Collective bargaining in Cyprus

The right to collective bargaining is guaranteed and safeguarded by the Constitution of 1960. In particular, Article 26(2) of the Constitution provides that ‘a law may provide for collective labour agreements of obligatory fulfilment by employers and workers with adequate protection of the rights of any person, whether or not represented at the conclusion of such agreement’.

In the absence of relevant law, however, the collective agreements concluded thus far are considered ‘gentlemen’s agreements’. This implies that the regulatory part of the agreements – terms regulating pay and working conditions issues, along with other issues arising from the provision of labour – has no direct or obligatory effect on workers.

In practice, the system of free collective bargaining developed in the framework of the IRC applies to both the private and the semi-public sectors.

Despite a clear trend towards decentralisation of collective bargaining, as reported by both trade unions and employer associations, a mixed situation continues to exist in Cyprus in which bargaining levels alternate between the sector and company levels. In this context, it is rather difficult to assess which is the predominant level, mainly with regard to the total bargaining coverage rate. Specifically, despite the numerical preponderance of the enterprise level, the sectoral level is seen as just as important, if not more important, as far as coverage is concerned.

The available data on collective bargaining coverage are fragmented and derive from various sources, while the methods by which they are collected and processed are unknown. In this context, it is problematic to cite any specific data, while it is extremely important to differentiate between the public/broader public sector, where the proportion of coverage reaches almost 100%, and the private sector. As far as the private sector is concerned, without providing an exact figure, trade unions have reported that there has been a trend of decreasing bargaining coverage since 2007 and that the pace of this trend has been steadily increasing since 2010. This trend became more evident over the course of the recent economic crisis.

Collective wage bargaining coverage of employees

Note: * Percentage of employees working in local units where more than 50% of the employees are covered under a collective pay agreement against the total number of employees who participated in the survey.

Sources: Eurofound, European Company Survey 2013 and 2019 (including private sector companies with establishments of >10 employees (Nomenclature of Economic Activities (NACE) codes B–S), with multiple answers possible; Eurostat [earn_ses10_01], [earn_ses14_01], [earn_ses18_01], Structure of Earnings Survey 2010, 2014 and 2018 (including companies with >10 employees (NACE codes B–S, excluding O), with a single answer for each local unit); OECD and AIAS (2021).

In Cyprus, collective bargaining takes place at sectoral and enterprise levels. At sectoral level, direct negotiations are always held between the two sides of industry, in most cases between the two biggest confederations from the employees’ side (PEO and SEK) and the OEB from the employers’ side. At enterprise level, collective agreements are drawn up and negotiated, usually directly, between the trade union representatives and the employer, but in a number of cases with the assistance of the company’s affiliated employer association.

Levels of collective bargaining, 2022

Articulation

Articulation between the two bargaining levels is rather weak. As a result, bargaining at sectoral level does not constitute the basis for setting pay on a more specific level such as enterprise level.

The time when collective bargaining takes place is not set. Nevertheless, based on the provisions of the IRC, the party seeking to modify an existing collective agreement should give the other party at least two months’ notice of its intention to do so, before its expiry, and accompanied by a list of either claims or modifications. The only exception is when, in the case of small undertakings, a different process is stipulated in the collective agreement.

When both parties agree, the existing collective agreement will continue to be in force for a period equal to the length of the delay in the submission of the claims if this delay does not exceed 15 days. If the party seeking to modify an existing agreement has failed to give notice of its intention to do so, the collective agreement remains in force for another year.

As a result of the economic crisis, an objective of employer organisations is the conclusion of longer-term collective labour agreements, something that they believe the unions are also seeking. Unions, however, believe that the term of collective agreements should be shorter, as many provisions are judged to be temporary due to the economic crisis.

Although there is no operational coordination between the different levels of bargaining, in a few sectors of economic activity, such as hotels, metalworking and the construction industry, collective bargaining constitutes the basis for setting pay in other sectors of economic activity, at either subsectoral or company level. This means that these sectors are informally considered as pacemaking sectors.

Collective agreements apply to signatory parties’ members only. However, in Cyprus, there is no general legal provision for mandatory extension of the collective agreements, nor is there a functional equivalent.

The Christofia’s government submitted, in February 2013, a draft law aimed at introducing an extension mechanism for sectoral collective agreements. The Anastasiades’ government, which took office in March 2013, revoked the draft law. Thereafter, the president of the Labour Committee of the House of Representatives resubmitted the draft law with minor essential changes. As of end of 2022, the draft law was still with the Labour Committee and had not yet been taken into the committee’s priority agenda.

A type of extension mechanism was introduced by legislation in May 2020. The legislation is specific to the construction industry. The legislation extends the following five provisions of the sectoral collective agreement to all of the industry’s workers: (1) public holidays, (2) a provident fund, (3) working time, (4) remuneration of overtime and (5) a 13th salary payable to workers in December.

In relation to wage indexation that applies to the outcomes of collective bargaining, all employees are covered, regardless of whether they are a member of a trade union.

Derogation is possible, but no concrete figures on its extent are available for Cyprus. The DLR reported for 2012 that there was an increase in the number of employers that introduced unilateral changes to the terms and conditions of employment, which, in most cases, resulted in a partial violation of collective agreements and fewer people being covered. Partial violation means either that not all of the provisions of the agreement were observed or that only a small portion of the staff were covered (with those covered usually being permanent staff who are union members).

Opening clauses have been more common since 2012, as a result of the economic crisis. There is no relevant legislative or institutional framework and, prior to 2008, opening clauses were not used. It should be noted that, in Cyprus, instead of the term ‘opening clause’, social partners prefer to refer to ‘special/ad hoc agreements’ (or provisions within an existing agreement) that take the form of a hardship clause as a result of the economic crisis. The OEB has stated that, since 2012, most renewals have been made in the framework of this type of agreement, being entered into for a short period of time, usually for one year. As regards their content, these special/ad hoc agreements refer almost exclusively to pay and working time. In practice, the ad hoc agreements function as framework agreements, allowing deviations from the original agreement, whereas any individual deviations take place at enterprise level, depending on the special conditions faced by each individual enterprise. As the economy returned back to positive growth rates, from the second half of 2015 the main trade unions of the private sector began focusing on the recovery of all of the terms provided by collective agreements.

Until their renewal, the previous agreements usually remain in force. In the view of PEO, however, this is a grey area in which it is unclear what is or is not in force. In this context, PEO has pointed out that, as a result of the economic crisis, there have been more delays in renewing collective labour agreements and therefore many workers both in individual enterprises and in whole sectors of economic activity have remained uncovered by basic terms and conditions of employment.

Not all collective agreements contain a peace clause, and those collective agreements that do have a peace clause point to the provisions of the IRC anyway. The IRC is merely a ‘gentleman’s agreement’ and therefore does not produce legal obligations. However, social partners involved in collective bargaining adhere to its provisions. The IRC deals with industrial peace according to the nature of the dispute. For conflicts over interests (conflict arising out of negotiations for the conclusion of a new or the renewal of an existing collective agreement), the IRC provides that the parties must not resort to industrial action either during the validity of a collective agreement or during mediation, arbitration or public inquiry.

In the case of disputes over grievances (defined as disputes arising from the interpretation and/or implementation of existing collective agreements or of existing conditions of employment or from a personal complaint including a complaint over a dismissal), the parties undertake not to resort to any industrial action. Trade unions may resort to industrial action if an employer, against the recommendations of the MLSI, flagrantly violates a provision of the collective agreement.

In terms of its content, collective bargaining is rather limited and covers traditional issues such as pay and working time. Other issues related to individual employment and working conditions are considered to be of secondary importance.