Temporary re-employment support: How to protect your Income after a dismissal

A sudden company restructuring or an unexpected dismissal can upend a stable career. The immediate concern is almost always financial: how to pay the mortgage and maintain your family's standard of living, especially if the only available new jobs come with a significant pay cut. This is a daunting reality for many professionals across Luxembourg. However, there is a highly effective, yet often overlooked, safety net designed precisely for this scenario: re-employment support (aide temporaire au réemploi).

At its core, this mechanism acts as a financial bridge. Managed by ADEM, it ensures that a worker forced to accept a lower-paying position will continue to receive up to 90% of their former salary. This protection lasts for the first 48 months, offering individuals four crucial years of financial stability while they rebuild their careers.

In practice, the calculation is quite simple. Here is an example of how the State steps in to make up the difference and guarantee your income up to this 90% cap:

• Your former gross salary: €6,000 per month
• The guaranteed 90% cap: €5,400
• Your new salary: €4,500
• Re-employment support pays you: €900 per month (the difference between your new salary and the 90% cap)

However, there are important limits to this safety net. First, for the calculation, your previous salary is capped at a maximum of 350% of the social minimum wage for unskilled workers, and the amount of the financial aid may not exceed half of the gross salary paid by your new employer.

More importantly, the aid is limited to the duration of the employment relationship in the company for which the support was granted. Although the maximum duration of the support is 48 months, it will never exceed your length of service in the company that dismissed you. For example, if you worked there for ten years, you are entitled to the full 48 months. But if you were employed there for only two years before a social plan forced you to leave, the re-employment support will cover you for exactly two years.

You might think this is only for the long-term unemployed, but the support primarily targets two distinct groups. The first concerns employees who have been dismissed. You can apply even if you transition directly from your old job to a new one, provided your departure is strictly linked to the economic situation of the company. To be eligible in this category, you must be in one of the following situations:

• You have left your job of your own volition because the company faces economic difficulties of a structural or cyclical nature.
• You have been dismissed (or are about to be dismissed) for economic reasons.
• You have been dismissed as part of business recovery, reorganisation or restructuring measures.
• You have lost your job because the employer is declared bankrupt or in the event of the employer's physical inability to continue the business or death.

However, there is a major administrative hurdle: in all the cases mentioned above, the personnel of the company in question must have been officially declared eligible for re-employment support by the Minister of Labour and Employment. This decision is made at the request of any interested party (usually through social dialogue channels), and without this official ministerial approval, the support cannot be granted.

ALEBA offers one piece of essential advice for anyone in this situation: simply writing "economic dismissal" on a form will not be enough to guarantee your eligibility. A detailed argument justifying the economic reason is required. Furthermore, if your employer asks you to sign a settlement agreement (transaction) in which you waive your right to ask for the reasons of your dismissal, be extremely careful. Waiving this right can completely disqualify you from receiving this support. Finally, you must have worked legally in Luxembourg under the employment contract during the twenty-four months immediately preceding your departure from the company in question.

The second group eligible for the support concerns jobseekers receiving unemployment benefits. To receive this financial supplement, you must be at least 45 years of age on the day of your new hiring and have been registered with ADEM for at least one month. Crucially, you must have worked in Luxembourg as an employee on a continuous basis without interruption during the 24 months immediately preceding your registration at ADEM. Your new employer must also have declared the vacant position to ADEM prior to hiring you.

To qualify, your new employment contract must offer a certain level of stability. It must be either a permanent employment contract (CDI), a fixed-term contract (CDD) for a minimum of 18 months, or a fixed-term contract to cover for parental leave, with a company that has a fixed establishment in Luxembourg. Good to know: if you meet the conditions for both scenarios (economic dismissal and jobseeker receiving unemployment benefits), the first scenario (economic dismissal) takes precedence. This is an important point because, in the first case, there is no minimum age requirement of 45.

However, the administration is strict. You must submit your application within 3 months of returning to work. Given the frequent delays in occupational medicine, you must submit the file within this timeframe even if it is incomplete. No waiver or extension of this deadline is possible.

There is also a Hiring subsidy given to employers when they hire older unemployed people. In this scheme, the employer's share of social security contributions is reimbursed for a permanent contract (CDI): for 2 years for jobseekers aged at least 45 at the time of hiring, and until retirement age for jobseekers aged at least 50 at the time of hiring. For fixed-term contracts (CDD), contributions are only reimbursed for the duration of the contract. Keeping this in mind can be a powerful negotiation tool during job interviews, making the recruitment of experienced professionals a financially strategic decision for companies.

Navigating a career transition triggered by a dismissal is undeniably stressful, but understanding your rights turns a crisis into a manageable change. Re-employment support ensures that a temporary pay cut will not derail your life. If you believe you are eligible, or if you are currently negotiating a departure following a restructuring, never sign a settlement agreement without consulting your union first. For ALEBA members, our legal and support teams can assess your specific situation and provide detailed advice on your eligibility for this support. To discuss your case, please contact us directly at info@aleba.lu.