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Once seen as a privileged group, Luxembourg's cross-border workers are now grappling with worsening conditions that could impact the country's economy.
Luxembourg's 223,000 cross-border workers are facing mounting challenges, with their situation becoming increasingly complicated. So much so that these difficulties could impact Luxembourg's appeal as a workplace destination.
Often perceived as privileged, both in Luxembourg and their home countries, cross-border workers are now dealing with a host of issues. Long commutes averaging three hours daily, potential double taxation, limited teleworking allowances, overtime taxation, and most recently, reduced unemployment benefits are among the factors making work in Luxembourg less attractive.
Pascal Peuvrel, President of the Association of Cross-Border Workers in Luxembourg (AFAL), describes the situation as discriminatory. "Cross-border workers have been under attack from Luxembourg for years, and now their states of residence are doing the same," he told our colleagues from RTL Infos.
Significant drop in unemployment benefits
The latest concern comes from France which is seeking to reform its unemployment compensation system for cross-border workers. Under current EU regulations, these workers contribute to social security in their country of employment but receive unemployment benefits based on their salary levels–often significantly higher than in France, particularly for those working in Switzerland and Luxembourg.
According to Unédic, a French association that oversees social contributions and unemployment insurance, this arrangement creates an additional annual cost of approximately €800 million for France. While Switzerland accounts for the largest share of this expense, Luxembourg represents 22% of the total.
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In response, the French government has tasked social partners with identifying cost-saving measures. An agreement signed by several French trade unions proposes reducing unemployment benefits for French cross-border workers by up to one-third.
"A clear case of discrimination"
The proposed changes to unemployment benefits, set to take effect in 2025, have been swiftly condemned by cross-border worker associations which have vowed to challenge the measures in court.
French MP Lucas Grandjean criticised the proposal stating, "This measure violates our principles and contradicts previous court rulings." He added, "Savings cannot be achieved at the expense of 77,000 individuals who have worked in a border country and are now unemployed. These workers would shoulder nearly 60% of the savings, despite representing only 0.3% of the unemployed population in France."
Rising tax burden looms
Taxes are another area of concern for cross-border workers. Georges Godon, President of the non-profit organisation Frontaliers Luxembourg, expressed frustration, saying, "Each state is devising new mechanisms to syphon off as much money as possible." He noted that tax authorities in Luxembourg, Germany, Belgium, and France continue to target cross-border workers with increasing intensity.
One notable example is a looming tax hike for French cross-border workers with mixed incomes–those earning income from both sides of the border. Under the 2018 Franco-Luxembourg tax treaty, a revised calculation method was introduced for taxation in France. Initially presented as neutral for taxpayers, the changes led to significant increases for many affected workers, with some reporting additional tax burdens of several hundred to thousands of euros on their 2020 income.
Cross-border workers narrowly avoided steep tax increases in recent years, thanks to last-minute tolerance measures introduced by the French Ministry of the Economy. However, after four years of temporary solutions, France plans to implement a new calculation method starting in 2025, applied retroactively to this year's income.
The change is expected to result in significant tax hikes for the affected taxpayers. Séverine Bergé, director of the accounting and tax firm Néofisc, criticised the approach, stating, "This amounts to disguised double taxation. It's unfair because the tax rate is not based on the income actually received. Instead, both countries calculate taxes based on tax-inclusive income, meaning that you have a higher rate than you should have in both countries higher taxes overall."
German cross-border workers face a different issue: overtime pay, which is tax-exempt in Luxembourg, is taxed in their country of residence.
Teleworking: An unequal playing field
Teleworking remains another point of contention, highlighting disparities between Luxembourg residents and cross-border workers. While residents can telework 100% of their working hours without affecting their tax or social security status, cross-border workers face stricter limits. They are generally restricted to 34 days of telework annually, the tax threshold for non-residents.
Even if employers secure agreements allowing cross-border workers to exceed the tax threshold, social security rules introduce additional hurdles. Workers teleworking more than 112 days per year are transferred to the social security system of their country of residence. This shift can significantly affect their pension entitlements and access to state benefits.
Belgian cross-border workers face an added complication: their country considers on-call hours as a type of remote work.
Traffic: A daily struggle
Transport remains a major headache for cross-border workers. The train line along the Lorraine corridor is overwhelmed daily, and while the proposed Metz-Luxembourg RER project offers a glimmer of hope, it will not be completed any time soon.
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Road conditions are no better. The decade-long project to widen the A3 motorway is causing significant disruption, and the A31 Bis project, planned to follow, promises additional challenges. What's more, the new motorway will no longer be toll-free but is still expected to suffer from congestion.
Faced with mounting transport issues, alongside tax and teleworking challenges, an increasing number of cross-border workers are reconsidering their situation. There are already signs of a decline in cross-border work, with fewer workers commuting from Belgium and Germany.
This trend poses a serious threat to Luxembourg's economic model which heavily relies on its cross-border workforce. A significant reduction in this workforce would not only harm Luxembourg but also neighbouring countries, as the wages earned by cross-border workers play a vital role in sustaining regional economies in France, Belgium, and Germany.
