The basic salaries of civil servants, government employees and state officials will rise by 1.25 per cent as of January due to the Cost of Living Allowance, the finance ministry said on Thursday.

In a circular, the ministry explained how CoLA was calculated at 1.25 per cent.

It said the average consumer price index (not including the impact of excise duties) during 2024 came to 113.46 points, compared to 111.38 points during 2023 – an increase of 1.87 per cent.

The Cost of Living Allowance (CoLA) is calculated as 66.7 per cent of the change in the consumer price index. Multiplying 1.87 per cent by 66.7 per cent gives 1.25 per cent.

CoLA is given provided that there has been a growth in GDP during the second and third quarters of the preceding year.

“Given that during the second and third quarters of 2024, seasonally-adjusted real economic growth, registered at 3.5 per cent and 3.8 per cent, respectively, and factoring in the increase in the underlying CoLA index during 2024 in relation to 2023, as of January 1 and for a period of twelve months, a 1.25 percentage amount is incorporated…”

Later in the day, the Employers and Industrialists Federation (OEV) issued a similar statement regarding the private sector.

Workers in the private sector are entitled to CoLA provided their employment is governed by a collective agreement.

According to the labour ministry, speaking in 2022, only 30 per cent of workers in the private sector are paid CoLA.

The government froze CoLA due to the economic crisis that hit the country (in 2011 for the public sector employees and 2013 for the private sector) but it was partially restored in 2017 after a three-year transitional agreement achieved among the social partners. Under the agreement, the CoLA indexation would be incorporated in the basic salaries at 50 per cent of the annual increase of the consumer price index (CPI) once a year.

The agreement was suspended up until the end of 2021 due the spread of the coronavirus and the subsequent disturbances in the labour market and the economy.

After a long consultation period with the ministry of labour, social partners signed another three-year transitional agreement in May 2023 to apply from June 2023 onwards. The deal stipulated raising the rate from 50 per cent to 66.7 per cent of the annual increase of the CPI.