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Power to the workforce: demand for talent in financial services sector puts salaries under pressure

Financial services recruiters and heads of human resources have been facing high turnover and competition for experienced staff in Luxembourg over the past year - although it's good news for talented staff who can take their pick of positions on offer.

By June this year, the number of financial services employees had recovered from a slump stemming from the Covid-19 pandemic. Financial regulator CSSF says the sector's total workforce reached 50,811 as of mid-year, the highest level since 2007 and a significant recovery from the trough of June 2020, when many positions went unfill Competition for staff (and the resulting salary expectations) has been strongest at junior levels during the rebound, notes Vistra country managing director Jervis Smith, although he sees offshoring and automation alleviating hiring needs in Luxembourg.

Competition intensifies

Employment numbers could continue to swell for now, according to a Chamber of Commerce study earlier this year. Around 30% of financial companies said they expected to expand their workforce, more than any other sector.

Salaries have already risen significantly in recent years, with factors including businesses shifting activities to the grand duchy after Brexit and the reopening of offices after Covid lockdowns. Last year candidates could expect to be promised a salary uplift of 23% to move from their current positions, up from 11% three years previously, according to one recruitment firm.

In the longer term, an increase of 5% to 10% when moving jobs appears more typical, but for now expectations are appreciably higher at between 15% and 20%.

The Federation for Recruitment Search & Selection says staff with regulatory, legal, control or compliance experience may be approached daily with fresh offers. Outdated corporate HR practices may be increasing the pressure - some financial businesses just look at past technical experience rather than other skills that might benefit a future employer, the recruitment industry body says.

Demand for flexible working

Employees have also changed their wish lists regarding the working environment. Companies willing to provide flexible working options, offering the choice to work from home or hybrid models, are likely to attract more candidates.

However, businesses may find that increased flexibility problematic. The suspension of tax and social security rules restricting working from home for cross-border commuters has largely ended, which could cause issues for some of the tens of thousands of financial sector employees who currently commute into Luxembourg.

The tighter limits on telecommuting are due to be fully reintroduced from the beginning of 2023. The risk for Belgian, French and German residents working from home for more than a handful of weeks a year will again be to find themselves incurring taxation (and beyond a certain point, social security contributions) at home as well as in Luxembourg.

Competition for employees also comes from further afield. While Luxembourg salaries are comparable to those on offer in Germany, and higher on average than those in Belgium and the Netherlands, new recruits could expect to earn far more in London or Zurich, although those cities are also more expensive than the grand duchy, including for accommodation. Senior managers who might earn €90,000 a year in Luxembourg could find a similar position in Switzerland that pays €160,000, according to one estimate, but that mainly reflects the highest cost of living in Europe.

Housing and cost of living issues

The sector is also confronted with the realities of modern life in Luxembourg. KPMG has adapted its recruitment packages for new joiners, by moving variable bonuses into their fixed salary elements to offer assistance with the cost of housing. Generally, however, Luxembourg's reputation as an expensive place to live is unfounded. It ranks 52nd in Mercer's global cost of living index, well behind Zurich, Geneva and London, but also Paris, Dublin and Milan.

Meanwhile, as demand for skills in compliance and legal fields remains as heavy as ever, the rapid digitalisation and automation of financial services is creating the need for skills and talent in new areas. While the need for human beings may decrease in some areas, others will be needed to keep those new technologies, including artificial intelligence-based systems, running. For now, Luxembourg is seeking to keep up with the growing need for IT specialists and is a net importer of skilled personnel from abroad, especially its neighbouring regions, which represent an important talent pool.

At least for now, power lies in the hands of individuals with the needed financial sector skills and the ambition to boost their income and professional status. But Darren Robinson, managing partner of recruitment firm Anderson Wise, says: "As a global recession looms, Luxembourg’s financial services sector is likely to still be under-resourced, providing opportunities for local companies to attract talent from jurisdictions that will have a much harder time absorbing the impact of the downturn. And more resources from abroad could help cool the salary inflation Luxembourg is currently experiencing."


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