The Luxembourg government has agreed to a 3.2% increase of the minimum social wage as from 1 January 2023. In addition, like other Member States of the European Union, by November 2024 Luxembourg will have to ensure that the minimum social wage is indeed compliant with the new EU Directive on adequate minimum wages.
1. Increase of the minimum social wage and social income on the horizon
On 25 November 2022, the Council of Ministers approved two bills aimed at raising the standard of living for the most vulnerable people given the current economic context.
These bills amend respectively:
- Article L. 222-9 of the Labour Code1; and
- the law of 12 September 2003 on disabled persons and the law of 28 July 2018 on social inclusion income.
These bills aim to increase by 3.2%2:
- the minimum social wage as from 1 January 2023;
- the social inclusion income (REVIS); and
- the income for the severely disabled (RPGH).
These measures are part of the Tripartite Coordination Committee's agreement of 28 September 2022, which aimed at, among other things, introducing a series of measures to combat inflation and mitigate its negative effect on household budgets.
At the time of this Newsflash, these two bills have not yet been laid before Parliament but they should be shortly.
2. Towards an increase of the Luxembourg minimum social wage?
Directive (EU) 2022/2041 of 19 October 2022 on adequate minimum wages in the European Union (the "Directive") was adopted on 19 October 2022 and took effect on 14 November 2022. Luxembourg will have to implement this Directive into national law within two years.
The objective of the Directive is to promote adequate minimum wages within the European Union, taking into account "both wage distributions, productivity, the economy in general and the level of purchasing power in the various Member States"3 in order to improve the working and living conditions of EU workers.
The Directive does not impose a harmonisation of minimum social wages on Member States, nor a uniform and binding European minimum wage per se, but it does put in place:
- procedures for setting and updating minimum social wages according to a set of precise criteria so that they are adequate and can guarantee decent living and working conditions;
- the promotion of collective bargaining agreements4 on wage-setting – with an action plan to be established in this respect for Member States where less than 80 % of workers are covered by a collective bargaining agreement (Luxembourg being one of them)5;
- measures on enhancing workers' effective access to the protection offered by minimum social wages (reinforced controls, access to information, sanctions).
The Directive also provides that updates to the statutory minimum wage must take place at least every two years (or at the latest every four years for Member States which use an automatic indexation mechanism, such as Luxembourg for example).
The Directive must be implemented into Luxembourg law by 15 November 2024 at the latest.
1. According to Article L.222-2 of the Labour Code, the level of minimum social wage is set by law. Paragraph 2 of this Article requires the Government to submit a report to Parliament every two years on the development of general economic conditions and of incomes, accompanied, if necessary, by a bill to raise the level of the minimum social wage. In light of this report, the Government may propose an increase of the social wage. This does not imply an obligation to raise the entire wage scale within companies.
2. This figure needs to be confirmed on the basis of the bills of law to come.
3. CSL, Un salaire minimum non conforme aux engagements européens, Econews, N°11, September 2022.
4. Collective bargaining is the process by which workers, through their union representatives, negotiate contracts with their employers or employers' associations to determine their terms and conditions of employment.
5. The rate of coverage by collective agreements is 53% in Luxembourg for the private sector (Statec, Panorama sur le monde du travail luxembourgeois à l'occasion du 1er Mai, Regards, N°03, 04/2022).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.