Around 1,200 more jobs have been created each month in Luxembourg over the last two years. Increases on this scale haven’t been seen since the financial crisis.

Growth sectors include business services, mainly accounting activities, temporary work and cleaning activities, said the national statistics office Statec. Other strong increases are seen in construction, financial and insurance activities, and healthcare and social welfare services.

Financial and business services are driving economic growth, and this is leading to job creation across the economy and in the state sector to support this expansion.

Substance and Brexit

“Keeping up with regulatory change has been a major driver,” said Sinéad O’Donnell, director of DO Recruitment Advisors. “Accountants, legal, risk specialists and so on are needed to ensure compliance and to provide the substance firms need.” Accountants with qualifications respected in the English-speaking world are particularly sought after at the moment.

Brexit is also having a substantial effect, as UK-based firms seek to ensure long-term access to markets on the European mainland. Statec recently estimated that more than 40 financial companies have indicated they would be transferring some of their operations to the grand duchy for this reason. The statistics office reckons these relocations have brought at least 400 new jobs to date, but this figure looks quite conservative.

Anecdotal evidence suggests dozens of firms are hiring 5, 10, 20 people to meet their Brexit strategy. Mostly, this is back and middle office support, but some are going further. “Some asset managers are starting to put front office support here,” noted Richard Neale, director of Redbridge Recruitment. “These are not front office staff as such, but people who have good knowledge of the products and so can add value,” he explained.

Mainly, this appears to be about building substance to avoid accusations of creating “letterbox” companies, rather than a strategic shift of centralising operations in Luxembourg. However, there are instances of firms taking the decision to rationalise operations here.

Effect on salaries

As the months and years go by, we feel the drip-drip effect of this increase on the daily commute and house prices, but what about salaries? It appears that employers are trying to avoid major wage-bill commitments by targeting younger, perhaps more ambitious, staff to carry the load. “Salaries are increasing, but at a quicker rate at the junior to middle end,” said Neale.

O’Donnell agreed: “Often, we are seeing clients seeking people with three to seven years' experience. These people can be effective and operational, but at a reduced cost.”

Thus, firms might hire one or two executives to run the office on €100,000 plus per annum, but they calculate that two young people earning half are better for other roles. The belief is that enthusiasm and commitment will be sufficient to compensate for a lack of experience. Not least because firms coming from the UK can be quite surprised at salary expectations in Luxembourg.

“Accountants with a few years’ experience can receive five to ten job offers, but those with 15 years might only get one or two,” said O’Donnell. Pressures on salaries appear to match this, as those with relatively less experience are able to push for substantial hikes, while their older, higher earning colleagues tend to tread water. This is probably a temporary phenomenon while the market adjusts to new realities. But until a plateau is reached, such market distortions are likely to persist.

Sweetening the pill

Some are seeking ways to massage the salary negotiation process. Fringe benefits such as parking spaces are increasingly sought after. Several employers are looking to introduce more structured systems of substantial bonuses, offering 20%-30% rather than the one or two months that have been standard until now. The aim is to make remuneration more results-driven.

Salaries offered can depend on the size of the office. Places with just a handful of staff might be willing to pay at the upper end. Good news for the employee, although working in a smaller place reduces opportunities for promotion. Some firms are bringing in senior people from the UK in Brexit-related activities, but they need to hire locally as they require staff to have experience of working with local financial regulators.

The market has been very active in recent years in the financial and corporate sectors, and so this has been a boom time for recruiters. However, the thought remains that we are nearing the point where substance levels reach their optimum and Brexit plans will have been enacted. Ambitious office building plans are taking shape on the Kirchberg and Cloche d’Or, but will the market rise to meet this supply?

End in sight?

“I’m still talking to new firms that want to come to Luxembourg, and those who are already here after hiring their senior managers and they are now looking to hire,” said Neale. As well, new avenues keep appearing.

For example, law firms have made a major move to Luxembourg in recent years, often with ambitious business plans. The recent arrival of the Bank of Singapore to run private banking activity from Luxembourg has made people think that maybe more is set to come in this direction.

Neale added: “People have been saying for a while that we should expect the market to plateau, but there is little sign of it yet.”