Luxembourgish businesses will have to brace themselves for the increase of the minimum wage, as well as two wage indexations planned for the coming months.

The information was confirmed on Monday: a 2.5% wage indexation will be triggered in February or March, with the addition of another indexation in April, which has been delayed since the first tripartite meeting of 2022. On top of that, there is the 3.2% increase in the social minimum wage as of 1 January.

For René Winkin, director of business federation FEDIL, the increase in personnel costs does not come as a surprise, but "it is starting to be a lot for companies. Large entities employing many people will have to adapt their prices as they cannot cut their margins with every single salary increase."

Luxembourg's industry leaders believe that, overall, the postponing of the wage indexation from 2022 to April 2023 was the right choice, as this time frame allowed companies to include the increase in their respective budgets and offered them more predictability.

Winkin does not foresee any redundancies: "The people who work in these companies keep the shop running and are useful, but it is also possible that the introduction and development of automation will be accelerated, precisely in order to circumvent or minimise all these increases."

However, the FEDIL director also believes that the combination of rising personnel and energy costs might still increase inflation ever so slightly at the beginning of the new year.

For Tom Wirion, director of the Chamber of Crafts, the rise in personnel costs will have a certain impact on the sector, with hiring potentially slowing down in order to cope with these additional costs: "With inflation, these companies still have to guarantee their profitability in the face of future challenges," argued Wirion.

Only part of these additional costs can be passed on to the end consumer or customer. It is therefore likely that in the medium run, hiring will be less frequent and the labour shortage less acute than before Covid, with all the consequences that this might have on the sector and the economy. Wirion believes that "companies are clearly going to have to slow down", as future prospects remain rather bleak at present.