L-R: Economy Minister Franz Fayot; Minister for SMEs Lex Delles; Labour Minister Georges Engel; Credit: SIP / Emmanuel Claude

Luxembourg's authorities have announced the extension of government support measures for businesses in the context of the COVID-19 pandemic until June 2022 inclusive.

At a press conference on Tuesday, Luxembourg's Minister for Small and Medium-Sized Enterprises (SMEs), Lex Delles, the Minister of Labour, Employment and the Social and Solidarity Economy, Georges Engel, and the Minister of the Economy, Franz Fayot, announced an additional four-month extension for short-time working, aid for costs not covered and recovery aid for companies in the following sectors: hospitality (HORECA), events, entertainment, culture and the sale of new cars. The extension of this aid and the adjustment of its terms of application are part of a gradual phasing-out of temporary support measures for businesses in the context of the COVID-19 pandemic.

Short-time working

On the proposal of Economy Minister Franz Fayot and Labour Minister Georges Engel, the Luxembourg Government has decided to extend the short-time working scheme by four months, from March to June 2022 inclusive, for companies in vulnerable sectors and which have a job retention plan.

In order to continue to support companies and their employees impacted by the COVID-19 crisis, special terms and conditions apply to short-time working for the months of February, March, April, May and June 2022, provided that there will be no new health restrictions beyond 28 February 2022 (when the current restrictions are due to end). The criteria for granting short-time working for this period were presented and discussed at the meeting of the Economic Committee on 25 January 2022, chaired by Ministers Fayot and Engel.

For the month of February 2022, the number of working hours not worked may under no circumstances exceed 25% of the company's total normal monthly working hours, except for companies in the hotel and event sectors for which the rate is set for this month at 50% because they are particularly affected by the restrictions. For the month of February, the rate for nightclubs is set at 100%.

For the months of March and April 2022, the number of working hours not worked may not exceed 20% of the total normal monthly working hours of the company in a vulnerable sector, except for the hotel industry (40%).

For the months of May and June 2022, companies will be able to apply short-time working up to 10% of the total normal monthly working hours, except for the hotel industry (30%).

In all cases, short-time working is reserved for companies covered by a job retention plan.

Expenditure borne by the Employment Fund and relating to the various short-time working schemes applied since the start of the pandemic has so far amounted to a total of €784 million, of which €456 million was spent under short-time working for cases of force majeure - COVID-19 between March and June 2020. Moreover, companies have received €328 million in the form of short-time working benefits since July 2020.

The hospitality sector has benefited the most from short-time working since the start of the pandemic: 1,907 employers have been granted short-time working which concerned 20,427 employees for a total amount of €235 million borne by the Employment Fund.

During the press conference, Minister Engel pointed out that the latest job market figures are positive. At 5.2%, the unemployment rate has returned to its pre-crisis level. STATEC estimates which predicted an unemployment rate of between 6.8% and 7.7% have therefore not been confirmed.

The ADEM unemployment agency also recorded a record number of declared job vacancies. For the first time, the number of vacancies exceeded 10,000 at the end of 2021.

The new Labour Minister also welcomed the strong increase in employment in Luxembourg. Over three years, there has been a net creation of 40,000 new jobs.

Extension and adaptation of aid for SMEs

Luxembourg's General Directorate for Small and Medium-Sized Enterprises has been supporting companies and the self-employed since the start of the COVID-19 pandemic with various support measures and has paid more than €548 million in this context. The recovery aid and aid scheme for costs not covered were put in place in December 2020 to support companies particularly affected by the economic consequences of the pandemic. These measures have been extended and adapted on several occasions, according to the evolution of the health situation.

These aid schemes were adapted in December 2021. With regard to the recovery aid, the amount of the subsidy increased from €1,000 to €1,250 per active self-employed person / employee for the months of December 2021, January 2022 and February 2022. Regarding the aid for costs not covered, the percentage of operating expenses taken into account for the calculation of this aid has also been increased. The companies concerned can thus take into account 100% of their operating expenses for the months of December 2021, January 2022 and February 2022.

Now, the government has decided, on the proposal of the Minister for SMEs, Lex Delles, to once again extend these aid schemes for an additional period of four months extending from March to June 2022.

Minister Delles noted that “we are aware that the pandemic represents a huge challenge for small and medium-sized businesses. It is therefore particularly important to me to provide companies with the support they need to get through this crisis. Extended recovery aid and aid for costs not covered will provide the necessary assistance to meet liquidity needs and provide greater planning certainty for struggling businesses. Some people refer to these measures as handouts. In my view, this aid is an investment in the future of our companies. This is why we are preparing for an economic recovery, without ending the support measures all of a sudden".

The recovery aid will be extended in favour of all the sectors of activity which are currently eligible for it (hospitality, events, entertainment, culture and sale of new cars). With a view to phasing out these measures and, in accordance with the measures proposed in relation to short-time working, the amount of aid granted to a company per employee or self-employed person will be gradually reduced. The amount will be set at €1,000 per employee or self-employed person for the months of March and April 2022 and at €500 for the months of May and June 2022. The monthly aid of €250 per employee on short-time working will be abolished.

With regard to the aid for costs not covered, only hotels and campsites will be able to benefit from this support measure from March 2022. The operating costs of these companies will be taken into account up to 75% for the determination of uncovered costs serving as the basis for calculating the monthly aid. The 75% rate had already been increased to 100% for the months of November 2020 to June 2021, the month of December 2021 as well as the months of January and February 2022. The monthly maximum as well as the aid intensity rates set at 70%, respectively 90% of the costs not covered, depending on the size of the company, will remain unchanged.

The recovery aid and the aid for costs not covered apply alternately, depending on the loss of turnover suffered by the company compared to the same month in 2019, namely 25% loss of turnover for recovery aid and 40% loss of turnover for aid for costs not covered.