Wage indexation in Luxembourg - May 2025

Luxembourg's automatic salary indexation will trigger a 2.5% increase in May 2025. Find out what it means for employers and employees with Salary.lu.

The next indexation of salaries in Luxembourg is due to come into effect in May 2025, with an automatic 2.5% increase in salaries, pensions and certain social benefits. This measure, forecasted by the Statec, aims to protect purchasing power in the face of inflation.

STATEC will publish on April 29 a first estimate of the annual inflation rate and will confirm, if applicable, the triggering of a new wage indexation.

Understanding the wage indexation mechanism in Luxembourg

Wage indexation in Luxembourg is an automatic system that increases wages, pensions and certain benefits when prices rise. It is triggered when the six-month average of the consumer price index (CPI) exceeds a certain threshold, currently set at 1013.46 points. In March 2025, this average reached 1012.69 points. A small price increase in April (around +0.56%) would be enough to breach this threshold, making a wage increase in May 2025 highly likely.

Why is indexation important?

Indexation allows salaries to be adjusted in line with changes in the cost of living. This has a direct impact on company budgets, but also on the savings capacity and financial stability of households.

What this means for employers

Companies must anticipate this increase by adapting their payroll software, updating budget forecasts and keeping their teams informed. Adjustments to pay scales and contracts may also be necessary.

What this means for employees

For employees, this indexation will be visible from the May pay slip. It represents a clear increase in take-home pay, an ideal opportunity to review one's budget, increase savings or adjust certain expenses. It may also be useful to find out what impact this increase may have on income-related benefits.

Impact of indexation on salary

The following table shows the detailed impact of the 2.5% indexation on different salary levels, illustrating both the net benefit for employees and the additional cost for employers:

Table with examples of the net additional amount before and after indexation and the employer's cost.

Net increase for a gross salary of

2.637,79€ before indexation (Non-Qualified SMW): +48€ per month / +582€ per year
3.165,35€ before indexation (Qualified SMW): +43€ per month / +522€ per year
4.000€ before indexing: +58€ per month / +703€ per year
6.000€ before indexing: +72€ per month / +866€ per year
8.000€ before indexing: +102€ per month / +1.226€ per year
10.000€ before indexing: +127€ per month / +1.527€ per year
20.000€ before indexation: +248€ per month / +2.986€ per year

Increase in total costs for the employer

2.637€ before indexation (Non-Qualified SMW): +75€ per month / +894€ per year
3.165€ before indexation (Qualified SMW) : +90€ per month / +1.072€ per year
4.000€ before indexing: +113€ per month / +1.355€ per year
6.000€ before indexing: +170€ per month / +2.032€ per year
8.000€ before indexing: +226€ per month / +2.710€ per year
10.000€ before indexing: +283€ per month / +3.387€ per year
20.000€ before indexation: +543€ per month / +6.510€ per year

* These figures are approximate and may vary.

Get ready with Salary.lu

Whether you're an entrepreneur or an employee, staying informed is essential to anticipate the impact of indexation. Salary.lu will help you manage your salaries and keep you on track in times of economic adjustment.

Sources:

Statec