Wednesday, January 30, 2013

The 3 Magic Cs of Luxembourg

Political preferences and debates aside, many European countries are known for their cushy social benefits.  Luxembourg, in particular, has distinguished itself as a family-friendly country. For starters, the income tax rate for married versus single folks is strikingly disparate. And if you've been reading here long, you know our adopted country takes great pride in its parks and playgrounds. Looking at maternity and paternity leave policies/durations as well as the direct pay-out you receive just for giving birth is enough to make any American expat couple seriously second guess their birth control plans.

There are three government systems in Luxembourg from which our family benefits on a daily basis that are sure to boggle the American mind. I like to call them "The 3 Magic Cs of Luxembourg." The first has nothing to do with families, but the other two are very specific to families with kids. And a disclaimer: I'm not an expert on these systems and don't pretend to understand how they work, so my explanations are most certainly lacking as a result. Perhaps someday I will more thoroughly understand. For now, the mind continues to boggle.

Cheque Repas
If your place of work does not have a cafeteria on site, you have the option of purchasing "cheque repas" (meal checks) from your employer. Cheque reaps is sort of a mash-up of Groupon and food stamps: prepaid coupons subsidized by the government. They are also called LunchPass, but despite this name, their use is not limited to buying the lunch you're supposedly missing out on at work.
our friend, the LunchPass
A LunchPass is a food voucher, currently worth 8.40€ a piece. (Yes, I finally looked up how to type the € symbol on my American keyboard. It only took me 8 months.) The employee contributes 2.80€ and the employer/government 5.60€ toward each pass. If you've signed up for the program, you receive a big stack of these 8.40€ LunchPasses totaling over 200€ at the beginning of each month, with your contribution already deducted from your paycheck. This is how it works for us, but I did look it up on the website, and this breakdown seems pretty standard from what I can tell.

You may then use the cheque repas just like cash to buy groceries or restaurant meals at virtually every establishment in the country. After 8 months living here, I still hold them out sheepishly to the cashier, fully expecting to be laughed at and denied. But to my continued astonishment, the things work! Buy 4€ of food with a LunchPass, and get 4.40€ back in regular ol' change!  Or pay for your whole grocery bill in cheque repas while simultaneously perfecting the art of mentally adding multiples of 8.40!

As I mentioned, the program is subsidized by the Luxembourg government--that's the food stamps part--except it doesn't matter how much money you make. Everyone's entitled to the same amount.
Luxembourg food stamps for all!
We were skeptical at first; coupons and Groupons and prepaid stuff are generally not our thing, plus we figured there must be a catch. But once we realized you really could use cheque repas like cash to buy any food anywhere, we decided to sign up. We then decided to treat our contribution functionally like a tax on our paycheck, so it doesn't factor into our monthly budget for food. It's now our extra food-fun money, and we almost always use them to eat out rather than buy groceries. We also like to stockpile them for when people come to visit so we can treat them to food during their stay. (So? When are you coming?!  We will wine and dine you in style!  We have food stamps, people!)

Child Allowance
This is money you receive from the government simply for having children in your household. Again, it's the same for everyone regardless of income.  The amounts are adjusted from time to time, but we currently receive a total of over 400€ every month because we have two kids under 18. They also kick you a couple extra hundred euros at the beginning of Fall to help with purchasing school supplies, clothes, etc.

I've heard that other European countries have a similar system, but that some are being phased out and that Luxembourg's allowance is particularly generous.

Cheque Service
This is the system that subsidizes childcare. With this program, everyone working in Luxembourg is entitled to at minimum 3 free hours of childcare per week. After that, the rate you pay is determined by your salary. We use this system to pay for lunchtime care at school for the kids. You'll see in the table below, for example, that everyone pays a maximum of 4€ per hour per child after the first free 3 hours, up to 24 hours a week.

So, what do you think, Americans? Do you have a hard time wrapping your minds around this stuff like we do? I suppose at least we don't take it for granted.


Mike Snaadt said...

Curious as to what the tax rate of the country is? This has to be funded somehow???

Pete and Rosie said...

Yes. So all I know so far is that our effective income tax rate is SUPPOSEDLY going to work out to be around the same it was in the US. So far it's about the same percentage coming out of our paycheck as it was in the states, but we'll see what happens after our taxes are filled. Generally speaking, I know it's a very wealthy country, and there's a LOT of total income out there being taxed! But I honestly understand almost nothing that goes on behind the scenes.

Sam said...

Rosie - great post and seems your cheque service bit is much simpler to understand than my long post! (I did write mine half asleep at about 11pm last night!). I've just msgd my hubbie about the cheque repas!!..not heard of that and am fairly sure he doesn't get them. I love the family allowance system here, it's similar to how our UK one worked many, many years ago. To 'Mike': It's sustainable here because their are so few citizens placing a burden on the system (less than 500,000) and a high proportion of those people are in work paying tax not to mention all the cross border workers who go back to France, Belgium and German every evening! Employers contribution is quite high I believe. Retirees get a very generous final pension too, and I love the healthcare system, it's like private care at public price levels. How sustainable it all is down the line is anyone's guess but right now, it's a good place to raise a family despite high property prices.

Anonymous said...

I think that a lot of the funding also come from taxing the large number of corporations that make Luxembourg their home.
Not sure how long will be sustainable for as Lux has an ageing population... I think part of the reason they encourage people to have lots of kids! :)
If you're here long enough to want to buy a home the government also contributes to your mortgage - the more kids you have the more they contribute to your mortgage.

Anonymous said...

Josh formerly known as your neighbor here! great post and awesome benefits. Speaking from a combination of speculation and partial ignorance, my guess is their taxes go a lot farther toward providing for their people because they aren't out there funding massive oversized war efforts and inflating corrupt lobbyist run corporate manipulated power hungry government parties' pockets. :)

ayumi said...
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Anne said...

Hi Rosie - do you need to live in Luxembourg a certain amount of time before qualifying for the child allowance? We're trying to work out a rough monthly budget and what we could afford on rent. Where would we look to find out how much for 1 child etc...?

Also would you recommend the relocation agent you used?

Thank you!!

Pete and Rosie said...

I think these amounts are current:

The benefits won't kick in for several months (maybe faster for you guys since you're EU and your whole residency will happen faster) - BUT, they are retroactive from the date you arrived. So you'll get a lump payment.

Our relocation agency was assigned by Pete's company. It was through European Relocation Services. They were fine, but since this is the first time we used one I have nothing to compare it to. I think they did a good job though?

Anne said...

Thank you! One more question (sorry!)... Can the education allowance also be claimed if one is looking after kiddywinkles full time or is this just for people who have worked in Luxembourg previously?

In the UK I can claim child benefit (about £80 per month) and maternity allowance (£136 for 39 weeks)
So trying to work out the difference between parental leave & education allowance in Lux and eligibility. As part of EU I THINK I can opt to stay on UK or switch...
Complicated! We're on a tight budget as accommodation costs are higher & we normally (when i'm not temporarily on maternity leave) have our 2 salaries to live on.
Did the relocation agent cover this type of thing?
P.s. we loved Luxembourg when we visited despite the sloshing rain. So peaceful & clean!


Pete and Rosie said...

Glad you liked Luxembourg! My husband was in Paris this week and London last week for work and he also was reflecting on how peaceful, clean, uncrowded and just generally manageable Lux seems in comparison! Re: education allowance...I believe you can claim it even if you haven't worked in Lux (I think a friend of mine did that), but I'm not sure (our kids are over age 2 so it didn't apply) . It looked like there was more info on that same website? Yes, I think a relocation agent could help you with that, or you could try calling the British Ladies Club or the American Women's Club and they might be able to tell you where you could find more info.

Anne said...

Thank you! & sorry to pester with so many questions!