Understanding CDI Contracts in Luxembourg: Key Features and Termination

Definition of a permanent contract (CDI)

Before anything else, we must first clarify the meaning of a CDI contract, so let's go to it: an employment contract is an agreement by which a person undertakes to perform an activity on behalf of another under a relationship of subordination in exchange for remuneration.

In this order of ideas, we know that before a worker starts working for an employer, it is then necessary to sign an employment contract that regulates and formalizes the employment relationship between both parties.

The permanent employment contract, as its name indicates, is an employment contract with no expiration date, however, it may be terminated unilaterally at any time at the will of one of the parties, provided that certain conditions are met and the termination procedures are respected.

Prerequisites

It is important to bear in mind that there are two prerequisites an employer must meet before being able to conclude a permanent employment contract in Luxembourg. First, the employer must declare a vacancy to the Employment Development Agency (ADEM), this declaration allows the ADEM to check the availability of job applicants who have priority right to recruitment. Secondly, the employer must give prior notice of the vacancy to employees with fixed-term contracts in his company.

Mandatory information in a permanent contract

In Luxembourg the employment contract must be drawn up at the latest at the time the employee starts working and two copies must be made, one of which is kept by the employer and the other by the employee. In addition, according to Luxembourg law, all employment contracts must contain the following information:

Identity of the parties entering into the contract: both their names and addresses must be included.
Start date: it is necessary to state the exact date on which the worker will start working and in the case of hiring persons coming from a country outside the European Community, who are subject to obtaining a work permit, the start date may be indicated conditionally.
Place of work: the place of work must be indicated precisely, if this is not possible due to the nature of the work, it must be indicated that the worker will work in several places or abroad.
Registered office of the company: the registered office of the company or, if applicable, the employer's place of residence.
Nature of the job: the contract must specify the nature of the job and, if applicable, a description of the functions and tasks assigned to the employee at the time of hiring. In addition, the employer may specify that the employee may be assigned to other tasks.
Duration and working hours: the normal daily or weekly duration of the work as well as the normal working hours must be indicated. At this point, the limits and conditions established by Luxembourg law must be taken into account, the normal working hours for employees are 8 hours per day and 40 hours per week and the maximum working time may not exceed 10 hours per day, nor 48 hours per week. In addition, employers must guarantee their employees rest periods of at least 11 consecutive hours in each 24 hours and 44 consecutive hours in each 7 days.
Base salary and prevailing rate: the base salary at the time of signing the contract as well as the prevailing rate and any additional pay must be indicated. The minimum wages established in Luxembourg must be respected, these are 3,085.11 euros per month for skilled workers and 2,570.93 euros per month for unskilled workers.
Duration of vacation: if it is not possible to specify this value at the time of the conclusion of the contract, the procedures for granting and determining vacation must be indicated. It should be noted that each employee is entitled to a minimum of 26 working days of paid vacation per year.
Duration of notice periods: the notice periods to be observed by the employer and the employee in the event of termination of the contract must be clearly specified.

Additionally, some elements are not always part of the employment relationship and therefore do not always have to be present. However, if these elements are to be part of the employment relationship, they must be added:

Duration of the trial period
Reference to collective bargaining agreements regulating the employee's working conditions.
The existence and nature of a supplementary retirement scheme, the mandatory or optional nature of this scheme, the rights to related benefits and the existence of any personal contributions.
Additional clauses or non-application of the law. These clauses must be favorable to the employee. If they are not, they are considered null and void.

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Trial period

When contracting in Luxembourg, one should remember that any employment contract may include a probationary period. This is a period at the beginning of the employment contract during which both parties can quickly terminate the employment contract and whose purpose is to allow the employee to make sure that the position satisfies him and to allow the employer to evaluate the employee's skills.

The minimum duration is 2 weeks and the maximum duration depends on the worker's level of qualification and salary: 3 months if the worker does not have a level of training equivalent to that of the CATP/DAP, 6 months if his level is equal to or higher than the CATP/DAP, or 12 months if the worker receives a gross monthly salary equal to or higher than 4,938.75 euros according to the index in force.

Conditions for terminating a permanent contract

As mentioned at the beginning the permanent employment contract is an employment contract without an expiration date but a CDI contract termination can occur at any time at the will of one of the parties provided that certain conditions are met and the termination procedures established by law are respected. According to the law, a permanent contract can be terminated in multiple ways:

Employee initiative

All employees have the right to resign without stating a reason but must respect a minimum notice period except in the case of serious misconduct on the part of the employer. This notice must be one month if the employee has been with the company for less than 5 years, 2 months if between 5 and 10 years or 3 months if 10 years or more.

Employer initiative

There are several reasons for which an employer may notify its employees of the termination of an indefinite-term contract and depending on these, specific procedures must be followed.

Dismissal with notice: to proceed with a dismissal with notice the employer must have reasons that justify it, these can be of a personal nature and be related to the dismissed person or be of an economic nature and be related to the operation of the company. The employer is not obliged to specify them in the letter of dismissal but the employee may request them by registered letter within one month from the receipt of the letter of dismissal. In addition, a notice period of 2 months must be observed for employees who have been working for less than 5 years, 4 months for those who have been working for between 5 and 9 years and 6 months for those who have been working for longer.
Dismissal for serious misconduct: the employer may dismiss an employee with immediate effect if the employee has committed misconduct that makes it definitively and immediately impossible to continue the employment relationship.
Collective dismissal: if an employer plans to dismiss at least 7 employees within 30 days or at least 15 employees within 90 days for reasons other than personal reasons, he must resort to the collective dismissal procedure. A dismissal within this framework must follow a specific procedure that includes informing the Agency for Employment Development (ADEM) and the workers' representatives or the workers themselves when the company regularly employs less than 15 people, negotiating a redundancy plan, implementing the redundancy plan and, if applicable, applying for tax exemption on voluntary redundancy payments.

Mutual agreement

Both parties can also terminate their employment relationship by mutual agreement.

FAQ

What is a CDI contract, and how does it differ from a CDD?

A CDI is a permanent employment contract in Luxembourg, designed for roles without a predefined end date. Unlike a CDD, which is fixed-term and typically used for temporary positions, the CDI offers long-term job security and additional rights. A CDD is more restrictive in terms of renewal and duration, while a CDI provides stability for both the employee and employer.

Can a CDI contract be terminated without notice?

Yes, a CDI can be terminated without notice, but only in cases of gross misconduct. Such situations involve serious breaches of the employment relationship, like theft, violence, or severe insubordination. The employer must act quickly to notify the employee of the termination after the misconduct is discovered. In all other cases, a notice period is mandatory.

What are the employee’s rights under a CDI contract?

Employees with a CDI contract enjoy comprehensive rights, including access to the national minimum wage or a higher negotiated salary, paid annual leave (at least 26 days per year), social security coverage, including healthcare, pension, and unemployment benefits, protection against unfair dismissal, particularly for vulnerable groups like pregnant women or union representatives.

Are there restrictions on modifying a CDI contract after it is signed?

Yes, modifications to a CDI require mutual agreement between the employer and the employee. Changes to essential terms, like salary, working hours, or job responsibilities, cannot be imposed unilaterally. Unjustified alterations may result in disputes or claims for constructive dismissal.

CDI Contract in Luxembourg