Implementation of the tripartite agreement of 7 March 2023 concerning the third index bracket for 2023

On 4 August 2023, the Ministry of Social Security and the Employers' Mutual Insurance published a press release on the implementation of the tripartite agreement of 7 March 2023 concerning the third index bracket for 2023.

This agreement between the Government, the UEL and the trade unions includes measures to help companies cope with persistently high inflation. It provides for compensation for companies in the event of the application of a new index bracket in 2023, between the time of application of this bracket and January 2024 inclusive.

This compensation will take the form of a reduction in the contribution rate in each of the four contribution classes of the Employers' Mutual Insurance. The rate adjustment will become effective as of the financial year 2024.

The details of this compensation were set out in the law of 26 July 2023, which is based on the probable application of a new index bracket in September 2023. This would correspond to a reduction in the rate in each class of 1.34 percentage points.

This reduction represents the cost of the indexation in question applied to the sum of the contribution bases. As a reminder, the contribution base, as defined in Article 3 of the Employers' Mutual Insurance's Statute, includes the base wage as well as supplements and accessories payable monthly in cash, with the exception of overtime payments. Gratuities, financial participations and other benefits, even those not expressed in cash, enjoyed by the insured person by virtue of his or her occupation, are not taken into account.

It should be noted that the cost of indexation to be offset by the mechanism of the law of 26 July 2023 takes into account the total wage (including overtime payments and gratuities) without taking into account the annual contribution threshold.

In order to avoid class rates becoming negative, the adjustment of rates may, if necessary, be spread over several financial years.

The law therefore provides the following staggering of the reduced rates in the four contribution classes:

• For class 1, the reduction will be spread over 3 financial years, with a contribution rate of 0.01% for 2024, 0.04% for 2025 and 0.35% for 2026;
• Class 2 will be spread over 2 financial years, with a contribution rate of 0.01% for 2024 and 1.10% for 2025;
• Classes 3 and 4 will be fully offset in 2024, with a contribution rate of 0.42% and 1.36% respectively.

These rates are estimated and the law provides for a reduction in the rates, the rates for the 4 classes being calculated annually and communicated to companies. In other words, the rates are not yet fixed and may be subject to subsequent legal changes. The final calculation of contribution rates for the 2024 financial year will take place at the end of 2023.

The reductions set out in the law of 26 July 2023 may be revised, as indicated in the explanatory statement of the proposed law, depending on the effective timing of the index bracket. Consequently, the rates for 2024 could evolve based on the effective implementation, as well as the latest available figures on the total wage bill and financial absenteeism across the four contribution classes.