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Luxembourg – new rules on calculating sick pay introduced

Written by
CASTEGNARO, your partner in labour and employment law in Luxembourg.
Luxembourg has recently introduced new rules clarifying and simplifying the calculation of sick pay entitlement for employees absent through ill health. The details, and their implications for employers, are set out below.

On 15 April 2018 the Law of 8 April 2018 modifying various provisions of the Labour Code came into force. Among other things, it modifies article L. 121-6 (3) of the Labour Code on the payment of salaries in the event of illness. From now on, employers must follow the rules set out below to calculate what remuneration employees who are on sick leave are entitled to receive.

The new rules draw a distinction between sick employees who are in possession of their working hours for the month covering the sick leave and those that do not.

Employee who know their working hours when they fall sick

If employees who get sick are in possession of their schedule of working hours until at least the end of the calendar month covering the sick leave, the employer must pay the basic salary for the month in question and all standard bonuses and additional current payments, as well as any increases that the employees would be entitled to if they had worked. The majority of employees will fall into this category.

Employee who do not know their working hours when they fall sick

If employees who get sick are not in possession of their work schedule at least until the end of the calendar month covering the sick leave, the employer must pay a daily allowance equivalent to the employee’s average daily salary over the six months immediately before the employee became unwell.

Performance-related, piecework and variable remuneration rules

For employees who are paid according to performance or on a piecework basis, or whose salary is expressed as a percentage of turnover, or is otherwise subject to significant variations, the average salary over the previous 12 months is used as the basis for calculating the daily allowance.

New employee rules

If employees have been at the company for less than 6 or 12 months respectively, the reference period for calculating daily allowances, above, must be reduced to the length of time they have actually been at the company.

Daily allowance calculation

The daily allowance is calculated as follows:

  • The average daily salary is the gross monthly salary divided by 173 hours (or the normal number of hours of work per month as stipulated in the collective agreement or the relevant employment contract), multiplied by the number of hours worked per day.
  • Permanent salary increases introduced by law, an applicable collective agreement or in the employee’s contract that occur during the reference period or during the illness are included in the calculation.
  • Non-periodic benefits, bonuses and performance bonuses, incidental expenses related to work and overtime hours are not included in the calculation.
  • Periods of annual leave, sick leave, short-time working (partial unemployment), inability to work due to bad weather or accidental or involuntary technical unemployment during the 6 or 12-month reference periods should be taken into account in the calculation of the daily allowance in principle, subject to other future clarifications by law.


What do the new rules mean for employers?

These new legal rules mean that most case law on this issue is no longer relevant. Previously, case law indicated that in calculating sick pay, employers had to take into account overtime and overnight work, bank holidays or Sundays (if employees had regularly worked such hours before becoming unable to work due to ill health), over an undefined period of several months, which had to be established in the event of a dispute.

From now on, employers must establish whether employees have received their work schedule before falling ill. If so, employees must be paid as though they had worked according to their predefined timetable on the days they were ill.

If not, they will receive a daily allowance corresponding to their average daily salary for the last six months (if applicable). This will not take into account any overtime worked during this period.

Dorothée David
Head of Knowledge - Luxembourg