Luxembourg  - An employer who sacks a worker while they are on parental leave must base the severance pay on the worker's full-time salary, rather than on what they were earning while at home with the kids, the European Union court ruled Thursday.

The precedent-setting judgement has potentially huge ramifications for businesses across the EU, since it would apply to similar cases anywhere in the bloc.

The case before the European Court of Justice in Luxembourg began when a Belgian woman, who was working half-time so that she could take care of her child, was dismissed with immediate effect just nine days before she was due to go back to full-time work.

The company paid her compensation equal to 10 months' salary, but based the total on the woman's part-time pay, which had been reduced by half to reflect the fact that she was working half time.

The woman appealed to the Belgian judiciary, which in turn referred the case to the European court.

The Luxembourg judges ruled in favour of the employee, arguing that the severance pay should have been based on her full-time salary instead.

This is because "a reduction in the rights arising from the employment relationship in the event of parental leave could discourage workers from taking parental leave and could encourage employers to prefer to dismiss those workers who are on parental leave."

The ruling was based on European rules aimed at discouraging any form of discrimination on the workplace.(dpa)