Net Salaries in Luxembourg to Fall by €10–40 from January 2026 as Pension Reform Takes Effect

Luxembourg employees will see their net salaries reduced starting January 2026, as the government’s long-discussed pension reform begins to bite. The reform, strongly pushed by Prime Minister Luc Frieden, includes a 1.5% increase in pension contributions—a measure meant to secure the financial stability of Luxembourg’s pension system in the coming decades.

How the reform works
The increase will be split evenly between the three key contributors:

• Employees: +0.5%
• Employers: +0.5%
• The State: +0.5%

This means individual contributions will rise from 8% to 8.5% of gross salary. Although a modest-sounding adjustment, it will directly affect workers’ take-home pay.

What workers will lose
According to calculations based on current tax rules, the expected monthly reduction in net salary is as follows:

• Unskilled minimum wage: –€11.82
• Skilled minimum wage: –€11.62
• Gross salary €4,000: –€14
• Gross salary €10,000: –€29.10
• Gross salary €15,000: –€37.10
• Gross salary €30,000: –€35.60

In all cases, the decrease should remain under €40 per month. Interestingly, the impact is not proportional: higher earners above the contribution ceiling (€13,518) will feel less of a pinch in percentage terms. For instance, someone earning €30,000 gross will see only a 0.21% decrease in net salary.

Impact on businesses and the State
The reform does not affect employees alone.

• Companies will contribute an additional €150 million annually starting in 2026.
• The State will shoulder a yearly cost of around €187 million between 2026 and 2029.
• The self-employed, who pay both employee and employer shares, will face the steepest hike: a full 1% increase in contributions.

Why it matters
The pension reform has been a cornerstone of government debate in recent years. With Luxembourg’s ageing population and increasing life expectancy, the system has faced growing pressure. Past warnings from the Ministry of Social Security and independent experts underlined that without adjustments, the pension fund’s sustainability could be at risk within the next decade.
While this increase is pitched as a “final effort” to stabilise the system, it has already sparked discussion on whether the reform distributes the burden fairly. Since lower and middle-income workers bear a slightly heavier relative loss, critics argue the change does not fully align with principles of social justice.

Read More : Retraites Lux: Votre salaire net baissera dès janvier 2026 avec la hausse des cotisations - L'essentiel
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