ESTABLISHING A “SAFE HARBOUR” IN THE GREATER REGION: CROSS-BORDER TELEWORK AS IMPORTANT STEP TOWARDS LUXEMBOURG’S ATTRACTIVENESS

UEL position and Opinion – Written by Gwendoline Berger and Laura Bacharzyna

Modernising the framework for telework to attract and retain talent in the Greater Region.

The mobility and attractiveness of foreign labour have always been among the pillars of Luxembourg’s economic success. Today, nearly half of the workforce contributing to the Grand Duchy’s prosperity are cross-border workers, essential to the competitiveness and sustainability of our socio-economic model.

A striking decline and new expactations

For the first time in 2024, the number of cross-border workers commuting from Belgium and Germany has declined, after decades of growth. This trend is particularly concerning as it disproportionately affects professions that are suitable for telework, highlighting new challenges for employers in terms of recruitment, talent retention, and organisational structure. Telework emerged as a central element of work organisation during the pandemic, especially in sectors and roles well-suited to this mode of working, meeting employees’ expectations. It has become today a major asset for attracting and retaining talent. Yet, in Luxembourg, nearly one in two companies reports recently having lost a candidate due to a lack of flexibility regarding telework.

Persistent obstacles to cross-border telework

Luxembourg companies remain limited in their ability to offer cross-border telework due to tax, administrative and social security constraints. Additional reporting requirements and related costs, or the fear of creating a permanent establishment and becoming liable to taxation abroad, hinder the possibility of teleworking for Luxembourg employers and their cross-border employees.

A 25% “safe harbour”: an innovative and balanced solution
In response to these challenges, UEL and its members propose the creation of a “safe harbour rule” for cross-border telework, aligned with the 25% threshold recognised by the European legislation on social security. Concretely, this would allow:

• neutraling the risk of establishing a permanent establishment up to this threshold;
• enabling employers, where appropriate, to offer their cross-border employees the possibility of working remotely up to 25% of their time with full fiscal and social neutrality;
• simplifying and reducing employers’ administrative burden by clarifying the rules and removing local reporting obligations.

This proposal, in line with the recommendations made in March 2025 by the Benelux Parliament, meets the needs of compagnies and employees, while ensuring a balance between sectors of activity (some of which are more dependent than others on the physical presence of employees at their workplace), employee status (some professions being more suitable for telework than others) and the countries involved.

Towards a comprehensive solution for the Greater Region
Implementing a 25% “safe harbour” for cross-border telework would be a decisive step towards a more comprehensive approach aiming to create a regional area that fosters the development of economic activities for compagnies and their employees.

In practice, UEL and its members therefore recommend the implementation of a single digital declaration portal (“one-stop-shop”), in the long term. Such dedicated portal would centralise all administrative formalities related to employment, taxation, and social security for employers in the Greater Region. This initiative would facilitate socio-economic integration within the region, improving the flow of economic exchanges, worker mobility, and the provision of cross-border services. While leveraging the opportunities offered by the cross-border ecosystem, this comprehensive solution would contribute to dynamise the economic activity within the Greater Region.

A call to action for Luxembourg
It is now essential for Luxembourg to take the initiative to modernise the framework of cross-border telework by establishing a responsible, balanced and advantageous solution for all. The establishment of a “safe harbour” allowing up to 25% telework for cross-border workers, without negative consequences on taxation or social security (both for compagnies and individuals), would give companies the ability to strengthen their competitiveness, to meet their employees’ expectations and support the economic sustainability of the country and the Greater Region.

This step would pave the way for the creation of an ambitious project for a Greater Region integrated within an extended, interconnected, and simplified “cross-border economic and working area”, facilitating cross-border economic activities without unnecessary complications, to the benefit of both compagnies and employees.

The Greater Region is a true European laboratory, putting the fundamental freedoms of European integration into practice. It is time to lay the groundwork for the next steps.