Cyprus Mail

Public service CoLA freeze to continue until 2018

Persons employed in the broader public sector (central government and semi-governmental organisations) will continue not receiving Cost of Living Allowance (CoLA) until 2018.

However automatic salary increments for civil servants – frozen since 2012 as part of a drive to rein in the public payroll – will be resuming as of 2017.

Under a package of six government bills – designed to overhaul appraisal, promotion and transfers in the public sector – pay rises are to be tied to the increase in nominal GDP. It follows that no salary increases would be granted at times of zero economic growth, and any such increases would be given following collective bargaining and provided the state can afford it.

Regarding the index-linked CoLA, the bailout agreement between the government and its international lenders stipulates that it will be granted only during economic growth – registered during the second and third quarters of the preceding year – and provided there is inflation.

And under another provision, CoLA will be given once a year but only at 50 per cent of the calculated rise in the cost of living compared to the previous year.

There’s a catch: although for 2016 the government is forecasting a 2.2 per cent growth in the economy, CoLA would not have been paid anyway in 2017 because authorities are also predicting negative inflation, or deflation for the third quarter of this year.
As such, the finance ministry will not be budgeting for CoLA in the public payroll.

According to the finance ministry, deflation throughout 2016 is expected to reach 0.7 per cent. In 2015 and 2014, deflation registered at 1.5 per cent and 0.3 per cent, respectively.

Payment of CoLA will resume in 2018, when both economic growth and inflation are forecast to be positive.
But the system will not work in reverse – civil servants will not see their monthly salaries docked during times of falling prices, for example by a percentage corresponding to the rate of deflation, even if the economy has grown during the period in question.

Civil servants’ salaries were slashed in mid-2013 in the face of fiscal implosion. The cuts were tiered, ranging from 10 per cent to 17 per cent, and were imposed on a temporary basis until 2016.

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