Cyprus: Impact of the crisis on industrial relations

  • Observatory: EurWORK
  • Topic:
  • Published on: 17 June 2013



About
Country:
Cyprus
Author:
Eva Soumeli
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

As part of the new economic governance at EU level, a number of national government instruments have been put forward, affecting also industrial relations. Nevertheless, most of the implemented measures to date refer almost exclusively to the public and broader public sector. In the private sector, the system of automatic wage indexation is of particular concern for workers, since pressures from the employers’ side for a radical revision or even an elimination of the practice are now also supported by the positions of the Troika. As far as collective bargaining is concerned, social partners confirm that there is a clear trend towards decentralisation, to a large extent as a result of the weakening bargaining power of trade unions.

Section 1: Basic data on the impact of the crisis on industrial relations

1.1: Academic studies

Please give details of up to five relevant academic studies on the impact of the crisis on industrial relations. Please summarise their findings in a couple of sentences.

Despite the fact that the effects of the economic crisis on the institutions and the system of labour relations has been a strong concern in the public dialogue both on the political front and also between the social partners, it has not however been the subject of study on the academic and research front. In this context, the very few studies have failed to link the crisis with labour relations, but rather examine the evolution of the economy and employment in the present-day conditions of economic crisis. To this end, the three most important studies, in chronological order, are the following:

  • The redistributive effects of the economic crisis, Economics Research Centre of the University of Cyprus (December, 2010).
  • Economy and Employment Report for 2011, Cyprus Institute of Labour (INEK/PEO), October 2011.
  • Institute of Labour of Cyprus (INEK/PEO), November 2012: apart from developments on the national level (i.e. evolution of macroeconomic indicators, developments in the labour market with the emphasis on pay and employment, crisis of the banking sector in Cyprus, domestic devaluation procedure) this study also examines the economic crisis in Southern Europe.

Solely as regards the effects of the crisis on labour relations, one basic source of information are the national reports carried out more widely in the framework of the Industrial Relations Observatory (EIRO), as well as specifically in the framework of targeted studies by the Observatory (e.g. SMEs in the crisis: employment, industrial relations and local partnerships TN1010039s, CY1010039q, Helping young workers during the crisis: contributions by social partners and public authorities CY1101019Q).

1.2: Government and social partner research

No relevant studies or research have emerged from the interviews conducted with the social partners. However, the Employers and Industrialists Federation (OEB) from the employers’ side, as much as the unions Democratic Labour Federation of Cyprus (DEOK), Pancyprian Federation of Labour (PEO) and Cyprus Workers' Confederation (SEK) from the workers’ side have stated that even though there is no official outgoing information within the organisations, the developments in the area of labour relations have been the subject of systematic study and monitoring.

The Cyprus Gender Equality Observatory (CGEO), an independent research organisation that functions however under the umbrella of DEOK, is running a study on the impacts of the crisis on policies and measures to promote equal opportunities for women and men, the results of which are expected to be ready in March 2013.

On the government level, any references are included in the official reports of the Cypriot government on the policies and measures to manage and deal with the crisis (e.g. Cyprus National Reform Programme 2012).

1.3: International comparative research

Except for targeted studies by the European Foundation for the Improvement of Living and Working Conditions (Eurofound) in which Cyprus also takes part, Cyprus is usually not included in research conducted on the international and European level. In this context, apart from sporadic references in relation to basic indicators such as employment, redistribution of income, poverty levels, in most cases Cyprus is not part of the analysis, nor is it included in relevant OECD studies.

1.4: Grey literature

In the context of desk research conducted in the three largest universities of Cyprus, the University of Cyprus, the University of Nicosia and Frederick University, no studies have emerged in this regard.

In the context of the deficit seen on the research front, this report was based to a large extent on meetings with the social partners. For the purposes of better representativeness between the social partners and coverage of as many aspects of the issue as possible, we first got in touch with five unions and two employer organisations. Despite the constant efforts of the EIRO correspondent, the Cyprus Union of Bank Employees (ETYK) and the Pancyprian Public Employees Trade Union (PASYDY) did not agree to take part in this study. Given the impact on public servants of the measures the government has taken to date, it is worth noting that PASYDY did not consider its participation in this study important. Given the concurrence between OEB and the Cyprus Chamber of Commerce and Industry (CCCI), the meeting with CCCI was not held.

1.5: Relevance of debate

 a) academic debate

very relevant

relevant

 not very relevant √

 not relevant at all

b) political debate

very relevant√

 relevant

 not very relevant

 not relevant at all

c) debate among social partners

very relevant√

 relevant

 not very relevant

 not relevant at all

Section 2: Policies, instruments and regulations

2.1 EU-level instruments

Based on Cyprus’ commitments under all four priority areas of the EuroPlus Pact, the government put forward a number of measures. Specifically, in fostering competitiveness, a policy of containment of public sector wages has been put forward. Further measures directly affecting the industrial relations in the public and the broader public sector were also taken as a way to achieve the budgetary target in 2011 and the correction of the excessive deficit by 2012, in compliance with the Country Specific Recommendations (CSRs). Overall, the measures to effect fiscal consolidation have been adopted in three packages and covered both the revenue and the expenditure side of the budget. The main measures in relation to industrial relations are the following:

  • Contribution of 3% on gross earnings of broader public sector employees against public pension entitlements.
  • Temporary contribution on gross earnings of broader public sector employees and pensioners for a period of two years (2011-2012) as illustrated in the following table:
Scale of temporary contributions – broader public sector employees

Monthly gross earnings

% of contribution

0-€2,500

0%

€2,501 - €3,500

2.5%

€3,501 - €4,500

3%

> €4,501

3.5%

Source: Ministry of Finance

  • Increase of the rate of contribution for the Widows and Orphans Fund by 1.25% to 2% on gross earnings, of broader public sector employees.
  • Abolition of occupational pension for new employees of the broader public sector.
  • Abolition of all vacant posts (exemptions up to 10%).
  • Reduction of the number of personnel in the broader public sector by 5,000 over the period 2011-2016 (one recruitment for every four retirements).
  • Reduction of salary scales for newcomers of the broader public sector by 10%.
  • Total freeze of wages, salaries and pensions in the broader public sector for a period of two years (2011-2012) having a permanent impact on the level of expenditure.
  • Introduction of a temporary scaled contribution on gross earnings for private sector employees for a period of two years (2011-2012) in line with public sector employees. The contribution will be equally distributed between the employer and the employee.

Apart from the above implemented changes, the government also examines additional measures aimed at further decreasing the state’s operational expenses, of which some are already included in the 2013 budget.

2.2: Governmental instruments

As it is stated above (2.1), national government instruments are part of the new economic governance at EU level. In this context, with the exception of automatic pay indexation, the measures to date refer almost exclusively to the public and broader public sector.

In relation to indexation mechanisms, the political commitment on the social dialogue on COLA mechanism (see 2.3) comes in response to the CSRs for 2011 on wage indexation, and also in relation to the commitments undertaken by Cyprus in the context of the EuroPlus Pact.

2.3: Measures from social dialogue and/or bipartite and tripartite bodies

In response to the CSRs for 2011 on wage indexation, the government took steps to reform, in consultation with social partners and in accordance with national practices, the system of wage bargaining and wage indexation to ensure that wage growth better reflects developments in labour productivity and competitiveness. In this context, the three biggest unions DEOK, PEO and SEK have agreed to a proposal from the Ministry of Labour and Social Insurance on reforming the pay indexation system. Although the ministry’s proposal is considered particularly harsh for the employees, as it effectively cancels out the automatic nature of the system, the three trade unions believe some of the characteristics of the system are retained, while indexation can still be arranged through collective bargaining. The basic provisions of the ministry’s proposal foresee the following:

  • Pay indexation should be carried out once instead of twice a year, every January, and be calculated on the basis of the cost-of-living index for the second and third quarter of every year.
  • If during the second and third quarter of the current year the economy displays negative growth rates, there will be no pay indexation the following year.

In the opinion of the three trade unions, although in other times the employers’ side would consider the above-mentioned terms to be especially favourable, on the contrary, at the present conjuncture the employers’ side is covered by the positions of the Troika, and insist on imposing even stricter conditions. Specifically, OEB had made a counterproposal for a freeze for as long as the memorandum would be in force, and also account would be taken of the financial behaviour throughout the whole year rather than just the last two quarters. OEB is also asking that other factors be taken into account when calculating automatic indexation, specifically labour productivity on the sectoral and enterprise levels and competitiveness of enterprises. For OEB competitiveness refers essentially to the profitability of enterprises. All the above should constitute the basic elements of the automatic pay indexation system, even after exiting the crisis.

According to statements by the Minister of Labour on 22 November 2012, in the context of the consultations with the Troika to set the terms of the memorandum, progress was made in the negotiations aimed at achieving a comprehensive agreement that would also include a revision of the system of automatic wage indexation. Given that initially the Troika wanted to abolish the system, the government working group considers the agreement in principle to retain COLA to be an accomplishment.

In the above context, although in the private sector of the economy changes to the existing indexation mechanism are not yet finalised, the agreement so far, which is already applied in some companies, stipulates that when the economy is in a recession there will be no wage indexation; however, during a period of economic recovery it will be applied once a year, but reduced by 50%. At the same time a series of products will be removed from the consumer price index (e.g. electricity), representing a reduction of around 30%.

In the public and the broader public sector however, the policy of containment of public sector wages that has been put forward, also includes a total freeze payment of the COLA. Initially, the measure was applied for a period of two years 2011 and 2012, but with the enactment of Law 185(I)/ 2012 on 21 December 2012 the measure was extended to cover the period from 1 January 2012 until 31 December 2016.

2.4: Severity of impact of policies, instruments and regulations

 EU new economic governance

very severe

 severe√

 not very severe

 not severe at all

National governmental instruments

very severe

 severe√

 not very severe

 not severe at all

National social partners’ measures

very severe

 severe

 not very severe

 not severe at all

Section 3: Impacts of the crisis

3.1: Impacts on industrial relations actors

3.1.1 The industrial relations actors in this section will principally be the social partners at all levels, including national, regional, sectoral and company. Please describe any relevant impacts. This could include impacts such as:

  • Reorganisations of the social partners, including mergers and changes in representation

Over the period from 2007 to 2012 there were no notable developments regarding the organisation of the social partners, while any foreseen changes are not related with the crisis. From the meetings we had with the social partners, only DEOK is planning for organisational changes. Specifically, the abolition of the Union of Clothing and Shoemaker Employees has being taken forward, practically as a result of the limited economic activity in the specific sector, and are also discussions on the need to create a new union in the services sector, with an emphasis on organisation of scientific staff.

  • Changes in role and visibility of the social partners. Where relevant to your country, please also indicate any changes in the role of the social partners as stakeholders in the Public Employment Services (PES), including:
    • Changes to social partner consultation about the management and operation of the OES (for example, due to the government needing to act quickly in response to the crisis)
    • Changes in the involvement of the social partners in the PES, possibly due to the government wanting to act unilaterally in response to the crisis

The question on PES and the social partners is not relevant in the case of Cyprus. In the meeting however with the social partners, we asked them on how they see their role in the social dialogue and whether they encounter any visibility problems.

In the opinion of all the unions that participated in this study, national measures were put forward as a response to the new economic governance at EU level. In this framework, each union, more or less, believe that most of the measures were in effect decided by the government and as such were imposed on the social partners in a one-sided manner, a practice that constitutes an outright attack on the existing system of labour relations which is based on the principle of tripartite collaboration. Practically, although the social partners are invited to relevant meetings and deliberations under the President of the Republic, these are informational rather than substantive in nature. As a result, the practice of social dialogue is being weakened, and certain social dialogue bodies remained effectively inactive (e.g. the Economic Advisory Council has not met for the last two years 2011-2012, the Joint Staff Committee in the public sector, the Semi-governmental Organisation Council).

SEK further pointed out that since 2008 there has been a slight downgrading of the social dialogue institutions mainly involving delays on the part of the government in tabling issues for discussion in a timely manner. For example, the negotiations with the Troika could have been placed in the framework of social dialogue from the beginning, so as to also highlight in practice the role of the social partners on the national level. In any case, however, SEK believes that the social dialogue will not lose its importance as a procedure, but it will lose the tripartite cooperation as regards the possibility of meaningful intervention.

In terms of visibility, only DEOK believes that unions become less visible. Specifically, DEOK is of the opinion that in the context of the economic crisis, the unions are losing their bargaining power, which is being won by the employer organisations, and the unions are being sidelined in society more broadly, compared to formerly when there was a very strong labour lobby.

On the level of cooperation with state bodies however (e.g. Public Employment Services), all the unions stated that cooperation continues to be good.

  • Trends such as trade union or employer organisation membership (upwards or downwards), and how far this can be attributed to the crisis. Any impacts on other actors, such as central and local government, and NGOs, where relevant.

On the employees’ side, all three unions that participated in the study agree that the trade union movement is affected by the crisis both collectively as well as individually. Collectively, mainly as far as the ability to intervene is concerned, and individually in terms of decreasing membership. Even in the case of the DEOK where the number of members has reported as remaining steady in the 2008-2012 period, member turnover has been increased, which is due to changing employer more often. In DEOK’s opinion, when employees lose their work they distance themselves from the trade union movement, while new employers may create obstacles.

According to PEO, decreasing membership has also a negative effect on the organisation’s finances. In this context, whereas for the years 2009, 2010 and 2011 the number of members remained unchanged, for 2012 there are indications that fewer members are joining, with a corresponding decrease in the organisation’s finances of the order of 8%-10%.

As regards the dramatic decrease in union density, the basic reason in PEO’s view is the downward course of traditional sectors of economic activity and the rise in the services sector. As regards the increase in employment rates among immigrants, the problem is centred on the exploitation of the foreign labour force, mainly of European citizens, by the employers as a cheap labour force, which creates conditions of pressure on workers as a whole. Quite often the workers themselves are not interested in joining the unions, other times there is a serious language problem, but most of the time the employers make it a necessary condition for hiring immigrants that they not belong to a union.

It should be noted that according to data provided by the Trade Union Registrar, since 1990 there has been a gradual decline of over 25 percentage points, reducing the rate of union density from 76% in 1990 to less than 50% in 2011 (CY1203029Q).

SEK without providing for a specific figure or estimate, it relates decreasing membership first and foremost to increased unemployment, more frequent changes in employer and early retirement. The decrease in the organisations’ finances is due, apart from decreased contributions, to the disproportionate differentiation between inflows and outflows of the provident funds. That is, wages may not be directly cut, but the inflow of money into the funds due to lower employer contributions may be decreasing. According to SEK, a certain proportion of workers is wary of organised bodies and their role, such as trade unions, and as a result is distancing itself from them. There is also a pervasive euro-scepticism, a logical reaction according to SEK for a country that is a new member of the EU and realises that before it jointed the EU and the euro zone it was not facing the problems it faces today.

On the employers’ side, OEB reported that there is a clear trend towards increased numbers of members as well as a unique rallying of members which is not however accompanied by a corresponding increase in the organisation’s finances. Thus whereas in the 2008-2011 period taking 2008 as a reference year, a steady increase in membership emerged, OEB’s income has been decreased. This happened, as a result of the direct connection between members’ contributions and enterprises’ payrolls, and thus due to increased dismissals as well as decreased pay. It is not yet known, however, if the reduction in income is large enough to give a negative figure.

3.1.2 Overall, how severe do you think the impact of the crisis has been on industrial relations actors in your country? Please tick the relevant box.

 very severe

 severe

 not very severe√

 not severe at all

3.2: Impacts on industrial relations processes

3.2.1 Please describe impacts in the following areas:

Impacts on:

collective bargaining arrangements;

  • centralisation or decentralisation trends;

On the employees’ side, according to PEO and SEK a clear trend towards decentralisation of collective bargaining can be seen, which is to a large extent related to the inability of the unions to press for implementation of the collective labour agreements. DEOK however, stated that decentralised practices refer to isolated cases at enterprise level.

In the employers’ side, OEB stated that although the sectoral level will not be dismantled, the enterprise level will acquire a dominant role with regard to the regulation of basic terms and conditions of employment.

  • the introduction of opening clauses;

According to information provided by OEB, already a number of deviations have been recorded mainly in relation to working time and the provident funds. In relation to the provident funds, the area with the most consensuses between the two parties of the industry, most agreements provide for a decrease on the employers’ contributions. As far as the span of time of these agreements is concerned, according to OEB, in the 95% of cases, information however that was not confirmed by the unions, the arrangement if for one to two years, but in some cases even for three years. Decreases often lower the contribution from 7%, 6% and 5% to 1%, 2% or even 0.25%. In most cases, according to OEB, in order to protect the workers the measure is combined with a retroactive payment of the whole percentage of the contribution in the event of dismissal, information that is not confirmed by the unions.

In relation to working time, OEB stated that shorter working hours on the enterprise level was a basic driver in reducing dismissals, mainly in enterprises employing 10-50 workers. The reduction was implemented either using a system of a shorter working week (i.e. 38-hour working week on a four-day basis), or a 20% decrease in weekly working hours with a corresponding decrease in pay, again on a four-day basis. Working time arrangements took place mostly in enterprises without trade union representation.

  • changes in the extension of collective agreements;

In Cyprus, there is no practice of extending collective agreements. According to information provided by PEO, there is currently a discussion in the MLSI about the adoption of legislation that will give successive Ministers of Labour the ability to extend the term of the collective labour agreements, by order and in specific conditions, in a whole sector or in specific enterprises. Legislation in this regard will be aimed at making the collective agreements statutory, whereas the order will be temporary in the framework of the economic crisis.

According to OEB, the employer organisations will not agree in any way to discuss matters of extension of the collective agreements.

  • wage setting mechanisms;

According to information provided by the unions of PEO and SEK, that was also confirmed by OEB, in non-unionised areas, pay cuts were also implemented aimed at saving more jobs. In the opinion however of the unions, these arrangements did not in practice safeguard jobs, as in most cases after a time decreased pay was followed by dismissals. In this way, the workers also lost out on severance pay, since severance pay is directly linked to the most recent salary. As a result workers lost out doubly or even triply in cases where the most recent salary is also counted in for pension purposes.

  • indexations mechanisms;

With the deterioration of the Cypriot economy in 2012 and the possibility of financial assistance from euro area Member States, public dialogue focused on revision of the system of wage indexation (see 2.3). Despite the tripartite agreement achieved in February 2012 to implement the system throughout almost the whole private sector (CY1202019I), constant pressure from the employers’ side as well as the upcoming consultations with the Troika on the implementation of a memorandum in Cyprus led the government to form a new proposal on the content and operation of the system (2.3).

arrangements for employee information, consultation and participation;

  • organisation of industrial action;
Strike activity 2008-2011

Year

Number of strikes

Days not worked

Workers involved

2008

2009

2010

2011

8

6

4

14

1,034

1,743

200

4,712

743

573

200

1,499

Source: MLSI

As shown on the above table, figures on strike activity during 2011 reveal a changing pattern in terms of the relationship between strike action and the economic crisis. In this context although during the first years of the crisis there was a drop in strike activity, probably as a result of rising unemployment, the rates were significantly increased during 2011. Given that austerity measures are especially affecting the public employees; this rise, at least for the time being, is attributed to a large extent to the public sector. Specifically, In December 2011, thousands of Cypriot public servants participated in a number of strikes that were called by PASYDY as a protest against a proposed two-year salary freeze and new austerity measures. Specifically, PASYDY called for a three hour warning strike on 13 December 2011, a three hour strike on 14 December 2011 and a 12 hour strike on 15 December 2011. As commented by press and media, it was the first time during the last 10 years that all the unions in the public and semi public sector - state offices, schools, hospitals, telecommunications, electricity, etc - went out on strike.

In the private sector, although developments either in sector-related or in company-related collective bargaining are largely in line with a moderate policy regarding demands for pay increases adopted by trade unions themselves since 2010, it is to be seen whether trade unions will remain willing to negotiate with employers, or whether employers’ increasing militancy will lead trade unions to also take a more militant approach. Since the beginning of 2012 however, Cyprus has been already in the grip of strikes, where workers from various sectors of economic activity are protesting about the violation of collective labour agreements, and in particular about the refusal of many employers to grant the wage increases agreed for 2012.

Overall however, the two biggest trade unions PEO and SEK consider that striking for the sake of striking should not be an option, whereas abuse of the right to strike may damage the trade union movement in the long term, without such a position ruling out the possibility that measures will be taken, especially in the event that equilibriums are overturned.

  • procedures for dispute resolution;

During the past decade, increasingly fewer sectoral collective agreements were concluded at the direct bargaining stage, causing as a result serious delay in the renewal of agreements. In the same context, trade unions in specific sectors of economic activity (e.g. hotels industry), are of the opinion that since 2006 tension between the two sides has increased dramatically, resulting in a plethora of industrial disputes at the MLSI, based on more frequent violations of the collective labour agreements and the laws. In this context, apart from an increase in the number of labour disputes that were referred to mediation during 2010 and 2011 (CY1203029Q) a phenomenon however that preceded the economic crisis no changes have been noted with regard to dispute resolution.

  • changes in the relationship between the social partners, either leading to closer cooperation or more conflict.

Overall the trade unions believe that there is a strengthening of the relations between trade union organisations on the basis of a collective effort for the better management of the problems that arise in the context of the crisis, without however abolishing the independence and autonomy of the organisations per se.

DEOK on the other side, believes that in the context of the crisis the position in favour of the creation of a Labour Congress for closer communication and action is more urgent than ever. PEO and SEK however believe that the idea to create a unified body with more competencies than it has today is not judged to be sustainable, mainly due to the different ideological orientations of the unions.

As to the relations between unions and employer organisations, unions stress the monolithic stand of management, which through complete denial not only fails to serve the best interests of the economy but also does not leave any leeway at all for another way out or other options.

On the employers’ side, both OEB and CCCI believe that employer organisations have become more conscious than ever that there is no room for different approaches. With regard to the relations of employer organisations with the unions, it is stated that there are no problems on matters of low policy (e.g. gender equality, health and safety).

3.2.2 Overall, how severe do you think the impact of the crisis has been on industrial relations processes in your country? Please tick the relevant box.

 very severe

 severe√

 not very severe

 not severe at all

3.3: Industrial relations outcomes

3.3.1 Please describe any impacts on collective agreements at national, regional, sectoral or company level.

As regards the private sector in particular, apart from a general tendency of lower levels of agreed pay increases compared with 2010, 2011 and 2012 were characterised by pay freezes or abstention from collective bargaining. In this context, most agreements both at the sectoral and the enterprise levels have either put on hold or reached a deadlock both at the stage of direct negotiations and the stage of mediation.

In the opinion of the trade unions, from the developments to date it is apparent that the system of indexation is more affected at the first stage than wage setting. Nevertheless, as far as future developments are concerned, two more issues are emerging or will emerge in the near future. The first concerns the indirect influence that the diversification of basic benefits in the public and the semi-public sector (e.g. 13th salary) may have on the private sector. The second issue refers to the privatisation of the semi-governmental organisations. In the context of the consultations between the government and the Troika to set the terms of the memorandum, although the government agrees on the privatisation or abolition of certain organisations (e.g. privatisation of the Cyprus Stock Exchange), do not agree on the privatisation of the profitable ones (CYTA), as the Troika is demanding. Instead the government is counter proposing that the income from profitable semi-governmental organisations be channelled towards paying off the debt.

In the opinion of the main employer organisations OEB and CCCI, given the comparative advantage that the employers’ side has, the employer organisations will seek for what they refer to as a rationalisation of the provisions of the collective labour agreements. With regard exclusively to working time, the two employer organisations demand a longer working week of 40 hours instead of 38, for the purpose of boosting productivity, a decrease in the number of official holidays now in force, as well as a reduction of overtime or of the cost of overtime. In the pay front, they will demand lower starting wages, as well as the simplification of payrolls (e.g. elimination of scales, etc.). Another objective according to the employer organisations is the conclusion of longer-term collective labour agreements, something which they believe that the unions are also seeking. Unions however, believe that the term of collective agreements should be shorter, since many provisions are judged to be temporary due to the crisis.

3.3.2 Overall, how severe do you think the impact of the crisis has been on industrial relations outcomes in your country? Please tick the relevant box.

 very severe

 severe√

 not very severe

 not severe at all

3.4: Severity of impact on industrial relations

Overall, how severe do you think that the impact of the crisis has been on industrial relations in your country? Please tick the relevant box.

 very severe

 severe√

 not very severe

 not severe at all

Section 4: Views of the social partners

According to both the employer organisations and the trade unions, it is still early to make an overall assessment of the impact of the crisis on industrial relations.

On the employees’ side, trade unions believe that since the developments regarding the talks with the Troika are ongoing, the situation is fluid. On the basis however of the experience of other countries where there has been the signing of memoranda, there is expected to be an internal decrease in the manner that the autonomy of the social partners is regulated and restricted, whereas the rationale of the system of collective bargaining and the importance of the collective labour agreements are expected to be undermined. Furthermore, although at the meeting of the unions with the Troika on 5 July 2012, it was clear that the Troika understands and respects the statutory procedures in the context of tripartite cooperation as a necessary condition for the successful implementation of any measures, employer organisations they are taking a very rigid stance. In this context, the reform of the COLA system is emerging as one of the most serious problems, mainly as regards the stance of the employers, whose behaviour is not consistent with the philosophy of the system that is based on the principles of voluntarism and tripartite cooperation.

On the employers’ side, although in the opinion of OEB there are already some indications that the system will be affected by financial control on the EU level; however, there are not expected to be changes that will alter the nature of the industrial relations system in Cyprus.

Section 5: Commentary

In the public sector, the measures that have been put forward as part of the new economic governance at EU level, have had a direct impact on the pay of public employees. In this framework, the measures so far, as well as the ones that will be implemented in the future are considered to be particularly severe for the employees. Overall however, the most important change so far regards a reversal of the bargaining power of the two sides, with the employers’ side clearly in the lead. In this context, it is a matter of time before it becomes apparent whether the employers’ side will make use of the comparative advantage it has in a way that would allow us to talk about an overturn of the basic principles of the system. Although in accordance with the claims of OEB the terms and content of the bargain change but the philosophy of the system does not change, in the unions’ view however, the demands of the employers’ side themselves put the basic principles of the system at risk. In this context, the stand taken by the employers is expected to determine to a large extent the stand that the unions will take.

Eva Soumeli, INEK-PEO

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