Price indexation: how to stop your margin disappearing over the contract term

What is the CPI, and what does CBS do?

CBS, Statistics Netherlands, measures how prices and wages develop in the Netherlands. Many contracts use its figures to adjust prices each year. Other countries have their own statistics offices and indices, but the principles below are the same. Which series, which figure and which month, read in detail in CBS indices for price indexation.

The best known is the consumer price index, the CPI. It measures how the prices of goods and services bought by households change: groceries, energy, rent, transport. The CPI is an index relative to a reference year. Since February 2026 that is 2025, set at 100. An index of 104 means the basket is 4% more expensive than in 2025. The percentage rise compared with the same month a year earlier is what we call inflation.

• CBSConsumer price index (CPI)Price development of what households buy. The index most often used in contracts.
• CBSContractual labour costsDevelopment of collective agreement wages including employer social charges. According to CBS the more complete choice for the wage part of a contract.
• CBSCollective agreement wagesDevelopment of wages under collective agreements, without employer charges.
• CBSService and producer pricesPrice development per sector or product. Useful when your costs come mainly from one kind of material or service.

There is also a European version of the CPI, the HICP. CBS advises using the regular CPI unless the contract explicitly names the HICP. And the calculation is always the same: new price equals old price times new index divided by old index.

The common methods

The draft contract says how prices are indexed. Always read that clause before you start calculating. These are the variants you will see most often.

• Which indexCPI, labour costs or a mixOne index, or a weighted combination, for example 70% labour costs and 30% CPI. The better the mix matches your cost structure, the smaller your risk.
• Which monthOne month or an averageThe rise from, say, October to October, or the average over twelve months. An average moves more smoothly, but lags behind.
• WhenFixed date or as it happensOnce a year on a fixed date, or as soon as a cost increase such as a new collective agreement takes effect. The second is better for you, but less common.
• From whenImmediately, or only after a whileSometimes you may only index after the first or second contract year. Until then you carry every cost increase yourself.
• LimitsCap or thresholdA maximum per year, or indexing only above a certain percentage. A cap protects the buyer, but can hit hard when inflation is high.

Where your margin leaks away

Your margin shrinks in three places. The index rises less than your costs, for example because your costs are mostly wages and the CPI follows a different path. The indexation comes later than the cost increase. Or you may not index at all in the first years.

The dates are what people underestimate most. Say your wages rise every year on 1 January under the collective agreement, and you may only index from 1 July. Then every year you carry the higher costs yourself for six months. With a wage rise of 4%, that is around 2% of your labour costs, year after year, even if the index rises exactly in line with your costs.

Indexation follows an index, not your costs. Whatever falls in between, you pay yourself.

How to work it out

1. 1Look at the pastHow did your costs rise in recent years, and what did the index do in the same period? The difference is your best estimate of the gap.
2. 2Calculate two totals over the termOne with the price you need if it grows with your costs. One with the same starting price, but indexed only as the contract allows. The second total comes out lower.
3. 3Raise your starting priceIncrease the price in year one until the second total equals the first. Then you have covered what you need over the whole term.

A simplified, fictional example. Your costs rise 4% a year. The contract indexes by the CPI, which you estimate at 2.5% a year, and only from the third year.

And if you do not know how long it will run?

With option years, the buyer decides whether the contract continues. So when you bid, you do not know how many years to calculate over. And that matters a lot, because the gap grows every year.

So work out both scenarios and choose deliberately. Price for the full term and you are more expensive, earning extra if the options are not taken up. Price for the fixed term and you are sharper, but you carry the risk in the option years. Whatever you choose: know what it costs.

And if the indexation does not fit, for example the CPI for a contract that is mainly labour costs, or indexing only after two years? Raise it in the clarification round. A well-argued question can lead to a better index or an earlier start, for every bidder.

That question helps in another way too. The biggest risk is the bidder who does not do the maths: they bid lower, may win, and suffer for years themselves. Every bidder reads the answer in the clarification round. Whoever had not seen the risk is pointed to it, and may still price it in.

Work it out with the indexation calculator: for services, supplies and works, with your own cost structure, the dates of your wage agreement and your supplier, and the clause from the contract.

A sharp price in year one is worth nothing if you are making a loss in year four.

And in your accounts?

A higher starting price affects your results. In the first years you earn more than your costs, later less. Book that surplus as profit straight away, and the contract looks profitable at first and loss-making later, while over the whole term it is exactly right.

So set the surplus aside and release it over the years, so your results show the contract fairly. How to account for it, discuss with your accountant. The calculator shows per year how much you set aside and when it peaks.