After last week’s talks collapsed, the government submitted a new negotiation framework on the Cost of Living Allowance (CoLA) to social partners while 13 unions were meeting to weigh strike action. According to information seen by Politis, the plan restores CoLA to 100 percent within a year and a half, applies it universally without income-based scaling, and introduces a ceiling of 4 percent as the maximum inflation rate that will be counted for CoLA. The document was sent at 4:30 p.m. on Monday. Unions paused their meeting to review it and said they await clarifications.
Phased path to full restoration
Under the proposal, for workers who already receive CoLA, the rate would rise to 80 percent from 66.7 percent on 1 January 2026, increase to 90 percent on 1 July 2026, and reach 100 percent on 1 July 2027. If inflation exceeds 4 percent, no additional CoLA would be calculated beyond that threshold, which the government argues is necessary to safeguard fiscal stability and contain inflationary pressures.
The current eligibility rules stay in force. CoLA is paid only if the previous year’s real GDP growth is positive. A committee reviews the payout rate if growth is double the inflation rate. CoLA is granted once per year. If inflation is negative, CoLA is set to zero and is offset against any positive rate in the following year.
The government proposes embedding CoLA into the national minimum wage, with a review every two years that takes into account the cumulative CoLA granted in the interim. To broaden adoption across the private sector, the plan outlines incentives for employers, including an annual rebate equal to 50 percent of CoLA paid, subject to detailed terms that have not yet been specified.
Unions ask for clarity
PEO (Pancyprian Federation of Labour) Secretary General Sotiroulla Charalambous said the all-union meeting endorsed the negotiators’ handling so far and that unions are ready to reach agreement within the positions submitted to the two ministers on 16 October. She stressed that CoLA must be paid according to its founding philosophy and within a clear framework for CoLA for all. SEK (Cyprus Workers’ Confederation) Secretary General Andreas Matsas asked whether the text is a mediation proposal or a working draft, noting that the unions’ position depends on that clarification. PASIDY (Pancyprian Public Employees Trade Union) Secretary General Stratis Matthaiou said a decision on a meeting will follow once clarifications arrive. DEOK (Democratic Labour Federation of Cyprus) President Stelios Christodoulou cautioned that although the parties appear close, they may be just as far apart.
Employers push back
KEVE (Cyprus Chamber of Commerce and Industry) Secretary General Filokypros Rousounides said the framework arrived at 4:30 p.m. with a request to meet at 6:00 p.m., which KEVE declined due to the tight timeline. He added that KEVE’s executive committee convened immediately but would not decide on a matter of this weight within hours. OEV’s (Cyprus Employers & Industrialists Federation) expanded executive committee met online for a long session. Director General Michalis Antoniou said the document contains key points that are unclear and contradictory, with references that complicate convergence. According to business feedback seen by Politis, there is strong discontent in the business community, with some employers calling the framework out of touch and tailored to the unions. Speaking to CNA, Mr Rousounides added that at first glance the framework does not reflect a modernised scheme with fairer distribution. Employers plan to run impact exercises in the coming days to assess effects on public finances, the wider economy, competitiveness and workers before tabling concrete counter-proposals.
Not a mediation proposal
Ms Charalambous said that after the all-union meeting, union negotiators phoned the two ministers and were told the text is not a mediation proposal but a framework for discussion. Unions asked for clarifications and reiterated non-negotiable elements without which they cannot agree. These include a clear payout framework for CoLA, enforceable provisions for implementing what is agreed, and concrete steps to extend CoLA coverage to additional workers. No ministerial meeting has been set. Asked if the framework could serve as a basis for a positive outcome, she said important elements are missing and the text contains many ambiguities, so it cannot be accepted in its current form.