The country is at the top of the OECD members list when it comes to average remuneration. In 2019, the average annual salary per full-time and full-year equivalent employee was EUR 65,843. But how much is the minimum social wage, how does the salary indexation system work, and what are the best-paid sectors?
The highest minimum social salaries in Europe
In Luxembourg, the salary and pay adjustments are freely negotiated between the employer and the employee. Nevertheless, employers must respect a social minimum wage (salaire social minimum or SSM). According to Eurostat, this social minimum wage is the highest in the European Union.
The applicable minimum salary depends on the employee’s age and professional qualifications. If the worker doesn’t have any qualifications, the gross monthly social minimum wage is EUR 2,201.93 as of 1 January 2021. It is decreased by 20% to 25% for an adolescent worker (EUR 1,761.54 between 17 and 18 years old and EUR 1,651.45 between 15 and 17 years old) and increased by 20% for a skilled worker (EUR 2,642.32). To be considered a skilled worker, the employee must have an official certification or a minimum number of years of professional experience.
The administration may adapt the SSM according to the evolution of the average salaries. In the event of an increase in these minimums, employers must increase the employees concerned accordingly. Like other levels of remuneration, the SSM is also indexed to the cost of living.
The automatic wage indexation system
To preserve purchasing power, Luxembourg has implemented in 1921 an automatic wage indexation system to the cost of living. The consumer price index is based on a basket of around 8,000 goods and services. When the index increases by 2,5% over the previous six months, all wages and social contributions must be increased by the same amount. This index is published monthly by Statec, the National Institute of Statistics and Economic Studies. The last wage indexation dates from January 2020, and the next one won’t fall before the second quarter of 2022 due to the health crisis and the economic slowdown.
Since 1975, Luxembourg is the only country worldwide to extend the indexation system to all employees across the entire public and private sectors. Posted workers in Luxembourg are the exception: the indexation does not apply to those who earn more than the social minimum wage.
The best-paid sectors
Wages can differ significantly in Luxembourg depending on the sector of activity. The last salary structure survey conducted by Statec in 2018 reveals that the financial industry is three times more profitable than the hospitality industry. Financial activities and the insurance sector remain at the top, with a gross average annual salary per full-time equivalent of EUR 99,250. They are followed by education with EUR 98,835. Then come specialist, scientific and technical activities, which have been experiencing above-average wage growth since 2010, with EUR 88,271 and the public administration with EUR 86,852. The lowest salaries are paid in commerce, construction, administrative and support services (cleaning, security, etc.) and hospitality. To make a comparison, a director or senior manager earns on average four times the salary of an employee in an elementary occupation.
According to SalaryExplorer.com, which compares the salary and cost of living of every country in the world, the highest-paying careers in Luxembourg in 2021 are surgeons, judges, lawyers, bank managers, chief executive officers, chief financial officers, orthodontists, college professors, pilots and marketing directors. These ten categories combined, the gross monthly salaries range from EUR 3,090 to EUR 28,900!
The gender pay gap persists
As reported by Eurostat, Luxembourg would have the lowest gender pay gap in the EU. In 2019, women in Luxembourg earned 1.3% less per hour than men while the EU average (27 countries) was 14.1%. But despite this good score, differences persist. Regards, the four-page periodical from Statec, has published in January 2021 an issue dedicated to the main determinants of wages in Luxembourg (only in French). In this article, the author, Paul Frey, explains that the wage gap between men and women would be greater than the gap observed in the last salary structure conducted in 2018. The observed gap was 7.1%. On average, however, women have characteristics that are more favourable to high wages than men. In particular, they have a higher average level of education and work more in better-paid sectors and occupations. With the same characteristics, they would therefore earn 13.4% less than men!
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 Gender pay gap in unadjusted form.