Does Luxembourg really support self-starters?
I have always been someone who believed in paying tax and social security contributions so that we as a society could collectively benefit from a fairer, safer and healthier life.
When I worked full time in the UK, I paid higher rate tax and national insurance. When I came to Luxembourg as a trailing spouse, I didn’t have a job. That was one of the main points in favour of relocating. For the first time we could live on one salary, and I could finally spend time with my children.
It didn’t last long. I got bored during the times my children were at school. There is only so much cleaning and meeting people for coffee I can do, and no amount of phonics could alleviate the feeling that I was not really exercising my grey cells.
With a bit of luck and a bit of graft, I managed to find a dream combination of work I enjoyed with the flexibility to fit it around my children’s schedule, so I could still spend time with my kids and avoid incurring any childcare costs.
This set up seemed perfect for the first few years when my actual earnings were so laughable that tax returns were met with nice letters saying I had nothing to pay in either tax or social security contributions. Life pootled along nicely, with my husband’s EU institution insurance covering us for healthcare and family allowances. Luxembourg too, benefited because we were no burden on the state.
Fast forward to my tax returns of 2019. Being a good girl, I filed them before lockdown. My Luxembourgish accountant warned me that my earnings (just into double figures) would not elicit any tax but I would get a call from the CCSS.
That’s fine, I thought. I’m happy to pay national insurance. Until I got a bill in June for more than €8,000. There followed a series of frantic calls to try to work out why my CCSS bill was 80% of my earnings. Could it be possible that by earning just a little more in 2019, I would end up losing all my earnings in contributions.
Well although it didn’t work out quite as bad as the initial bill, the answer is firmly yes.
A re-calibration of my pension requirements lowered the bill a bit, but the minimum contribution towards health remains the same (and is charged at the minimum rate for someone earning the minimum wage).
Since I don’t earn the minimum wage, my social security contributions are about 35% of my income (and remember this is not including tax). This seems unduly harsh given that there is a big difference between earning €10,000 and earning €25,000 (the approximate minimum wage). Surely social security contributions should be based on your actual earnings not the minimum wage?
Earn less to earn more?
What I’ve realised is that if I drop my earnings and work a bit less, I will be better off. Either that or I need to more than double my yearly income so I reach the minimum wage. What’s more if I start paying tax too (payment kicks-in at around the €11,000 mark), I will be handing over quite a significant amount.
And naturally this begs the question – why should I bother earning? Worse still, if I was trying to get a business off the ground, how likely would it be that I could leap in one year from earning €8,500 to €25,000, particularly in today’s current Covid climate?
Of course there are some benefits from joining the CCSS in terms of health cover for me and my children and a monthly allowance for them too. But my husband already had health cover and got a monthly allowance. Now the difference is that Luxembourg is paying for all of this instead of the EU Institutions. So me and the country are losing out.
It’s also resulted in a tonne of paper work to take us out of one system and put us into another. My husband’s health insurance covered me for trips anywhere in the world, whilst under the CNS, as a soon-to-be non-EU citizen, my European Health Insurance Card won’t cover me for some European countries nor for any visits back home to the UK.
Part-time independent work not valued
That of course is personal, but back to the main point – why would anyone start up as an independent in any profession here if by growing their business they are walloped with a hefty social security bill?
And perhaps more importantly, what does this mean if you are a spouse who wants a part-time job to balance childcare with your career?
What if you are a single parent who runs a business that doesn't bring in the minimum wage?
I don’t have an answer, since I didn’t really get an answer from the CCSS advisors I spoke to on the phone. They were polite and very helpful (and particularly good at sending forms in the post), but they explained that ultimately this is just the way it is in Luxembourg.
So in other words, bad luck if you’re a part-time working mother trying to get back into the workplace independently. Go and earn the minimum wage in a 40 hour a week job.
I don’t want someone else to look after my kids. I want to look after them, but I also want to work. That doesn’t sound unreasonable, does it? How about a CCSS contribution rate that is based on a percentage of your earnings with no minimum, to encourage spouses into the workplace and support work-life balance?
At least this has explained one thing to me. Why there are so many coffee shops and places to “do lunch”. Faced with the choice of earning a lot more or a lot less (neither of which will be helpful to my career or family), I might find myself going back to spending a lot of time sipping Lait Russe through a straw at Namur.
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