Is two indexations in three months good news for employees? Yes... and no, because some people may see their income fall with the second one.
Since 1 February, wages in Luxembourg have risen by 2.5%. The minimum social wage (SSM) for unskilled workers rose from €2,387.40 to €2,447.07 gross. The minimum wage for qualified workers over 18 years of age has risen from €2,864.88 to €2,936.48.
Some people are already looking forward to a second index in just two months’ time. This is the one from last July, which was delayed until April 2023.
It is true that wages will rise by 2.5% again, but at the same time the energy tax credit (ETC), which was granted to compensate for the postponement, is to disappear, although it was advantageous for those who earned the least.
Only 50 cents more in April than in January for minimum wage employees
Thus, an unqualified employee who earns minimum wage with no benefits will earn €2,056.26 net in February and March, according to Calculatrice.lu. To this must be added the €84 energy tax credit, making a total of €2,140.26 net per month. In April, their gross income will increase to €2,508 euros, but €2,099 net, which is lower than the previous two months. It is almost the same as in January, before the first index, when it was €2,098.52 net.
The same calculation applies to a person earning €5,000 gross today, i.e., €3,596 net, including the energy tax credit of €78.67. In April, despite a gross income that will increase by 2.5% to €5,125, the net income will decrease to €3,579. This is still slightly higher than before the February index, which was €3,535.77 net (for €4,875 gross).
Bigger salaries, winners of the end of the energy tax credit
The trend is reversed for the highest earners who were losing out under the ETC. An individual who ears €7,000 gross per month receives a tax credit of €38.01, i.e., a total net of €4,539.47. In April, their gross income will increase to €7,175 and the net to €4,589.97 despite the absence of the energy tax credit.
The second index of 2023 thus appears to be less good news for the lowest paid, but also for employers. Unlike the tax credit which was paid by the state, the cost of the indexation will be passed on to employers.
It remains to be seen whether the tax breaks envisaged by finance minister Yuriko Backes (DP) and the good health of the finances will be confirmed after April, thus perhaps compensating for the end of the energy tax credit.
This story was first published in French on Paperjam. It has been translated and edited for Delano.