Understanding the Luxembourg index and calculating your net salary

What is the Luxembourg index, in two minutes

The Luxembourg index is the automatic indexation mechanism for salaries based on the evolution of consumer prices. In Luxembourgish it's called "Den Index", and the official term is the sliding wage scale. The principle: when the cost of living goes up, your salary follows, without anyone needing to sign anything.

The system has existed since 1921 (originally for railway workers and civil servants), then was extended in 1975 to the entire economy. Today it's enshrined in the Labour Code (article L. 223-1) and applies to everyone:

• private and public sector employees
• retirees
• social benefits (unemployment, allowances)
• the social minimum wage (SSM)
• cross-border workers, under the same conditions as residents

When the index is triggered, all gross salaries go up by 2.5 % at once, on the same date, with no action required on your part.

How an index bracket is triggered

An index bracket (in Luxembourgish "eng Indextranche") is the unit of measurement of the index. Each triggered bracket = 2.5 % increase on gross. For a bracket to be triggered, the six-month average of the national consumer price index (IPCN) must exceed a certain threshold compared to the last reference value.

It's STATEC (ouvre dans un nouvel onglet), the national statistics institute, that calculates all this. In practice, surveyors record the prices of around 7,700 products and services every month in 580 different sales points, to track the real evolution of the cost of living in Luxembourg.

The rhythm of brackets

The pace isn't regular, it depends on inflation. A few examples from recent years:

• between August 2018 and January 2020, 17 months without any bracket
• between 2022 and 2023, three consecutive brackets in 12 months (effect of the energy crisis)

During periods of calm inflation, you can go a whole year without a bracket. During periods of strong inflation, it's several per year.

Who decides when the index falls

Nobody "decides": it's mathematical. When the threshold is crossed, the bracket is triggered automatically by law. STATEC publishes a press release, and all employers must apply the increase on the scheduled date.

What the index actually changes on your salary

The index acts on your gross salary, not directly on your net. And that's where many people are surprised: a +2.5 % bracket doesn't mean +2.5 % on what lands in your bank account.

A simple numerical example

Imagine you earn €3,500 gross per month before the index. A bracket falls.

• New gross: 3,500 × 1.025 = €3,587.50 (+€87.50)
• On the net, the increase will be smaller, because:
  • your social contributions also go up (they're calculated on the gross)
  • your tax also goes up (the taxable gross is higher)
  • you might even shift into a higher marginal tax bracket

In practice, on an average salary, an index bracket translates into a net increase of around 1.5 % to 2 %. It's less flattering than the headline +2.5 %, but that's the mechanics.

The cumulative effect over the year

A detail that matters: the index also applies to indexed bonuses and benefits in kind. So your 13th month, your Christmas bonus, your end-of-year allowance also go up by 2.5 %. Over the full year, the total effect exceeds the simple monthly increase.

From gross to net, how your salary is really calculated

To go from gross to net, two steps: subtract social contributions, then subtract income tax at source.

Employee social contributions

In Luxembourg, the employee pays three mandatory social contributions (the employer's share is separate, paid by the employer). As of 1 January 2026, the rates are:

• pension insurance: 8.50 % of gross (8 % before the reform that came into force in 2026)
• health insurance: 3.05 % of gross
• long-term care insurance: 1.40 %, calculated after a monthly allowance of €675.93 (a quarter of the SSM)

Total on the employee side: around 12.95 % of gross, with long-term care insurance slightly softened by the allowance.

Note: pension and health insurance are capped at 5 times the social minimum wage, i.e. €13,518.70 per month in 2026. Above this cap, these two contributions no longer apply. Long-term care insurance, however, remains due on the entire salary.

All these contributions are paid to the Joint Social Security Centre (CCSS) (ouvre dans un nouvel onglet).

Income tax at source

Once the contributions are removed, what remains goes through the income tax filter, withheld directly at source by your employer. The scale is progressive, with marginal rates from 0 to 42 %, plus an employment fund contribution (sometimes called the solidarity surcharge) of 7 or 9 % of the tax.

The exact amount depends on your tax class:

• class 1: single without children
• class 1a: single with dependent child, single parent, or over 64
• class 2: married or in a civil partnership with joint taxation

Class 2 is generally the most favourable, because it widens the brackets of the scale by pooling the couple's incomes.

Tax credits that ease the bill

Several tax credits reduce what you pay:

• the employee tax credit (CIS): automatic, decreasing with income
• the employee CO2 tax credit (CI-CO2): to soften the impact of the carbon tax
• the social minimum wage tax credit (CISSM): for low salaries

These credits are applied automatically by the employer via the tax withholding form.

A complete example

For a gross of €5,000 per month, in class 1, with no special benefit, it roughly gives:

• social contributions: around €600
• income tax at source: around €800
• monthly net: around €3,600

This is a rough order of magnitude. The exact calculation depends on your class, your tax rate, the tax credits that apply, and any benefits (company car, travel allowance, second job).

See also : Labour law in Luxembourg: what you need to know before you start

Calculate your net in two minutes with calculatrice.lu

Doing the calculation by hand is feasible but long, and the slightest change (marriage, child being born, company car, second job) shifts everything. To go fast, the best is an online simulator.

We have a partner who does this very well: calculatrice.lu (ouvre dans un nouvel onglet). You enter your gross, your family situation, your tax class, any benefits, and the tool gives you in a few seconds:

• your monthly net
• the breakdown of social contributions (pension, health, long-term care)
• the amount of income tax withheld at source
• the possibility to compare several scenarios (simulating a raise, a change of class, the addition of a benefit)

It's the ideal practical tool before a salary interview, a raise request, or simply to understand what happens on your payslip. The site exists in French, English, German, Luxembourgish and Portuguese.

For more specific questions (tax optimisation, choice of tax class, mixed France-Luxembourg income declaration for a cross-border worker), a tax advisor can help you see things more clearly.