What is the salary indexation in May 2025 in Luxembourg?

Effective 1 May 2025, salaries across Luxembourg have increased by 2.5% due to a statutory indexation trigger. This adjustment, part of the country’s automatic inflation-protection mechanism, is now being implemented across all relevant payrolls.

As the Employer of Record (EOR), Horizons is fully compliant with this requirement, and the change has been automatically applied for all eligible employees under our management. 

What Is Salary Indexation in Luxembourg?

Salary indexation is a mandatory system that adjusts wages, pensions, and specific social benefits based on inflation, ensuring income levels reflect the rising cost of living. The adjustment is triggered when the six-month moving average of Luxembourg’s Consumer Price Index (CPI), as calculated by STATEC, the national statistics bureau, reaches or exceeds 2.5%.

Each time this threshold is met, eligible salaries increase by 2.5%.

Why Is Indexation Important?

The indexation mechanism protects employees’ and pensioners’ purchasing power and helps maintain income stability. It ensures wages rise automatically with inflation, offering a uniform and predictable adjustment across the workforce.

Why Was the May 2025 Indexation Triggered?

In 2023, high inflation led to three separate wage indexations—in February, April, and October. However, no triggers occurred during 2024 due to a slowdown in inflation.

In early 2025, forecasts anticipated an April trigger, but the CPI average did not cross the threshold until April's figures were added. STATEC’s March 2025 data confirmed the average CPI met the criteria, causing the May 2025 indexation to take effect.

Is Salary Indexation Mandatory for Employers?

Yes. Salary indexation is a legal requirement for all employers in Luxembourg. Once triggered, the increase must be implemented by law for all eligible employees, and failure to comply can lead to legal and financial consequences.

How Is Horizons Managing the May 2025 Indexation?

As the Employer of Record for our clients' workforce in Luxembourg, Horizons has already implemented the 2.5% salary increase for all qualifying employees as of 1 May 2025.

• The adjustment has been automatically applied to May payrolls.

• Client invoices have been updated accordingly to reflect the revised salary amounts.

• No action is required from Horizons clients or employees, the change is handled entirely by our local payroll team.

• Because this is a statutory change, no amendments to employment agreements are necessary.

What If an Employee Recently Received a Salary Increase?

Even if an employee received a recent salary raise (e.g., for performance or promotion), the 2.5% indexation still applies by default, unless the raise explicitly included the indexation component.

• If the prior salary increase did not clearly account for indexation, the full 2.5% will be added on top of the new salary.

• If the increase did include the indexation (and this was documented), a separate adjustment may not be required.

Horizons reviews all applicable cases to ensure accurate and compliant implementation, preventing duplication or underpayment.