The job market continues to hire, but is finding it increasingly difficult to retain staff. According to a study by Morgan Philips, 78% of companies cite the cost of living as the main obstacle to retaining talent, a figure that far exceeds that of any other factors mentioned.

This figure reflects a paradoxical situation. On the one hand, “87% of organisations report having recruited over the past 12 months” and “70% of respondents anticipate growth in their business”. On the other hand, companies are facing increasing difficulties in retaining their staff in an environment where external pressures are taking precedence.

The market isn’t slowing down. It is reshaping itself around a new balance between attractiveness and retention.

A survey grounded in market realities

The study is based on responses from over 300 decision-makers working in Luxembourg, including senior executives, HR managers and finance professionals. The participants represent a wide range of sectors, predominantly financial services, but also consulting, manufacturing and property.

The sample includes local companies and subsidiaries of international groups, as well as organisations of various sizes, providing a comprehensive overview of the market. Conducted in late February 2026, the survey aims to “identify the main challenges companies face in recruiting and retaining talent”, as well as to assess the use of schemes designed to enhance the country’s attractiveness.

A sustained hiring trend

Against this backdrop, recruitment remains buoyant. “45% of organisations plan to increase their workforce”, whilst an equal proportion plan to keep staff numbers steady, confirming a “structurally active” market.

The demand is primarily for finance-related roles, but also extends to technology-related roles, with “35% of companies recruiting IT professionals” and “13% seeking cybersecurity experts”. This trend reflects the growing impact of digital transformation on business needs.

A persistent mismatch between expectations and candidate profiles

Despite this activity, recruitment difficulties persist. “Respondents rate the difficulty of recruitment at 3.38 out of 5”, a figure that reflects ongoing pressure in the market.

The study highlights an important distinction. “The issue is not necessarily the number of available candidates”, but “a mismatch between companies’ expectations and the profiles currently on the market”. Employers cite, first and foremost, “a shortage of candidates with the required technical skills”, as well as a lack of profiles that meet expectations regarding soft skills.

At the same time, “many organisations report receiving a large number of applications, yet failing to find candidates whose profiles match their requirements”, which highlights a problem of suitability rather than volume.

The cost of living is shifting the balance

Factors relating to the Luxembourg environment are a key consideration. “The high cost of living appears to be the main concern,” and directly influences the decisions of talented individuals.

“78% of organisations cite the cost of living as the main obstacle to staff retention”, far ahead of other factors. Companies also mention “the limitations of remote working for cross-border workers” and “transport difficulties”, which exacerbate these constraints and undermine the country’s overall attractiveness.

Retaining talent is becoming a key issue

In this context, staff retention is a top priority. “59% of respondents believe that retaining talent will become more difficult by 2026,” in a market where qualified professionals have a wealth of opportunities.

Companies have identified several ways to address this. “Corporate culture is cited by 62% of organisations as a key factor in staff retention”, ahead of other factors such as flexibility or working conditions. The employer’s image and the quality of the working environment are playing an increasingly important role in HR strategies.

Measures that are in place but are still underutilised

The study highlights a disconnect between the tools available and their actual use. “The schemes are generally well known”, particularly the tax mechanisms, but “awareness does not automatically translate into adoption”.

Some measures remain underused due to a lack of clarity or criteria that are perceived as complex. The report emphasises that “the policy toolkit exists, but its effectiveness depends heavily on its accessibility and how well it is understood”.

International visibility remains limited

Opinions on how Luxembourg is promoted abroad appear to be mixed. “Only 7% of respondents believe the country does enough to attract international talent”, whilst a majority consider its promotional efforts to be insufficient.

The Work in Luxembourg platform illustrates this lack of visibility, with “30% of respondents [saying] they had heard of it”, whilst a significant proportion consider the initiative relevant without actually knowing about it. This discrepancy highlights a problem of outreach rather than a lack of tools.

Expectations that evolve alongside changes in the world of work

Finally, companies describe a shift in the types of candidates they are looking for. They are prioritising “candidates who can adapt quickly, learn continuously and thrive in changing environments”, in a context shaped by “digital transformation and artificial intelligence”.

Recruitment is now part of a broader approach, where “the challenge also lies in identifying candidates capable of growing into their roles over time”.