Tripartite Agreement 2023: inflation under control and predictability guaranteed

Against a difficult economic backdrop and persistent inflation, UEL and its members welcome the tripartite agreement signed between the Government and the social partners on 7 March. This agreement offers prolonged action on inflation, predictability for companies and an increase in net pay for employees.

The tripartite agreement confirms the Government’s commitment to cover a possible 3rd indexation in 2023 after those of February and April (postponed until July 2022). This compensation, initially scheduled to run until the end of 2023, has even been extended to 1 February 2024.

The action taken against the inflationary surge at the September 2022 tripartite meeting has proved effective, since it has maintained household purchasing power and shifted the November 2022 tranche to February 2023. The energy price cap, which was due to last until the end of 2023, will be extended for a further year under the new agreement. According to Statec projections, this should result in contained inflation in 2024 (2.8%, compared with 4.8% without such an extension).

This agreement provides the necessary predictability that companies need to maintain their economic activity and slows down the rise in wage costs: there should only be one indexation instalment in 2024 (October) after the one that companies will have to bear in February 2024, i.e. 9 months apart. The signatories to the agreement have included a revision clause in the event that the Statec projections show that the tranche currently scheduled for October 2024 is triggered earlier.

In addition, the agreement has led to the indexation of the tax scale to inflation by 2.5 index brackets from 2024, which will significantly increase the purchasing power of employees (for 2023, a tax credit will be introduced – retroactive to 1 January – to compensate for the equivalent of two index brackets on the scale). This measure will boost the attractiveness of Luxembourg as a destination for long-term talent by increasing take-home pay without increasing the labour costs borne by companies.

The agreement also includes a commitment by the Government to extend aid to companies particularly affected by the rise in energy prices until 31 December 2023 or beyond, in line with the European regime.

In conclusion, this agreement makes it possible to support households and businesses through strong and lasting action against inflation, increased purchasing power and wage predictability for businesses. Beyond these crisis measures, UEL reiterates that it is also imperative to tackle the country’s structural problems, particularly in terms of productivity and international competitiveness.