Unions and employers brace for fight over wage rises

Unions and employers’ organisations are on a collision course over the cost of living allowance (CoLA), which they are set to discuss with the Labour Minister Kyriacos Koushos at a meeting on Monday.

The two sides are completely at odds over the level of CoLA to be incorporated in wages from January 2023, with unions insisting that the pre-bailout formula for calculating the pay rise is used and employers strenuously rejecting this. The unions have threatened industrial action if their demands are not met.

“We could see strikes at airports, ports and hotels which employ big numbers of workers that belong to SEK and PEO as well as at semi-governmental organisations,” said the general manager of the Employers and Industrial Federation (OEV), Michalis Antoniou. “We could enter a period of chaos and social unrest.”

He and the employers’ organisations want the transitional agreement, which was signed at the end of 2017 and has been in force for the last five years, to be maintained. Under the transitional agreement 50 per cent of the rise in the retail price index (RPI) is incorporated in wages, once a year. At the time, unions had agreed to this as an alternative to the scrapping of the automatic adjustment of wages, which was what international lenders – the Troika – had proposed in the days when Cyprus was in the assistance programme.

But now the unions want a return to the pre-bailout system which ensured the wage adjustment was based on the full increase in the RPI and the adjustment was made every six months. With the rate of inflation for this year forecasted to be to 8.2 per cent, the corresponding increase in gross wages would be in the region of 9 per cent, something businesses, faced with high energy and other costs, refuse to accept.

In addition, the full restoration of CoLA would pose big fiscal problems for the government, which would see an estimated €150 million added to the public sector payroll, an amount not factored into the 2023 state budget that has already been submitted to the legislature. Such an additional expense, would throw public finances into disarray, said a source at the finance ministry.

After a meeting of the bosses of all the big unions – SEK, PEO, Deok, Pasydy, Oelmek, Poed, Oltek, police association, firemen’s association – last Monday it was announced that they were determined “have the battle” to restore CoLA to its former basis.

In response, many members of OEV said they wanted CoLA to be completely scrapped. While the Chamber of Commerce and Industry (Keve) is less strident, it also opposes the full restoration of the wage adjustment system.

“We want full return of CoLA in its original form as we consider it would be helpful in these conditions, it would help workers by restoring the purchasing power and value of wages,” said Andreas Matsas, the general secretary of the SEK union federation.

Matsas acknowledged that it would be “extremely difficult” to bridge the differences with employers.

“We made a decision for mobilisations,” he told the Sunday Mail, if no agreement was reached. Restoration of CoLA was a “non-negotiable aim”.

This ‘no compromise’ stance was embraced by all the unions last Monday.

“They are going for all-out confrontation,” OEV’s Antoniou, told the Sunday Mail

“Most businesses are in no position to give 9 per cent pay rises on a gross salary in today’s conditions and many of our members are calling for the abolition of CoLA, altogether,” he said.

The irony is that the lowest paid workers of the private sector, those most in need of support in this period of soaring prices, are not paid CoLA. According to the labour ministry, only 30 per cent of workers in the private sector are paid CoLA. In other words, the low-earners, many on the minimum wage, have nothing to gain from CoLA in its new or old form. But for the public sector it’s very different.

“We all know who will gain from the restoration of CoLA,” said a senior official at the finance ministry. “This is not the time for well-paid public employees to be seeking full CoLA, especially considering that from this January all the earlier wage cuts will have ended and their pay will have been fully restored.”

Everything will depend on what will happen in the public and semi-governmental sectors, because almost all the private sector collective agreements have a provision, stipulating that wage rises are in line with what is paid in the public sector. If the government gives in to Pasydy and the powerful teaching unions, which is a distinct possibility three months before presidential elections, then businesses with collective agreements would be legally obliged to follow.

“The government’s stance in this dispute will be of vital importance,” Matsas told the Sunday Mail, alluding to the link between public sector and private sector pay.

Logically, the government should be totally opposed to the restoration of CoLA, given that it will cost it an additional €150 million and upset its budget planning, but it is on the way out and there are presidential elections in three months. Unions are aware of this power vacuum, which is the reason they have taken an uncompromising stance.

Antoniou sees this as part of the problem. “There is no central force to bring the two sides together, to take a tough stance with both and force some kind of compromise,” he told the Sunday Mail. “There is no force to restrain the unions or our people, both of whom seem to be out of control.”

Labour minister Koushos, who called Monday’s meeting of the so-called social partners at the request of the unions, was not so pessimistic. He said raising the ante was inevitable ahead of the meeting. “The war of words and threats they would go out on the streets is no big surprise as sides in a dispute tend to do this before a negotiation.”

He said: “On Monday I will listen to them and try to get an idea of what they are willing to discuss. I will then have separate meetings with the representatives of each side to gauge if there is enough room for a compromise. There could be several such meetings.”

If unions and employers do not reach an agreement, the transitional CoLA agreement that applies since the beginning of 2018 would remain. There is a provision in it which stipulates that if the two sides fail to agree on a new CoLA formula the transitional agreement stays in force.

Legally speaking, the employers’ side is in a stronger position, because if there is deadlock in talks with the unions the existing CoLA arrangement would remain. Unions, however, have not given the slightest indication that they would honour the agreement which they signed at the end of 2017.