Luxembourg: Salary Indexation May 2025

Businesses and employees across Luxembourg are implementing the required measures following the long-anticipated indexation, triggered on 1 May 2025, with salaries automatically increasing by 2.5%.

What is salary indexation in Luxembourg?

Luxembourg’s salary indexation system is an automatic mechanism that adjusts wages, pensions, and certain social benefits on a sliding scale.  The adjustment is made in line with the cost of living, as measured by the National Consumer Price Index (CPI). The average is calculated each month by STATEC – the National Institute of Statistics and Economic Studies of the Grand Duchy of Luxembourg.

Each time it is triggered, salaries will be increased by 2.5%.

What are the benefits of salary indexation in Luxembourg?

The indexation system ensures that salaries and pensions are balanced in line with inflation and increases in cost of living by protecting their purchasing power. The automatic application allows for greater financial stability for individuals and a consistent adjustment across the workforce.

When did salary indexation in Luxembourg occur?

The wage adjustment is triggered when the six-month moving average of the CPI reaches or exceeds a predetermined maturity rate of 2.5%. During periods of low inflation, there will be no indexation activated. In 2023, inflation fluctuated so drastically that there were 3 increases February, April and October; this however, meant that there were no increases in the Duchy in 2024 and this has continued to be postponed into 2025. Despite forecasts suggesting an indexation would be triggered in April,  the six-month moving average did not consistently remain above the threshold. STATEC data from March 2025 indicates only a small increase in April was enough to trigger the indexation in May.

Requirements from Employers

Indexation can have a significant impact on businesses operating in Luxembourg and employers need to prepare ahead for this as far as possible.

As an employer in Luxembourg, it is important to budget proactively for the indexation changes. The 2.5% increase was applied across all eligible salaries and all payroll software needs to be configured to apply the increase. Finance teams now need to be ready to implement the change immediately and adjust financial forecasts in line with the increase in operational costs.HR teams need to ensure employees are informed of the increase and provide notification of the new salary.

Luxembourg is not unique in its automatic salary indexation system although fully automatic, nationwide salary indexation systems like Luxembourg’s are less common.

Other countries:

Belgium Salary Indexation

indexation system based on CPI applied. The indexation can occur at different times based on the JIC sector of the employee.

Cyprus Salary Indexation

Collective Bargaining Agreements determine wage indexation along with Cost of Living Allowances (COLA) and are based on CPI. 

Malta Salary Indexation

Malta sees an annual allowance provided to employees linked to cost of living (COLA)

Other countries, Netherlands, Italy, France, Uruguay may observe a sector-specific increase which is linked to specific collective bargaining agreements or the minimum wage.