Navigating the Challenges and Opportunities of Simplified Right to Work for Third Country Nationals in Luxembourg

Under the Law of 7th August 2023, and amending the law of 29 August 2008 on the free movement of persons and immigration, Starting September 1st, 2023, businesses employing third-country nationals in ‘high-demand professions’, which are those facing shortages of labor in the EU market, will no longer undergo a labor market test. Instead, they can swiftly obtain approval from the Employment Development Agency within five working days upon requesting permission to hire these individuals. Formerly, such companies were required to wait for a labor market test lasting three weeks or more before receiving certification which often was prohibitive to progressing third-country nationals to an offer of employment.

 

High demand professions:

The specific professions considered as ‘high-demand’ in Luxembourg may vary based on the country’s economic needs, industry trends, and demographic factors. A complete current list is available at Legilux.public.lu however they span across all sectors, from hospitality, IT, healthcare and unsurprisingly, finance. Employers wishing to employ third-country nationals for roles outside of these defined functions will still require undergoing a lengthier formalisation process.

Opportunities:

  1. Attracting Talent: Luxembourg has a skills shortage; this is without question. Even today, in an economic squeeze, we observe full employment and a continued war for talent within certain segments of the market. Simplifying the access to overseas talent will open-up new avenues of exploration for some employers and should be considered as beneficial to the nation. Accessing this talent effectively will remain a challenge and will require a paradigm shift in talent acquisition strategy for both HR leaders and external consultants.
  2. Economic Growth: Enabling greater access to the market will naturally stimulate the acquisition of formerly unreachable talent; this may in turn my encourage foreign investment and domestic entrepreneurship to select Luxembourg as a base market where this would otherwise have not been the case. There are various sectors of development that the Luxembourg state has committed to support which may also benefit from this drive. An influx of formerly inaccessible talent may contribute to the development of emerging industries and enhance the country’s competitiveness; a topic of considerable significance.
  3. Cultural Diversity: Luxembourg is a melting-pot of diversity. This is not a new concept and it is arguably one of our richest national characteristics. We are excellently positioned to embrace an ever more diverse workforce and continue to foster cross-cultural exchange. There is no doubt that Luxembourg is a leader in leveraging strength through diversity and is debatably a beacon of this enhancement within a wider European context.

 

 

 

Challenges:

  1. Strain on housing stock: Luxembourg’s robust population growth in the last decade of around 0% annually continues to strain existing provisions. Despite efforts to increase housing supply, Luxembourg continues to face shortages and therefore a spiraling rental market. The intended desire to increase the population by stimulating the ease of access to the employment market will without doubt further exacerbate this topic. Without an ample supply of affordable housing schemes and a more substantial public transport system outside the City and principal urbanisations, will surely lead to further strain on a very vulnerable system even further.
  2. Integration and Social Cohesion: Ensuring the smooth integration of expatriates into Luxembourg’s society poses a significant challenge. Language barriers, cultural and religious differences can lead to a progressive erosion the existing social structure of the country. This is commonly understood to already be the case and further work must be undertaken to ensure that ample provision of common services and resources to cater for a wider spectrum and growing population of non-European immigrants. This is a substantial challenge facing such a small and traditionally conservative country as Luxembourg.
  3. Labor Market Dynamics: The loosening of right to work requirements will arguably stimulate competition in the labor market. Luxembourg which has long walked a narrow path of being both competitive in an international context, but also offering an enviable economic advantage to its labour force is exposed to shocks associated with a sudden oversupply of incoming labour. Luxembourg must strike a balance between leveraging foreign talent to enable growth but equally to safeguard salary stability and job security for the domestic labour pool. This requires proactive labor market policies including ongoing training and upskilling initiatives across all industries.

The practicalities of elegantly managing incoming offers of labour from a new third-country population will be a challenge. Markets are highly connected and information travels fast. There is already very substantial interest from would-be labour from all continents.  Nuance and cultural understanding of Luxembourg’s norms are however learnt and not inherent. Frustration by parties on either side the employment offer may become evident. On one hand there is now in principle, little restriction for overseas immigrants to obtain employment in Luxembourg, we are after all offer a highly attractive market with the highest minimum wage in the EU, but on the other, there are practical realities of possessing the necessary relevant skills, language and cultural norms that all come to make an employment relationship work.

Employers will need to be prepared for this challenge – it will be both sensitive and time consuming. Employer branding may be challenged, and special attention must be observed to ensure equal opportunities for all qualified applicants. A joined-up approach with both industry and the Employment Development Agency should be actively sought; only with this joined-up approach will there be the necessary policy and progress achieved.

Courtney Charlton 13/2/24

First published AGEFI Luxembourg Feb 2024