Background for Cyprus

In 2021, Cyprus’s economy once again began to experience rates of growth: gross domestic product (GDP) per capita increased by 10.5%, which was significantly above the EU27 average for that year. Similar to the rest of the EU, unemployment fell by 0.1%, although the unemployment rate of women (which decreased during the pandemic) increased by 0.3%. The total employment rate also increased, but the increase was slightly lower in Cyprus than the EU27 average. In 2022, these positive developments continued. GDP per capita increased by 4%, which again was higher than the EU27 average for that year. Unemployment further decreased by 0.7%, which was a significant decrease but was not as large a decrease as the EU27 average. While unemployment among both men and young people fell (1.1% and 0.9%, respectively), the decrease among women was minimal. Although this was the first time that female unemployment had fallen since 2020, the unemployment rate was higher than in 2020. In addition, the decrease in unemployment among young people was significantly less than the EU27 average. Total employment, on the other hand, increased in Cyprus by more than the EU27 average in 2022; however, the employment rate of young people continued to fall, in contrast with the increase of the EU27 average.

In Cyprus’s present system of industrial relations, labour legislation is a secondary regulating tool. Given that labour law is made up by common law and statute law, the employment relationship is regulated by ordinary Contract Law principles (Contract Law (Cap. 149), as amended), supplemented by statutory rights and obligations where appropriate. In this context, until very recently, industrial relations in Cyprus were regulated by a very limited number of statutes, principally the Termination of Employment Law of 1967, as amended in 2002 (Law 159(I)/2002), and the Annual Holidays with Pay Law of 1967, as amended in 2002 (Law 169(I)/2002). However, with the enforcement of the EU acquis in the area of labour law, a series of laws were introduced from 2002 onwards that now regulate a significant number of terms of employment. In some cases, the EU acquis provided for more favourable terms than those negotiated in collective agreements (for instance, annual leave).

The present system of industrial relations was substantially consolidated after 1960 – the year that Cyprus gained its independence – on the basis of the two fundamental principles: voluntarism and tripartite cooperation. Based on these principles, collective bargaining has traditionally played a leading role in regulating industrial relations, and legislation has been a secondary tool (see above). Along the same lines, state intervention generally in industrial relations and particularly in the formulation of terms and conditions of employment is kept to a minimum. In this context, the role of the state is mainly a mediatory one. It intervenes, as also laid down in the Industrial Relations Code (Κώδικας Βιομηχανικών Σχέσεων, IRC), through the Mediation Service of the Ministry of Labour, and Social Insurance (Υπουργείο Εργασίας και Κοινωνικών Ασφαλίσεων, MLSI) in cases in which agreement cannot be reached in direct bipartite bargaining between employer organisations and trade unions. In sectors of economic activity where trade union representation is not present or is weak, the state sets, through legislation, minimum standards of the basic terms and conditions of employment, such as the minimum wage and working time for specific occupations or sectors of economic activity, for example in the retail sector. In the light of decreasing trade union density and in particular given the recent economic crisis, trade unions have, since 2013, been more inclined to be in favour of state intervention in the regulation of the minimum terms of employment. For example, in April 2016, following the renewal of the collective agreement in the hotel industry, the House of Representatives (Βουλή των Αντιπροσώπων) amended the Terms of Employment Regulation for Employees in Hotels (Οι περί εργοδοτουμένων σε ξενοδοχεία (όροι υπηρεσίας) κανονισμοί) by obliging all employers of the sector to extend the minimum entitlements and benefits to all hotel employees, independently of the collective agreement coverage. This was a major demand of the sector’s trade unions. In a similar process concerning the construction industry, the sectoral social partners reached an agreement in 2019 for the renewal of the industry’s collective agreement including the introduction of legislation setting minimum terms of employment for all of the sector’s workers. Unlike any other legal instrument setting minimum terms of employment, this legislation, which was adopted in May 2020, provides for the automatic evolution of these minimum terms in accordance with the respective provisions of the industry’s collective agreement. These developments lead to the assumption that, in future, regulatory and legislative authorities will be called upon more frequently to adopt measures regulating the minimum terms of employment.

Sure enough, 2021 and especially 2022 saw significant developments in labour legislation. Within this short period, there were amendments to the law regarding pregnancy and maternity leave and to the law on the protection of wages. Furthermore, a new law was introduced on paternity leave, parental care, force majeure and flexible working arrangements, which resulted from harmonisation with the EU Directive on Work–Life Balance. This law was enacted in early December 2022 and it abrogated the previous laws on parental leave, force majeure and paternity leave. In addition, 2022 also saw the finalisation of the social dialogue regarding the establishment of a national minimum wage for the first time in Cyprus. The relevant ministerial decree came into effect in 2023, but it was very divisive, as trade unions considered it problematic in many ways. In fact, trade unions have had a number of reasons to be dissatisfied in recent months. In addition to the problematic minimum wage decree, there have been a multitude of disputes of varying significance. These disputes include the following: a great number of hotel owners did not adhere to the collective agreement even after it became a law, as, in the opinion of the trade unions, the incumbent government’s decree that allowed hotel owners and employers in other sectors to employ an increasing number of workers from third countries added insult to injury; the bill on telework, formed after a productive process of social dialogue, never reached the House of Representatives due to the interference of employer organisations that were hoping for a more favourable EU directive on the matter; and employer organisations refused, and the government was reluctant to adhere to, the deal to restore the cost of living allowance (COLA), a situation that led to the first general strike in the history of the Republic of Cyprus. All of these disputes are still ongoing and unresolved issues.