Employee benefits vs. salary increase: why 64% of employees in Luxembourg favor the salary package

In the Grand Duchy, compensation is no longer just a matter of gross salary. According to the latest Edenred Luxembourg Employee Barometer, conducted by an independent research firm among 1,025 resident and cross-border employees, employee benefits are now at least as powerful a compensation lever as a pay rise. This finding invites Luxembourg employers to rethink how they structure their compensation packages.

A barometer challenging conventional wisdom about compensation

For a long time, gross salary was considered the only lever for making an employer more attractive. The results of the Edenred Luxembourg Employee Barometer call that assumption into question. When asked about their initial preference, most of the 1,025 respondents – 504 residents and 521 cross-border workers from France, Belgium and Germany – say they would prefer a higher gross salary. But when faced with a concrete choice between a 15% pay rise and a benefits package of comparable value, the result changes dramatically: 64% of employees choose benefits, whether they are residents or cross-border workers.

“When employees are given a concrete choice, benefits come out ahead of a 15% pay rise. It therefore seems wise to review the benefits offered on a regular basis,” says Patrick Langlois, Managing Director of Edenred Luxembourg.

Employee benefits: an immediate boost to take-home purchasing power

 This apparent paradox is largely explained by the very nature of employee benefits. Unlike a gross salary increase, which is often reduced by taxes and social security contributions, a well-designed benefit provides an immediate, net boost to purchasing power that employees experience in their everyday lives. Patrick Langlois highlights this point in relation to meal vouchers, a well-established benefit in Luxembourg: “They provide a net boost to purchasing power that employees feel every day, without social security contributions for either the employee or the employer. These solutions also support local businesses. So it’s clearly a win-win-win.”

 In other words, a compensation package that includes targeted benefits can deliver a tangible return greater than that of an equivalent increase in gross pay. This is a compelling argument for companies facing budget constraints but looking to strengthen their appeal and retain employees.

Residents vs. cross-border workers: different economic realities

The barometer also highlights a clear economic divide between Luxembourg’s two working populations. 59% of cross-border workers say they are financially comfortable, compared with just 48% of residents. The gap is also evident in their outlook: only 13% of residents expect their purchasing power to improve over the next 12 months, compared with 26% of cross-border workers – twice as many.

Two factors help explain the sustained financial pressure on residents: 82% cite housing costs as their main concern, while 72% point to the cost of living in general. In this context, employee benefits are becoming a strategic tool for protecting purchasing power, particularly for residents, who are more exposed to these pressures.

Meal vouchers: a cornerstone of employee benefits in Luxembourg

Of the various benefits available, meal vouchers remain the most widespread: 43% of cross-border workers receive them, compared with 31% of residents. This gap points to significant room for improvement, especially given that 22.6% of Luxembourg residents currently receive no employee benefits at all. For businesses, this is a blind spot that needs addressing quickly. At a time when the war for talent remains fierce in the Grand Duchy, failing to offer a structured compensation package means giving up a major point of differentiation – particularly when it comes to attracting and retaining resident employees, who are more sensitive to purchasing-power concerns.

Digitalisation and environmental responsibility: employees’ changing expectations 

The barometer looks beyond the benefits themselves to how they are managed. 57% of employees would like their benefits to be managed entirely digitally, while only 3% oppose this approach. This preference is particularly strong among cross-border workers (65%, compared with 48% of residents). Given their daily commute between their country of residence and their workplace, ease of use and mobile accessibility are essential.

 Another key trend is growing interest in benefits that support environmentally responsible purchases, cited by 61% of cross-border workers and 51% of residents. Whether they live in the Grand Duchy or cross the border each day, employees in Luxembourg increasingly expect modern, digital solutions that reflect their environmental values.

Why is investing in an attractive compensation package a strategic move for employers?

Beyond its impact on individual employee satisfaction, employee benefits have a direct, measurable effect on companies’ HR performance. Patrick Langlois confirms this, citing the findings of an earlier Edenred study on workplace wellbeing: “Companies that provide benefits such as meal vouchers see employee retention rates rise by 11%.”

In a tight labour market, where retaining talent is a key priority for HR teams, rethinking a compensation package can be a worthwhile investment in both the short and medium term. Benefits are no longer just an optional extra; they are a strategic part of the overall compensation policy, on a par with gross salary.

Edenred Luxembourg: helping businesses build tailored compensation packages

Drawing on these findings, Edenred Luxembourg helps employers design practical, measurable solutions: meal vouchers and gift vouchers that recognise employees’ efforts, all integrated into a user-friendly digital platform. The goal is clear: to help Luxembourg businesses build competitive compensation packages that reflect the differing expectations of residents and cross-border workers, while directly improving their ability to attract and retain talent and their economic performance.

As pressure on purchasing power continues to grow, particularly for residents, employee benefits are emerging as one of the most effective HR tools. Companies that fully integrate them into their compensation strategy will gain a lasting competitive advantage in Luxembourg’s labour market.