Social partners agree on pay indexation

In February 2012 the social partners reached a framework agreement with the government, covering pay increases over the next two years. Its most important point concerns the continued payment of a cost-of-living allowance by private sector businesses. It also states that enterprises will pay wage and benefit increases according to existing collective labour agreements, unless they are deemed to be facing serious problems due to the current financial crisis.


On 3 February 2012, social partners signed a special agreement on a framework for granting wage increases during 2012 and 2013, after successful mediation between them and the Ministry of Labour and Social Insurance.

The two parties had been in dispute after the Employers and Industrialists Federation (OEB) decided to recommend that private enterprises should freeze wage rises and pay no cost-of-living increases in 2012 and 2013.

The framework agreement was signed by the Ministry of Labour and Social Insurance, by OEB for the employers and by the Pancyprian Federation of Labour (PEO) and the Cyprus Workers' Confederation (SEK) on behalf of the workers.

Terms of the agreement

The most important points of the agreement are the continued payment of the cost of living allowance (ATA) and payment of wage and benefit increases as set out in the current sectoral and enterprise level collective agreements.

However, any enterprises facing serious problems due to the financial crisis will be able to postpone paying wage increases until the end of December 2013.

By contrast, enterprises and sectors of the economy that are not facing any particular financial problems will have to continue to pay wage and benefit increases as normal.

Monitoring the agreement

The agreement provides for the creation of a joint monitoring committee, representing both sides, to make sure it is implemented correctly and to prevent enterprises abusing the provisions.

Enterprises will be helped to avoid making dismissals, or to limit them to the very minimum necessary; furthermore, the committee can make recommendations regarding the adoption of further measures in the framework of statutory procedures and only in exceptional cases where certain enterprises are facing serious financial problems.

A representative of the Ministry of Labour and Social Insurance will also be permitted to join the committee when this is deemed necessary.

In signing this agreement, the social partners have reconfirmed their commitment to implementing current collective labour agreements and the Industrial Relations Code.


Expressing her satisfaction that this agreement had been reached, the Minister of Labour and Social Insurance, Sotiroula Charalambous, referred to the voluntary nature of the existing industrial relations set up, stressing the importance of tripartite collaboration in difficult times such as the current financial crisis.

Representing the employers, the Chair of OEB Philios Zachariades stressed that this agreement will encourage dialogue between the two sides, enabling problems to be tackled on the basis of consensual and mutually acceptable solutions.

For the workers, the representatives of PEO and SEK focused on the importance of universal implementation of the agreement, a necessary precondition for ensuring stable industrial relations.

In the same spirit, the Democratic Labour Federation of Cyprus (DEOK) said it believed faithful implementation of the agreement would prevent negative developments in the labour market and would help maintain industrial stability. DEOK has expressed strong concerns, however, about the Ministry of Labour’s decision not to participate in the dialogue despite requests to do so from DEOK and the Cyprus Chamber of Commerce and Industry (CCCI). If they had taken part, any agreement reached would represent all worker and employer bodies and faithfully reflect the whole spectrum of the economy and society.

DEOK also believes the framework agreement would be more complete if it included a chapter on employment. This issue is of key importance for saving jobs and safeguarding collective agreements and employment conditions, especially at a time when unemployment is rampant.


In a climate of intense industrial and social uncertainty that is unprecedented in Cyprus, the framework agreement between OEB and the trade union organisations PEO and SEK is without doubt a positive development, which will, in the short term at least, restore industrial peace in sensitive sectors of the economy.

In the long term, however, there is doubt about the extent to which even the member enterprises of OEB, let alone non-member enterprises, will respect the framework agreement.

Eva Soumeli, INEK

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment