Green light for penny index: what does the wage index limitation mean for you?

As part of its budgetary measures, the government has decided to temporarily intervene in the automatic indexation mechanism for higher wages. There will be no traditional index jump: through the so-called ‘cent index,’ indexation is not abolished, but it is capped for gross wages above a certain threshold.

Pensions and social benefits will also be indexed only to a limited extent. It is important to note, however, that this measure will be applied only twice during this term of office.

1. How does the cents index work?

The automatic wage indexation For higher gross wages, benefits, and pensions, twice limited, especially the first time as of June 1, 2026 and a second time Effective January 1, 2028. Specifically, the standard indexation will only be applied up to a certain cap.

1.1. Gross Wages

The ceiling for gross wages is set at 4,000 euros. In the second round of restrictions (beginning January 1, 2028), this amount will indexed will be, which will raise the ceiling slightly.

Specifically, the gross salary is divided into two parts:

• The portion up to 4,000 euros remains subject to the full, standard indexing;
• The portion above 4,000 euros is only partially indexed, because a reduction of 2% is first applied to the normal indexation rate. This means that for an index of 2% or less In practice, wages above 4,000 euros are not indexed.

For part-time employees, the 4,000-euro cap is calculated on a pro rata basis according to their employment percentage.

1.2. Benefits and Pensions

The ceiling for pensions and benefits is set at 2,000 euros. Here, too, this amount will be indexed during the second round of reductions (effective January 1, 2028).

2. Implications for employers: wage restraint contribution

The limited indexation means that the labor costs in your company rise less sharply than with traditional indexing. However, those savings do not go entirely to you as an employer: through the mechanism of the wage moderation contribution Is part of this benefit attributable to to the government.

In practical terms, this means that you half of the amount any amount that you do not award to your employee due to the limited indexation must transfer to the RSZ. As a result, only a partial cost savings remains.

3. The Centen Index varies by sector

Due to the different sector-specific indexation mechanisms, it will specific moment at which point this limitation becomes apparent, vary from sector to sector.

For example, workers in cement factories will feel the impact immediately, since in this sector monthly is being indexed. For many sectors, the impact will not be felt until Effective January 1, 2027, as in PC 200, where wages are indexed only once a year (on January 1).