Luxembourg’s economic slump was slightly less severe than most European countries thanks largely to the country’s ability to embrace teleworking. How did the grand duchy reinvent office work within days, and what might be the long term legacy?
Of course there was little teleworking in hospitals, care homes, transport and logistics firms, food retailers and more. Indeed the daily routine for these workers took on a new intensity.
Yet for those residents who continued working, nearly half did so completely at home, with more than two-thirds doing so some of the time, says a Statec survey.
Nicolas Mackel of the Luxembourg for Finance trade body estimated that the figure in this sector would have been as much as 90%. In 2019, just 11.6% of the working population took this option, double the EU average, says Eurostat.
The economic damage this year will be terrible, but it would have been worse without this flexibility. The economy is currently on course to contract by 5.4% this year, say Eurostat, but this compares favourably to the forecasts of -8.2% for France and -7.2% for Belgium.
“Everything works remotely, even if some processes are sometimes rendered more complex and longer. I am even surprised that it works so well,” Guy Weymeschkirch, head of markets and surveillance at the Luxembourg Stock Exchange, told Paperjam.
Changes were often easier to implement for smaller operations, with some larger firms having to prioritise. “The big four accountancy firms, some of which employ thousands of people, had to adapt as their servers couldn’t support all staff having access at the same time,” noted Audrey Bertolotti, a consultant at Linklaters, a law firm.
Audrey Bertolotti of Linklaters. Picture credit: Focalize/Emmanuel Claude
Cross-border tax questions
Vitally important was the lifting of income tax restrictions on remote cross-border working. Normally frontaliers are permitted between 19 to 29 homeworking days per year before they are taxed in their country of residence. Around 45% of Luxembourg’s workforce are non-residents, and without their ability to work from home the economy would have struggled to function adequately.
As the borders start to open, will these tax restrictions be reimposed? Yes, the government is giving 50 masks to each cross-border commuter and stepping up cleaning of trains and buses, many frontaliers will still be nervous about the prospect of taking long journeys in confined spaces. Even if a small fraction decide the health risks out-weight the other benefits of working here, this could have a major impact.
Previous efforts to increase the number of days of cross-border teleworking have foundered on the grand duchy’s unwillingness to offer tax compensation to neighbouring countries. Might the government have to revisit this stance? Might employers have to increase salaries?
Guy Weymeschkirch of the Luxembourg Stock Exchange. Picture credit: Luxembourg Stock Exchange
Reinventing office work?
As for the real estate market, Lotfi Behlouli, director, at JLL Luxembourg, a property firm, is sceptical there will be much change, not least because most employers have signed long-term lease contracts. He foresees: “less a reduction in demand for office space or moves to low cost locations than towards a greater balance between collaborative work in companies and individual work at home.”
If teleworking has been a success so far, this might be because teams are relying on the social capital built up in offices over many years. “Interpersonal relations and a dynamic environment are essential for sustainable business growth,” Behlouli noted. As well, the rise in home working has seen a spike in cybercrime, and there are complications with Luxembourg data secrecy laws.
Moreover, teleworking it not to everyone’s taste. A Statec survey of residents found 55% thinking it has been a positive experience, 30% were neutral, with the remainder saying it represented a negative for them.
The perception of homeworking has changed, and will no longer be so easily dismissed as a soft option. It will probably become more widely used, but maybe we shouldn’t expect a revolution.