Are workers at an advantage in Luxembourg?

While gradually moving towards full employment, Luxembourg finds itself in a paradoxical situation: its labour market is as strong as it is… under pressure.

"There is a general feeling of tension on the labour market," confirms Gwladys Costant, co-president of FR2S, the federation of Luxembourg recruitment agencies. "But we were already talking about this tension ten years ago. What is new is that it is extremely strong and, above all, that it has become widespread." In other words, more and more sectors are finding it difficult to recruit. "All profiles, at all levels of seniority, in all sectors, are difficult to recruit," according to Costant.

One example is the health sector, for which the government was concerned during the Covid-19 crisis. Costant points out that "the wage gap with neighbouring countries is closing." And according to a study by the Luxembourg Institute of Socio-Economic Research (LISER), care assistant positions are among the professions affected by labour shortages.

Read also: Luxembourg's growing economy causes staff shortages in several sectors

The shortage of workers is also apparent in occupations that cannot be done remotely and require workers to deal with Luxembourg's infamous traffic problem on a daily basis. According to a recent Jobs.lu study, the commute could drive nearly half of Luxembourg's workforce away.

More broadly, the strong demand from companies, along with a scarcity of available and qualified candidates, is fueling this tension: "91% of candidates have too many offers on the market," says Costant. "In comparison to prior years, the labour market in all European countries, and even worldwide, is under pressure. It is even more obvious in Luxembourg because we are a small country with a small number of local candidates," she states. 

Gwladys Costant and Nicolas Hurlin, co-presidents of FR2S. / © Photos provided by FR2S

Are workers in a strong position?

Luxembourg is having problems filling the gaps due to a low unemployment rate, high demand from employers, and a lack of training. According to the latest estimates by the Luxembourg Employers' Association (UEL) and FR2S, 300,000 people will have to be recruited by 2030 to ensure market growth and compensate for retirements.

For all of these reasons, employees are in a strong position in Luxembourg. Employers and candidates must therefore find a balance. Employers must realise that they may not find the exact profile they were looking for while hiring. The others must understand that certain organisations will be unable to meet certain requirements.

© Joseph Gruenthal / Unsplash

The FR2S warns against certain behaviours that could, in the long run, turn against job applicants. "We consume professional opportunities like we consume anything else, with a sometimes limited duration of commitment," Gwladys Costant laments, referring to the profiles of workers who have had too many experiences in a short period of time. "We should keep in mind that companies work because there is a human commitment to the project," she stresses.

Nicolas Hurlin, co-president of FR2S, adds: "Be careful because companies will reject employees who change jobs every year or two. Some people will have a lot more difficult time finding work because they have been far too opportunistic, or 'short termist,' in their career management." 

'It's a pleasure to live and work in Luxembourg'

Despite this tension, Luxembourg's competitiveness and attractiveness are still strong. While they are declining, the Grand Duchy remains slightly ahead of neighbouring countries. "For a wide range of specific professions, Luxembourg remains a European passport for career management," according to the FR2S co-presidents. Luxembourg is still regarded as "a career accelerator." Particularly in professions where the country is a centre of excellence, such as investment funds and private banking.

More generally, "it remains a good country to live and work in." As a small European capital, the residents of Luxembourg City enjoy a certain quality of life.

© Polina Sushko / Unsplash

Salaries in many jobs in Luxembourg remain competitive when compared to neighbouring countries. The Grand Duchy also has other good arguments to attract talent, such as benefits in kind (the company car, for example), an appealing pension system, or indexation, which guarantees workers a salary increase.

Recruiters are nevertheless concerned about the growing number of wage indexations, with three index brackets planned for this year. "It will eventually lead to price inflation because businesses would have to catch up with wage increases. It's a bit of a vicious circle," admits Nicolas Hurlin. On the employer side, the index is obviously associated with an increase in labour costs.

Is reducing working hours a solution?

In recent months, there has been much discussion about lowering working hours. After declarations from political parties and public institutions, the proposal is certain to be one of the main subjects of the legislative elections in October.

The end of the 40-hour week "would complicate things enormously," according to the two FR2S presidents, for employers, in terms of the message this would send abroad, but also for employees. "Since work will be more expensive, many companies will hire fewer people or optimise their operations," perhaps by shifting the workload onto the staff.

"Based on our discussions with candidates, we believe that reducing working hours is neither an argument for attracting foreign talent nor retaining those who already work in Luxembourg," the FR2S presidents say. In fact, they perceive the combination of wage indexation/working time reduction as "a threat to Luxembourg's competitiveness."

After a certain age, recruitment gets harder

The FR2S co-presidents also mention "urgent issues" that the government should not ignore. "Access to housing in particular, taxation, disparities in remote working between residents and cross-border workers" are points of contention that can deter prospective workers… or put off those already working in the Grand Duchy. "Before thinking about recruitment, we need to think about retaining talent," says Nicolas Hurlin.

Finally, and above all, there is the issue of "senior" workers. Their employment rate is low in Luxembourg. In part because some can retire early, but also because companies are sometimes reluctant to invest in a less technologically savvy employee who is less "agile" than younger generations. "These are biases, these are mistakes," Hurlin states unequivocally. "Especially since someone over 45-50 years old will generally be more stable. These are candidates who will be able to make a long-term commitment," the FR2S co-president stresses.

Costant and Hurlin consider the employment of seniors a "national issue" that "must become a priority." They regret that whenever they present candidates who are over 45 years old, they have difficulty placing them. "There are obstacles to recruitment, but we can't have this mass of unemployed candidates who will become unemployable," Costant and Hurlin stress. With the elections just a few months away, Luxembourg's political parties have every interest in taking up the issue.