Draft Law No. 8804 extends the external redeployment allowance and fixes an inequality between employers.
In Luxembourg, the external redeployment allowance becomes almost automatic, but reimbursement stays limited to smaller employers.
Background and scope
Draft Law No. 8804 (the Draft Law) has been submitted to the Luxembourg Parliament (Chambre des Députés) on 24 July 2026. It amends Articles L. 551-1 and L. 551-3 of the Labour Code, which govern the external occupational redeployment of employees found unfit for their last position.
The Draft Law follows judgment No. 00195 delivered on 24 October 2025 by the Constitutional Court, referred to it by the Labour Court of Esch-sur-Alzette. The Court held that it breached the constitutional principle of equality before the law for the lump-sum redeployment allowance to be payable, among employers with at least 25 employees, only to those exempted from internal redeployment due to serious hardship, while excluding those exempted because they already met the employment quotas for disabled or redeployed workers set out in Article L. 562-3 of the Labour Code.
To remedy this unequal treatment, the Draft Law goes beyond the specific case decided by the Court and generalises the principle that a lump-sum allowance is payable whenever an employee is the subject of an external redeployment decision by the Joint Redeployment Committee.
A lump-sum allowance that becomes almost automatic
Article L. 551-1 of the Labour Code is supplemented to provide that, upon notification of the external redeployment decision by the Joint Redeployment Committee, the employer must pay the employee a lump-sum allowance that increases with length of service: one month's salary after five years of continuous service, two months after ten years, three months after fifteen years, and four months after twenty years or more.
The allowance is calculated on the basis of the gross salary actually paid to the employee over the twelve months preceding notification of the decision, including ordinary bonuses and supplements but excluding overtime pay, gratuities and expense allowances.
Reimbursement by the Employment Fund limited to smaller employers
A key point for employers: where the lump-sum allowance is payable following an exemption from internal redeployment granted by the Joint Redeployment Committee on grounds of serious hardship, it is only reimbursed by the Employment Fund to employers with a total workforce not exceeding forty-nine employees, assessed as at the date of notification of the decision. For multi-site businesses, headcount is assessed on a site-by-site basis.
It is for the employer to prove that it meets this threshold, and the reimbursement request must be filed, on pain of being time-barred, within six months of notification of the Joint Redeployment Committee's decision.
Mid-sized and larger employers that already meet the employment quotas for disabled or redeployed workers, and were previously excluded from any compensation obligation, will now have to pay this allowance without any possibility of reimbursement.
Exclusions that remain in place
The Draft Law preserves certain exceptions to the obligation to pay a lump-sum allowance: it remains excluded where external redeployment follows the employer's refusal to carry out internal redeployment (a refusal that continues to trigger the compensatory levy owed to the Employment Fund), or where the employee concerned is, at the time the Joint Redeployment Committee is seised, affected by the cessation of the employer's activity or serving a notice period following dismissal or resignation.
The Draft Law also clarifies that payment of the compensatory levy by an employer who refused internal redeployment does not, where applicable, relieve it of its obligation to pay the lump-sum allowance.
Conclusion
This Draft Law, currently before the Council of State for its opinion, implements the consequences of the Constitutional Court's judgment of 24 October 2025 by aligning the treatment of employees subject to external occupational redeployment. Employers with at least 25 employees, particularly those already meeting their employment quotas, should review their budget planning for such situations, as reimbursement by the Employment Fund remains limited to businesses with fewer than fifty employees.
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