It was an arduous process which took more than six months to reach a positive outcome, with CoLA now back at 100%, following yesterday’s Presidential Palace signatures and a Nicos Christodoulides reportedly determined, focused intervention.
Those with knowledge of all the last gasp backstage efforts, spoke of a ‘secret supper’ on the hill, which paved the way for closure, forging the hope that wounds will gradually heal, both in labour relations, as well as trust issues between social actors and the government.
Gains and losses
Both employers and unions are counting gains and damages. Unions have secured that CoLA stays, now more firmly established and up to 100%, but failed to achieve a wider extension of the allowance to more employees, beyond its connection with the minimum wage, adding 55 thousand people to the institution fold.
Employers took the 4% inflation ceiling and a controlled process when it comes to the prospect of further extending the institution, but failed to achieve their initial target of a comprehensive CoLA restructuring.
In comparison, unionists probably win it by a whisker, taking into account that this is now a permanent deal, with the allowance established as an institution in the country’s labour system. In fact, no other country quite enjoys the Cypriot CoLA model.
It might only concern part of wage earners, around a third, but with the system now secure, the door has firmly opened for more employees to claim entry.
In a full time employment market, business personnel competition is an advantage for those seeking improved employment terms, even on an individual basis.
Despite this positive outcome, the government is the only party involved which finds itself in a more difficult position, as social partners are left highly dissatisfied with how it handled negotiations over the past few months. To start with, the final result indicates that the agreement could have been reached much sooner.
The Presidential Palace counters that the two sides entered dialogue with a number of red lines and the proposal ‘CoLA for everyone’ which initially caused such fierce reaction and growing mistrust towards Labour Minister Yiannis Panayiotou, was ultimately the one that sealed the deal.
The agreement calls for the gradual restoring of the CoLA percentage from 66.7% to 100% based on the increase of the Consumer Price Index (80% in January 2026, 90% as of July 2026 and 100% as of July 2027).
Activating the CoLA mechanism only if the annual percentage change during the previous year is positive, while an inflation ceiling of 4% is set to estimate the annual CoLA maximum rise.
The Labour Minister, in coordination with the minister or finance, or following a suggestion by contractual parties to the deal, now has the flexibility to call a meeting of the Labour Advisory Body to jointly assess possible macro-economic risks.
For future reference, the government has committed itself to mplementing policies that will include more employees, following relevant consultations with social partners.
The minimum wage is connected to CoLA through the integration of the amount corresponding to the previous two years allowance to the relevant minimum wage directive.
The issue will be revisited, following review of the minimum wage legislation in 2028.