An index tranche of 2.5% will take place before the summer, the two ministers confirmed, while the minimum wage will be increased by 3.8%. This is the government’s reaction to price hikes, particularly in the energy sector.

This wage adjustment means that minimum wage will go up by 170 euros on 1 January 2027. To ease the burden on businesses, the state will compensate 1.3% of the announced 3.8% adjustment. The exact nature of this compensation will be discussed with employer representatives.

The ministers announced the news in a spontaneous press briefing on Friday afternoon. They were unable to provide exact figures for the cost of these changes, but estimated the state will be looking at 30 to 50 million euros a year.

Employers’ Association and trade unions react

Spautz and Delles’ announcement was met with criticism from the employers’ association and from the trade unions.

Michel Reckinger, president of the Luxembourg Employers’ Association ( UEL) said 2.5% was an improvement on 3.8% but that would not fundamentally change anything.

UEL representatives spoke to ministers on Tuesday to “explain how complicated the outside situation is”. In sectors such as hospitality, artisanal crafts and commerce, where many people earn minimum wage, employers would prefer to depend on other possibilities, such as financial grants.

The double 2.5% for the index and the minimum wage represents a “heavy cut” for companies, says Reckinger. “That will naturally increase inflation as businesses will raise their prices,” he said. “Or they’ll have to let people go. We want to avoid this at all costs.”

Even the 1.3% state compensation is unlikely to help and will put pressure on businesses’ competitivity, Reckinger told RTL.

The OGBL’s Nora Back explained the unions were disappointed on two levels. The decision was made without consulting the trade unions, despite the unions sending a letter to the government pleading for honest and fair social dialogue.

Back also criticised the fact that companies will be compensated by the government, meaning “taxpayers will pay businesses so nothing happens to the minimum wage.” She called the decision a “death knell for social dialogue with the unions”. The OGBL president promised the unions would be planning protest actions in the wake of the announcement.