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Ending an employment contract does not always involve resignation or dismissal. In Luxembourg, employers and employees may also decide to part ways together through a mutual termination agreement.
Here is what this means in practice, along with your rights, your obligations, and the key points to watch out for.
You wish to leave your position without resigning
A mutual termination agreement enables an employee to leave without having to submit a formal resignation. It is a negotiated termination, decided jointly by the employer and the employee. It can be agreed at any time, including during sick leave or pregnancy, and requires neither misconduct nor any specific reason.
Note: This arrangement requires the free and informed consent of both parties and cannot be imposed on either party.
You are an employer wishing to end the contract without dismissing
For employers, this procedure avoids the constraints associated with dismissal:
- No obligation to justify a genuine and serious reason;
- No formal dismissal procedure;
- No statutory notice period to observe (unless otherwise agreed).
Once again, the agreement must be freely consented to. Any pressure or coercion could lead to a dispute.
Formalisation, notice, compensation and rights
Although the law does not require any specific form, a written agreement is essential in practice. The agreement should specify in particular:
- the identity of both parties;
- the mutual intention to terminate the contract;
- the end date of the employment relationship;
- any negotiated compensation or benefits;
- the terms for payment of the final settlement.
Once signed, the agreement definitively ends the contract on the agreed date.
In the event of a dispute, the absence of a written document may result in reclassification (as dismissal or resignation).
Unlike dismissal or resignation, no statutory notice period is required. The contract end date is freely determined in the agreement. An “amicable” notice period may nevertheless be provided if the parties so wish. Everything therefore depends on what is negotiated and set out in writing.
Similarly, there is no statutory severance pay. However, compensation may be freely negotiated with the employer, particularly to offset the absence of notice, a loss of income, or specific circumstances (reorganisation, conflict, return from leave, etc.). Once again, it is a matter of negotiation!
Despite this flexibility, certain rights remain guaranteed:
- Payment for untaken leave;
- An employment certificate;
- The documents required for ADEM;
- Payment of salary up to the contract end date.
What about unemployment benefits?
This is one of the most important aspects to anticipate.
A mutual termination agreement is, in principle, regarded as a voluntary termination of the contract. The employee therefore does not automatically qualify for unemployment benefits, and a waiting period may be applied by ADEM. Each situation is, however, assessed individually.
Be careful: if eligibility for unemployment benefits is an issue for you, contact ADEM before signing.
A mutual termination agreement is a flexible solution for ending an employment contract without conflict. It can be particularly attractive when both parties wish to separate or when a professional transition is already planned. However, this freedom also calls for caution: there are no automatic safeguards, there may be implications for unemployment benefits, and a clear written agreement is essential. Before signing, ensure that all financial and administrative consequences are fully understood.
Read also:
Dismissal in Luxembourg: your rights
Resignation in Luxembourg: what you need to know
Find more articles on Luxembourg labour law on our blog.
