Cyprus’s social partners signed an in-principle agreement on automatic cost-of-living adjustments (COLA/ATA) on Thursday in the presence of President Nikos Christodoulides, after months of consultations, meetings and strike action.
The agreement partially satisfies all parties whilst fully satisfying none. It represents a compromise that falls short of the initial positions of both employers and trade unions, whilst also failing to fully achieve the government’s stated aim of “COLA for all”.
At the same time, each side has achieved some of its objectives, as reflected by the signing of the agreement.
What the agreement provides
The final agreement includes:
(1) Gradual full restoration of the cost-of-living payment from 66.7% to 100% of the Consumer Price Index increase as follows: 80% in January 2026, 90% in July 2026 and 100% in July 2027. Subsequently, COLA will be paid every July.
(2) Activation of the COLA mechanism provided the annual percentage change in the growth rate in the previous year is positive.
(3) Setting an upper limit of 4% for inflation increases in the previous year for calculating the maximum annual cost-of-living increase.
(4) For the implementation and extension of COLA and payment to more beneficiaries, the government will implement policies following agreement with social partners and incentives in consultation with employers.
(5) Linking the national minimum wage and COLA by incorporating the amount corresponding to the cost-of-living payment from the previous two years into the Minimum Wage Order, which will then be applied.
This issue will be discussed again when the minimum wage is reviewed in 2028. The final point on linking to the minimum wage forms an annex to the agreement and requires additional signatures.
Formal procedure
Final ratification of the agreement by the social partners is now expected. However, the entire process is considered a formality, as the leadership of employers and trade unions attended the Presidential Palace with authorisation to sign the agreement.
However, for final signatures to be secured, each organisation must complete its internal procedures and give its final answer, which is expected in the coming days.
55,000 additional beneficiaries
In a statement following the signing, Christodoulides said this was a permanent agreement on an issue pending for 15 years, stressing that COLA is being extended to 55,000 low-wage earners through its link to the minimum wage.
As a government, he added, “we inherited COLA at 50%, under conditions of insecurity and risk of industrial unrest, whilst today full restoration of COLA to 100% is achieved within 18 months, in a balanced and sustainable way. Under the new framework, more than 55,000 beneficiaries are included, effectively extending the institution to benefit wider groups of workers”.
Christodoulides noted that the positive course of the economy, reflected in continued growth, reduction of public debt and achievement of full employment conditions, creates opportunities for implementing policies that improve citizens’ daily lives.
Responsible fiscal policy and the trust regained both domestically and internationally, with successive upgrades from credit rating agencies, allow the government to proceed decisively in supporting workers, he said.
What employers and unions gained
Trade unions achieved gradual restoration of COLA payments to 100%, and within a relatively short timeframe compared to the schedule proposed by employers.
They also secured the link between COLA and the minimum wage, a development that increases the number of people who will receive COLA.
Employers, meanwhile, secured the linking of COLA to both economic growth and inflation increases, introducing a 4% cap. They also achieved biennial COLA adjustment based on the minimum wage, rather than the annual adjustment sought by unions.
