployment or a weather-related layoff, or in the event of an accident or technical issues causing a layoff.
13th-month payments are taken into account at a rate of one twelfth per month.
Bonuses are taken into account at a rate of one twelfth per month, based on the mean amount of payments received over the past 3 years.
Overtime pay and allowances for incidental expenses are not taken into account in this calculation.
The early retirement allowance may not exceed the monthly ceiling for pension insurance contributions (which amounts to 5 times the social minimum wage).
However, the monthly allowance for early retirement is equal to the full unemployment benefit, provided the employee meets the eligibility conditions for early retirement over the period when they are receiving unemployment benefit, in the event of:
- collective redundancy; or
- dismissal for reasons not related to the individual themselves; or
- termination of the working relationship due to the employer's bankruptcy or compulsory liquidation.
The duration of early retirement cannot exceed 3 years, and the payment is spread out over this period with a progressive annual decrease of 5%. Thus, the allowance is equal to:
- 85% of the worker's gross monthly salary for the first 12 months;
- 80% of that amount for the second 12 months;
- for the period remaining until the day the entitlement to the allowance expires, 75% of that amount.
The early retirement allowance must be adjusted to reflect changes in the cost of living, pursuant to the provisions of Article 11, paragraph (1) of the amended law of 22 June 1963 establishing the compensation scheme for civil servants.
The early retirement allowance is paid for no more than 3 years, and in principle, ceases to be paid on the day before the beneficiary's 63rd birthday.
However, if so stipulated in the agreement between the business and the Minister for Employment, the allowance may be extended to the day before the beneficiary's 65th birthday, provided the amount of the early old-age pension does not exceed the minimum amount of a personal pension. Even in that case, though, the early retirement allowance can only be paid for a maximum period of 3 years.
It should be noted that a worker who has applied for and been granted early retirement allowance is no longer entitled to severance pay should the working relationship with their employer come to an end.
Financing of benefits
A business that the Government has deemed to be in a balanced financial and economic position (based on the required opinion of the Economic Committee) is required to contribute to the costs resulting from the payment of early retirement benefit.
The rate of contribution is between 30 and 75% of the amount of early retirement benefit, including the employer's share of the related social charges. This rate may be less than 30 % only if a job-protection scheme authorised by the Minister in charge of Employment is implemented.
Who to contact
-
Ministry of Labour Early Retirement Office
- Address:
- 26, rue Zithe L-2763 Luxembourg Luxembourg
- Phone:
- (+352) 247 86 116
- Phone:
- (+352) 247 86 189
- Fax:
- (+352) 247 86 325
- Email address:
- preretraite@mt.etat.lu
- Website:
- https://mt.gouvernement.lu/en.html
-
Ministry of the Economy Ministry of the Economy - Economic Committee
- Address:
- 19-21, boulevard Royal L-2914 Luxembourg Luxembourg
- Phone:
- (+352) 247 84329
- Fax:
- (+352) 46 04 48
- Email address:
- info@cdc.public.lu
- Website:
- https://meco.gouvernement.lu/en.html
