Minister of Labour and Social Insurance, Yiannis Panayiotou, at a meeting with the social partners on the issue of wage indexation (CoLA). Photo: PIO/Stavros Ioannides
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Social partners sign landmark CoLA deal

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Social partners have settled a dispute over the Cost of Living Allowance (CoLA), by accepting the mediation proposal tabled by Labour Minister Yiannis Panayiotou.

The island’s four main trade unions – SEK, PEO, Deok and the civil servants’ Pasydy – and the two employer groups, the Chamber of Commerce and OEB, signed the compromise deal at the Labour Ministry late on Friday.

The last to give its blessing to the deal was left-wing Akel-affiliated PEO on Friday afternoon, saying it hesitantly accepted the minister’s mediation proposal, despite finding “it does not meet the goal of reinstating CoLA to 100%”.

PEO noted, however, that “the proposal is essentially a renewal of the 2017 interim agreement”, which the union claims it entails a clause to fully reinstate the institution, as public consultation will now continue until the first half of 2025, when the minister wants to settle the dispute, once and for all.

Panayiotou’s proposal on the automatic wage indexation system was first accepted by the majority of unions, except PEO. The Chamber of Commerce, CCCI, also said it would back the deal, despite reservations.

The minister’s proposal foresees renewing the 2017 interim agreement for a further three years and increasing CoLA to two-thirds of the Consumer Price Index. This would mean the rate of CoLA calculation would go up to 66.67% from the current 50%.

The deal retains the payment of raises to employees as of June 1, in line with 2022 inflation.

According to the new deal, based on the principles of the one drawn up in 2017, a structured social dialogue is to be launched in June 2025 to find a holistic solution to the matter.

In earlier comments, the head of the DISY-affiliated SEK, Andreas Matsas, said that the trade union would push towards an agreement, after its executive board approved the deal on Thursday afternoon.

Matsas noted that the vast majority of employees in the private sector will not benefit from any agreement on the renewal of CoLA, as 60% are not covered by collective agreements.

Civil servants were also on board, as Stratis Matheou, PASYDY’s General Secretary said that, “under the circumstances, the Labour Minister’s proposal is balanced and fair,” noted Matheou.

Social democrat EDEK’s affiliated union DEOK said that it had no intention of turning down the proposal.

Less than willing

AKEL affiliated PEO’s stance remains was somewhat enigmatic, as the union’s officials appeared less than willing to consent to the mediation proposal.

In comments to the Financial Mirror, PEO’s General Secretary, Sotiroula Charalambous said that the issue with the proposal is that it does not incorporate the philosophy of the previous transitional agreement which saw the CoLA rate increased by 50%.

“The philosophy for us is clear. CoLA must link workers’ salaries directly to inflation,” said Charalambous.

From the employers’ organisations, the Employers and Industrialists Federation (OEB) was the first to back the minister’s compromise proposal.

Speaking to the state broadcaster, its director general Michalis Antoniou said it was not a unanimous decision to support the proposal.

Nonetheless, he said, “OEB decided to take a responsible stance to avoid any turbulence, and keep the labour peace. However, the federation will not accept to budge by an inch on the proposal, and will tolerate no compromises over it.”

The OEB official told the Financial Mirror that the employers’ federation was willing to accept the deal even if it came at a cost to businesses, in order to maintain labour peace.

Businesses that pay out CoLA to their employees, will see their payroll increase by 1.45%, adding to an increase of 4.36%, dished out to cover the 50% CoLA rate rise.

The Chamber of Commerce General Secretary, Marios Tsiakkis, had told media earlier that there are constituents within the group that want the complete abolition of CoLA.

Talking to state radio CyBC, Tsiakkis said that, “the chamber is not satisfied with the mediation proposal, but does not reject it in its entirety”.

Tsiakkis said that the CCCI requested clarifications from the Labour Minister, tabling a proposal for tax incentives and compensatory measures for businesses.

Media reports have the Labour Minister contemplating the reduction of employers’ contribution to the contingency fund, while the CCCI has also tabled suggestions for reduction of their contributions to the redundancy fund.

According to calculations, the implementation of the new CoLA deal will burden state finances with an additional €20 mln a year, as civil servants’ salaries will automatically increase by 1.5% across the board as of June.