What is a sliding scale of wages?

Luxembourg has a system that automatically adjusts wages and salaries as soon as cumulative inflation reaches 2.5% of the cost-of-living index (consumer prices).

The process can be summarised as follows: each month STATEC determines the level of the consumer price index in relation to a base 100 for the year 2005 (previously 1996). The monthly index is then linked to the base 100 of 1 January 1948 by multiplying it by a linking factor (6.82708 since January 2006).

These linked monthly indices are used to calculate a six-monthly “sliding average” covering the last 6 months available (including the reference month).

As soon as this sliding average reaches or exceeds the expiry date, which is in fact the last expiry date increased by 2.5%, the sliding scale mechanism for wages and salaries is automatically triggered, but only in the following month, by the entry into force of a new application date, which is itself 2.5% higher than the previous application date.

In the event of major difficulties, the Government may temporarily suspend the sliding scale mechanism.

Calculation formula = employee X new index / old index

Are employers obliged to apply the sliding wage scale?

Yes. In case of non-compliance, employers are liable to a fine of between €251 and €25,000 which can be increased to twice the maximum in case of a repeat offence within 2 years.

The Inspectorate of Labour and Mines is responsible for monitoring compliance with the sliding wage scale.