The draft framework for the cost-of-living allowance (CoLA), presented earlier this week, was sharply criticised by the employers’ and industrialists’ federation (Oev) and the Cyprus chamber of commerce and industry (Keve) in a joint letter to the finance and labour ministries on Friday.

According to local media reports, Oev and Keve said the draft “includes many ambiguities, contradictory points, and references that were never part of the negotiating framework as it was formed in previous meetings.”

The employer organisations reiterated their firm opposition to the universal implementation of CoLA across both the public and private sectors, as demanded by trade unions.

In response to the government’s proposed five-point plan, Oev and Keve submitted nine counter-proposals for inclusion in any future CoLA framework.

First, they criticised the ministers’ proposal to offer tax benefits to employers who currently, or in the future, plan to implement CoLA – a measure one employer source described to the Cyprus Mail as “remarkably badly written.”

Oev and Keve warned that such incentives could create unfair competition between businesses.

In relation to inflation, they proposed capping the annual inflation adjustment at three per cent and paying CoLA in staggered instalments.

They also recommended a regulatory mechanism in cases where forecasted inflation exceeds, or is more than double, the real GDP growth rate for the year.

Instead of the unions’ demand for a full 100 per cent reinstatement of CoLA, Oev and Keve suggested restoring it to 50 per cent on an annual basis, calculated cumulatively from the start of next year.

They also argued that the percentage of the yearly CoLA concession should be taken into account during the four-yearly review of the minimum wage before any revisions take effect.

Should CoLA turn out negative for a given period (meaning deflation occurred), Oev and Keve proposed that salaries remain unchanged, with the negative percentage offset against the following year’s allowance until fully recovered.

The organisations agreed to the annual payment date of July 1 but called for the “household basket,” used to calculate CoLA, to be reviewed immediately after an agreement is reached.

Oev and Keve’s nine-point proposal stands in direct contrast to the ministers’ draft, effectively dashing hopes that an agreement could be reached soon.

The government’s framework outlined a gradual implementation of full CoLA by January 1, 2028. Under this plan, CoLA would remain at 66.7 per cent until the end of 2025, rise to 90 per cent at the start of 2026, and reach 100 per cent by 2028.

It also proposed biannual minimum wage reviews, taking interim CoLA payments into account cumulatively.

The inflation cap would be set at four per cent – one percentage point higher than the employers’ proposal – and included tax incentives covering up to 50 per cent of the annual allowance to encourage gradual implementation.

Trade unions had on Tuesday expressed equal criticism of the proposal, with Peo general secretary Sotiroula Charalambous saying that the framework “lacks significant elements and contains many ambiguities.”

Charalambous said the unions asked for clear guidance on key points, including the framework, the implementation of agreements, and the extension of CoLA to other employees.

Despite criticism from both sides, Labour Minister Yiannis Panayiotou on Friday reiterated his optimism that an agreement on the matter could be reached “in the coming days.”

“The conclusion of a permanent agreement on CoLA is feasible and can be achieved within the next few days, to restore normality and stability after the liquidity and transitional arrangements of previous years,” he said at the closing ceremony of safety and health week in Nicosia.

As of Friday evening, the Cyprus News Agency reported that no new meetings with social partners had been scheduled, while the government was still expected to provide further clarifications on the proposed framework.