It covers family benefits, unemployment insurance, work accident insurance, health care, old age and invalidity pensions, and long-term care insurance.
Luxembourg takes great pride in its benefits systems and the quality of its social security services, although the high cost of providing those services and benefits (employer contributions of up to 40 per cent plus employee contributions of up to 20 per cent of gross pay) has recently prompted the government to consider changes to the social security system in an attempt to encourage individuals to assume greater responsibility for the costs of retirement, disability and even health care.
All employees and self-employed people in Luxembourg are automatically enrolled in their respective state social security system, and benefits extend in most cases to family members, i.e. spouse, children and other dependent family members in the household. Even non-family members, e.g. an au pair, can be covered under certain circumstances. Special rules apply to students, trainees and apprentices if they aren’t included in their parents’ cover. Those drawing wage replacement benefits (unemployment, disability or old age pensions) continue to be covered by social security. The benefits authority makes the ‘employer’ contributions, and the ‘employee’ contributions are deducted from the benefits you receive.
Social security agreements exist between Luxembourg and many other nations, including all EU countries and the USA, whereby expatriates may remain under their home country’s social security scheme for a period. If you qualify for ‘non-resident’ tax status, you may be able to continue making social security contributions in your home country while working temporarily (i.e. for up to five years) in Luxembourg. EU nationals must obtain forms E101 and E111 from their home country. Americans should be aware that US social security agreements cover pensions only, and that medical and some survivor benefits (particularly Medicare) aren’t payable to those living outside the USA.
If you or your spouse work in Luxembourg but are insured through the social security system of another EU country, you can claim social security benefits from that country. If you wish to claim benefits in Luxembourg, your contributions to the foreign scheme are taken into account when calculating your eligibility. Contact your country’s social security administration for information. In Britain, information is provided by the Department for Works and Pensions (formerly the Department of Social Security, www.dss.gov.uk/dfwp). An information guide entitled Your Social Security Rights When Moving Within the EU is available on the European Union website (click here).
In Luxembourg, the 2.5 per cent ‘solidarity surcharge’ levied on your net taxable income goes towards unemployment benefits, in addition to an overall social security contribution of around 31 per cent of the first €7,000 of an employee’s gross income (11 per cent deducted from salary and the remainder contributed by the employer and the government).
This article is an extract from Living and Working in Holland, Belgium & Luxembourg. .