A leading EU institution in Luxembourg has warned that rises in the Grand Duchy’s minimum wage and upcoming indexations could lead to the bloc’s lowest-paid staff in the country being left behind, risking harming the appeal of the EU as an employer.
The EU’s budget watchdog, the European Court of Auditors (ECA), which is headquartered in the Kirchberg district of Luxembourg’s capital, said it is “monitoring the Luxembourg salary indexations with great attention” and may have to take further measures to bring its own salaries “in line with the Luxembourgish amount”.
The ECA warning comes after the government announced last month that minimum wage earners in Luxembourg are set to see their pay rise by 3.8% from 1 January 2027, with additional indexation measures set to increase monthly incomes by around €170.
Following both the pay increase and inflation-linked rises due to indexation, the so-called unskilled minimum wage will rise to €2,876.64 per month and the skilled minimum wage will be €3,451.96 per month.
Luxembourg minimum wage adjustment ‘scandalous’, says ex-EU jobs commissioner
EU bodies forced to react
There are currently just over 14,500 EU staff in Luxembourg and some, such as contract agents in the lowest pay bands, already earn below the skilled minimum wage. That gap could now be set to widen further.
“During the past years, salary indexation in Luxembourg was often higher than the salary indexation applied to EU staff, which required specific actions on our side to stay at or above the minimum wage in Luxembourg,” an ECA spokesperson told the Luxembourg Times.
“The last few indexations for EU staff were slightly higher thus providing for a small margin of safety to safeguard staff from falling under the minimum salary wage applied in Luxembourg,” the spokesperson added.
The current basic salary on the minimum grade of recruitment for ECA staff is €3,344.35, which is “already 3.1% higher than the minimum Luxembourg wage”, the budget watchdog noted.
Luxembourg Prime Minister Luc Frieden speaking at the European Parliament in Strasbourg, France, on 7 October 2025. His government’s plans to increase the national minimum wage, coupled with scheduled indexations, has led to concerns among EU bodies in the Grand Duchy that the wages of some of their lowest-paid staff could fall behind those of employees in the Grand Duchy © Photo credit: AFP
However, the combined measures recently announced in Luxembourg – salary indexations plus the increase in minimum wage -will leave a gap, even accounting for a planned 2.2% pay rise for EU staff from 1 July 2026.
“If the 2.2% increase is confirmed, then the EU salary will fall below the minimum Luxembourgish wage and we will have to take measures to bring it in line with the Luxembourgish amount,” the ECA spokesperson said.
The EU has already taken several measures to ensure staff salaries remain competitive with national wages. Pay levels for all EU staff regardless of location are adjusted annually, with the next update due in July.
Compensation mechanisms
Other EU bodies in Luxembourg have also introduced a compensation mechanism for staff earning less than the national minimum wage for so-called skilled workers.
The European Parliament in 2021 “adopted a corrective mechanism to address cases where EU staff in Luxembourg – whether officials, temporary agents, or contract agents – received a basic salary below the national minimum wage for qualified workers,” a spokesperson explained.
“This top-up takes the form of a monthly allowance that covers the difference between the staff member’s basic salary and the Luxembourg minimum wage. The scheme is reviewed annually and adjusted whenever the Luxembourgish minimum wage is updated by national authorities,” a spokesperson for the European Parliament said.
What do you think of the planned minimum wage increase?
The European Court of Justice (ECJ), which is also headquartered in the Kirchberg district, said it has “introduced a social allowance in the form of a supplementary payment representing the difference between the said social minimum wage and the basic salary of the staff concerned.”
Last year, the EU agreed to set aside around €10 million in its 2026 budget to continue paying a monthly housing allowance to its lowest-paid staff at several of the bloc’s bodies in Luxembourg.
The allowance, first agreed for up to four years as part of the deal for the 2025 EU budget, will continue to be paid throughout 2026 under the same criteria for employees at five EU bodies in Luxembourg – the commission, parliament, ECA, ECJ and European Public Prosecutor’s Office (EPPO).
The monthly housing allowance of up to €500 is aimed at helping the lowest-paid staff who live in Luxembourg deal with sky-high accommodation costs and improve the country’s attractiveness for EU civil servants.
The European Investment Bank (EIB), which is the largest EU employer in Luxembourg, does not offer the housing allowance to its staff and did not disclose whether it has taken or plans to introduce any specific measures in light of Luxembourg’s recent announcement. The bank said it “reviews its staff remuneration within a framework that includes benchmarking against relevant markets, such as Luxembourg.”
“For 2026, a guiding principle was to protect the purchasing power against inflation for all colleagues with lower salaries,” an EIB spokesperson said.
The European Investment Bank is the largest EU employer in Luxembourg © Photo credit: Shutterstock
Long-term effect
The ECA previously said it is planning to rent part of a building in Junglinster from mid-2027 to offer rooms for trainees, having stated that prospective new recruits have turned down job offers in Luxembourg as a result of the country’s housing costs.
The ECJ said it is assessing a similar proposal to offer temporary accommodation to new staff.
However, the ECA has warned about the long-term effect of trying to keep pace with rises in the Luxembourg national minimum wage and indexation.
“Throughout the past years, the higher levels of indexation in Luxembourg have obliged us to increase the starting level of EU staff from FG I/1 to FG I/3, which is the last grade available under FG I,” the ECA spokesperson said. “Should the long-term tendency persist, we may soon or late run out of options within FG I and will need to find a lawful manner to recruit under FG II, for which different minimum requirements have to be met.”
Although staff at the ECA who were recruited previously were able to increase their wages through the gradual accumulation of experience, the budget watchdog explained that this path had been largely eroded, and that “due to the increased entry levels this makes little or no difference with the salary levels of newcomers.”
Such a pattern over the long term means ECA employees are effectively being forced to “stay throughout their entire career at salary levels close to the minimum wage, thus not rewarding their increased seniority and experience.”
“This has a severe impact on their job fulfilment and motivation,” the ECA spokesperson said.
One union representing EU staff in Luxembourg, the Union Syndicale Luxembourg, previously described the implementation of a correction coefficient as the solution to the issue.
Under the correction coefficient salaries are adjusted upwards to account for the increased cost of living compared to Brussels. This is the case in many other EU cities, such as Dublin, but the EU does not currently apply the system to staff in the Grand Duchy.
