Teleworking thresholds for cross-border workers should be increased to two days a week, the Luxembourg Bankers’ Association (ABBL) has said in an interview. The scope of the recently EU social security framework should be expanded to allow flexibility, in the ABBL’s opinion, to permit teleworking beyond a worker’s country of residence, and to harmonise rules governing tax thresholds, attaining consistency for all cross-border workers.

, ABBL secretary general, and Elisabeth Franssen, its HR legal advisor, spoke with Delano in mid-December, following an ABBL working session held in late November that was closed to the press. Here are four takeaways from the interview.

Luxembourg’s workforce and teleworking status present impressive figures

Seillès commenced the discussion by presenting publicly available data about teleworking, including that 10.9% of Europe’s cross-border workforce is in Luxembourg and that cross-border workers account for 47% of the total workforce in Luxembourg. She added: “one of out of two persons working [in Luxembourg] is resident in a neighbouring country and commutes back home at the evening.”

“We are representative of the banking sector. So, we estimate that a slight majority of employees within the banking sector--52%--are non-residents in the first instance. For us, the cross-border dimension as a workforce is quite important,” said Seillès.

Seillès explained the impact on competitiveness, identifying problems related to the administrative hurdles attached to this commuting situation.

“Home-working is identified by all [ABBL] members as an important element of the package that can be offered to employees,” he added. “In fact, we estimate that [practically] all banks in Luxembourg do have a home-working policy in place, and there are detailed procedures to regulate this way of working.”

Teleworking is a key recruitment question

Seillès said that ABBL members report that when young people are seeking employment within the banking sector, one of the very first questions they ask is whether there’s a teleworking policy in place. And if so, how many days are working a week are permitted.

He explained that the policy for residents is straightforward, basically complying with tax and social security rules. But for non-residents, especially cross-border workers, complex scenarios arise, impacting talent attraction in Luxembourg and posing competitive challenges that financial centres like Paris or Frankfurt do not face. Tax agreements between Luxembourg and neighbouring countries aim to regulate where income is taxed.

Seillès commented that “we need to increase the threshold levels [for] cross-border workers to work from home for two days a week, so that would mean from 34 days to 96 days [a year].”

In summary, to implement the desired measures, we propose elevating the permissible threshold to enable cross-border workers to engage in telecommuting for up to two days a week. This adjustment would signify a significant increase from the current limit of 34 days to an extended period of 96 days, assuming my calculations are accurate.

The social security agreement is creating confusion

Elisabeth Franssen, ABBL’s HR legal advisor on employment law, is particularly interested in teleworking for cross-border employers.

The new EU social security framework agreement that came into force on 1 July 2023 permits employees to allocate up to 49.9% of their total working time to activities conducted in their country of residence while remaining affiliated with the social security system of the employer’s country. The regulation does not come into effect if the employee engages in business activities that are both within their (i.e. the employee’s) country of residence and that do not meet the criteria for telework as defined by their employer.

Franssen commented: “The idea of increasing [the teleworking threshold from 25% to 50%] was good, and it was actually a demand. But the practical implementation is questionable, because of the framework elements, the scope of this agreement really limited.”

She explained the limitations by examples:

“Let’s imagine [that] you are resident in Germany and on top of your work during the week in the bank, you work on Saturdays as a waiter: you are not eligible to benefit from the agreement.”

Or: “You have a nice [farm in the] countryside, you have some crops, and you sell some milk and vegetables in the market… you are not eligible either.”

Why not? “Because the agreement is only applicable if the employee is only doing home-working in their country of residence, [not] anything that goes beyond that. So, working as a waiter in a restaurant, running your own farm as a hobby--[you are] no longer eligible for the benefits [of the new agreement].”

Seillès said of the new rules: “It’s good news, but with narrow scope of application. So, at the end of the day, it’s not such good news.” He thinks that the rules will prompt a review of work agreements at the EU level, adding: “We welcome the fact that our new government has indicated in the coalition agreement its intention to continue discussions with neighbouring countries to further increase the number of annual days allowed for cross-border workers. More generally, it has also announced that it aims to improve the applicable tax and social security framework to allow increased reliance on teleworking. But all this remains at this stage a statement of intent and would need further negotiations with neighbouring countries.”

Teleworking agreements are full of inconsistencies

“We as the ABBL put together a list of inconsistencies across all three agreements, which we would like to see harmonised. We had good discussions with the tax authorities already. Some points with certain countries have been already settled, but many remain open. But let me give you one or two examples where there is no harmonisation where the rules differ,” said Seillès.

The table shows one of the ABBL’s examples of inconsistency between the social security framework agreements signed variously with Germany, Belgium and France.

Seillès provided another example of inconsistency by asking: “What happens if, before jumping into your car to drive to work you check your email while sipping a coffee in your kitchen? Does that count as home-working?” He explained that the agreement with Germany specifies that any work under 30 minutes is disregarded, whereas for Belgium the agreement states that marginal home-working shall be disregarded.

“But what does [the word] marginal mean? Thirty minutes… 60 minutes? This is open to interpretation.” As regulated entities, banks do not like legal uncertainty, he pointed out. “It opens up the prospect of facing potential sanctions in case of non-compliance with rules that are not clear cut.”