The deal between social partners to renew the Cost-of-Living Allowance agreement to cover 66.7% of inflation, up from 50%, means the state will pay an additional €1 bln in salaries over three years (2023-2025), according to estimates.
News site Stockwatch, quoting government sources, said the state would dish out €1.2 bln to cover salary increases for civil servants resulting from the deal struck between social partners and signed on Friday.
The overall cost of the deal on the automatic wage indexation system could increase, as employers have conceded to the Labour Minister Yiannis Panayiotou’s mediation proposal that financial incentives would be given to employers.
The cost was calculated on the basis that inflation in 2023 is expected to hover around 3.2% and 2.5% in 2024.
Total employees are approximately 430,000, of which 77,000 belong to the public sector and will be reaping the benefits of the new CoLA deal.
Of the remaining 353,000, only 28%, or approximately 100,000, are entitled to CoLA.
This includes employees covered by a collective agreement, such as the hotel and construction industry, the manufacture of medicines, and some professions.
Economists say the new agreement will benefit civil servants, who are better compensated than most of the workforce.
In comments to Stockwatch, economist Mike Spanos said: “It is clear the majority of workers in the private sector, who are low paid, will not get a single cent from the new CoLA agreement.”
Spanos argued that, in this instance, the government assumed a disproportionate social cost to avoid a political cost.
He argued that the €1.2 bln could have been assigned to projects to benefit low-income groups, not a privileged class of employees.
Social partners settled an ongoing dispute over CoLA by accepting the mediation proposal tabled by Labour Minister 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 minister’s proposal foresees renewing the 2017 interim agreement for 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 pay rises for employees as of June 1, in line with 2022 inflation rates.
Left-wing Akel-affiliated PEO said it hesitantly accepted the minister’s mediation proposal, despite finding “it does not meet the goal of reinstating CoLA to 100%”.
PEO noted: “The proposal is essentially a renewal of the 2017 interim agreement”.
Public consultation will continue until the first half of 2025 when the minister wants to settle the dispute once and for all.