Directive (EU) 2022/2041 on adequate minimum wages in the European Union (Directive) entered into force on 14 November 2022 (see our Newsflash of 1 December 2022).
Bill of law 8437[1] implementing the Directive (Bill) was introduced into Parliament on 30 August 2024. It aims to align Luxembourg’s national rules with the new European standards without going beyond the bare minimum required to comply with the Directive. Its implementation into national law may nonetheless present some difficulties, particularly as regards the timeframe, as Luxembourg must implement the Directive by 15 November 2024 at the latest.
Below is an overview of the key changes proposed by the Bill:
Scope of application
The Bill’s approach is to implement the Directive solely with regard to “employees” (salariés) within the meaning of the Luxembourg Labour Code (Code du travail). It thus excludes the civil service (fonction publique), where salaries are already considered to be compliant with the minimum requirements of the Directive, even though there is no formalised two-yearly reassessment meeting the requirements of the Directive. Trainees and apprentices are not covered by the Bill either, although they are also within the scope of the Directive in principle.
New criteria for assessing the minimum wage
Luxembourg has had a minimum wage since 1953, which is subject to automatic indexation in accordance with fluctuations in the cost of living. Currently, salaries in Luxembourg could also in theory be indexed downwards, which could be contrary to the Directive, although this scenario has never arisen in practice.
The minimum social wage is reassessed every two years in accordance with Article L. 222-2 (2) of the Labour Code. Although the Directive requires a reassessment to be carried out only every four years, the Bill does not amend the current system of biennial reassessment.
To comply with the Directive, the Bill introduces the following new criteria for revising the minimum social wage:
- the purchasing power of the minimum social wage, taking into account the cost of living;
- the general level of wages and their distribution;
- the growth rate of wages;
- long-term national productivity levels and developments.
To date, the predominant criterion used in reassessments has been the growth rate of wages in general, including in the civil service. It remains to be seen how productivity will be taken into account in the future, both in terms of method and weighting.
New consultative body
To meet the requirements of the Directive, a new consultative body will be created within the Ministry of Labour (Ministère du travail). Its role will be to advise the government on issues linked to statutory minimum wages. The social partners (partenaires sociaux) will be members of this body.
Variation of the minimum social wage and deductions from pay
The Directive limits the variations and deductions that may be applied to the minimum social wage. Despite this, the Bill does not call into question the reduced minimum wage rates for minors, pupils and students.
However, it does repeal a long-standing statutory provision that does not appear to have ever been used and which was therefore obsolete. This provision permitted an undertaking to derogate from the minimum social wage in accordance with its financial capacity and on the basis of a ministerial derogation.
Finally, the Bill does not clarify whether the minimum wage within the meaning of the Directive is to be construed as cash salary, which could potentially restrict deductions for benefits in kind.
Penalties and protection of employees
Luxembourg law already imposes criminal penalties on employers who do not comply with the minimum wage (fines ranging from EUR 251 to EUR 25,000). An employee may also bring an action before the employment courts in order to obtain their legal entitlement and/or recharacterise their resignation as serious misconduct (faute grave) by the employer.
The Bill strengthens the protections against retaliation for employees who exercise their right to obtain the legal minimum wage. It provides that an employer is not permitted to dismiss an employee on the grounds of their entitlement to rights under the minimum wage legislation or their request to benefit from those rights. Any such termination will be void; the employee will have 15 days following the dismissal to apply for it to be declared void. All forms of adverse treatment are also prohibited.
Encouragement of collective bargaining
Under the Directive, Luxembourg is obliged to introduce a national action plan to encourage collective bargaining. This is because Luxembourg’s current collective bargaining agreement coverage rate (of around 50%) is below the 80% target set by the Directive. A reform of the legislation on collective bargaining agreements is currently under discussion but the Bill does not set out anything substantive on this topic. Instead, the Bill restricts itself to a statement in the reasoning (motifs)[2] that the government plans to (i) put in place an action plan which will modernise the collective bargaining agreements legislation whilst adapting it to the modern day realities of the world of work in Luxembourg, and (ii) create a suitable framework for entering into workplace collective bargaining agreements whose main objective will be to improve the national coverage rate. This two-part action plan must be notified to the EU Commission before 1 October 2025.
It should be noted that Denmark has brought an action to annul the entire Directive,[3] or at least the provisions concerning the promotion of collective bargaining aimed at setting wages and the creation of an action plan to promote collective bargaining for countries whose collective bargaining agreement coverage rate is below 80%. The plans to reform collective bargaining in Luxembourg are therefore dependent on the outcome of this action before the Court of Justice of the EU.
[1] Bill of law 8437 amending the Labour Code to implement Directive (EU) 2022/2041 of the European Parliament and of the Council of 19 October 2022 on adequate minimum wages in the European Union.
[2] Submission document (document de dépôt) for bill of law 8437 amending the Labour Code to implement Directive (EU) 2022/2041 of the European Parliament and of the Council of 19 October 2022 on adequate minimum wages in the European Union, page 4.
[3] The action was brought on 18 January 2023, the hearing was scheduled for 17 September 2024.
