Businesses must reorganise: Dan Kersch

Luxembourg is tightening rules for companies to benefit from partial unemployment subsidies, saying businesses must reorganise in light of the pandemic.

“Before the crisis, 18 companies a month requested partial unemployment. This cost us €635,000 per month,” said labour minister Dan Kersch at a press conference on Monday.

Since the start of the pandemic, the monthly cost has increased to between €8 and €49m, depending on the month. More than 151,000 people have been affected by reduced hours, Kersch said, around a third of Luxembourg’s workforce.

Retail, construction and the hospitality sector are the most affected, Kersch said. For March, the government expects to spend €2.85m on wages for people on partial unemployment, he said.

Starting in May, however, the rules will be stricter. Since the start of the year, partial unemployment isn’t calculated by the number of employees but based on the hours worked in the business.

Companies not considered vulnerable will be able to get state funds for just 10% of hours worked from May onward, down from 15%. For vulnerable companies, the number of hours will go down from 100% to 50%, unless they can provide a restructuring plan on how they want to manage their business in future.

In both cases there are restrictions on layoffs when receiving state funds.

The government is also in the process of recovering money paid to companies who weren’t eligible to receive it. During the first months of the pandemic, the government made advance payments without being able to account for actual business lost.

“We paid €396.3m too much and we have already recovered €364.8m,” said Kersch, adding that the state would use all means available to recover the outstanding €31.5m from companies that were less affected by the pandemic than perhaps initially estimated when the companies applied for the cash injection.

While Kersch said the government aims to keep as many people as possible in their jobs and companies afloat, he didn’t rule out an increase in bankruptcies this year.

The changes to partial unemployment being reduced could point towards a reopening of the hospitality industry starting in May, although the new rules stipulate that aid could be increased should the sector be shut down by the government because of the pandemic.