President Christodoulides presented the recent agreement between the Employers Associations and the Trade Unions to restore 100% of COLA – Αutomatic Cost-Of-Living Adjustment as a reform, a fairer distribution of national income, and the strengthening of the middle and low income classes.
CIReN examined his claim based on what was actually agreed and what the agreement comprises in order to verify who it will benefit and how as well as how many will continue to be excluded.
The Claim
On November 13, 2025, immediately after the signing of the COLA agreement, President Nikos Christodoulides stated: “Today’s conclusion of a permanent agreement is part of the framework and effort of our reform policy for a fairer distribution of national income, for the further strengthening of the middle class and low income (classes), with the aim of social cohesion.”
The Facts
COLA is a mechanism that has been implemented since the British rule in the 1940s in Cyprus. It concerns the automatic adjustment of wages based on inflation.
In Cyprus, COLA covers only specific categories of employees and workers who belong to trade unions that a collective n agreement with the employers.
The purpose of COLA is to maintain purchasing power so that increases in the prices of basic goods and services do not reduce the standard of living of those who benefit.
The employees covered by COLA are:
(a) Civil servants (permanent or temporary), employees and workers in the broader public sector (semi-governmental organizations, municipalities, security forces, etc.)
(b) Employees in the private sector who are covered by collective labor agreements, or other agreements with their employer, which explicitly provide for the payment of COLA.
There is no legal obligation on the part of employers to pay COLA. Thus, a large portion of employees and workers are exempt:
(a) Employees and workers in the private sector not covered by a collective agreement or special agreement with their employer that provides for COLA.
(b) Self-employed workers (freelancers, entrepreneurs, etc.)
(c) Hourly workers and employees with flexible forms of employment.
All of the above are exempt, unless their employment contract provides for the payment of COLA, or they are granted this benefit at the initiative of their employers. In 2013, after the collapse of the banking system in Cyprus due to the financial crisis, COLA was frozen for four years. In 2017 the government resumed with the payment of 50% of COLA, provided that there is a positive growth rate and, of course, inflation.
In 2023, a new transitional agreement was made with a two-year reassessment clause for the payment of 66.7% of COLA.
In April 2025, trade unions demanded full restoration and extension of COLA to cover all employees and workers. In contrast, employers’ associations argued that COLA caused “artificial wage increases” and hurt competitiveness. The government, through Minister of Labor Yiannis Panayiotou, acted as a mediator between the parties to reach an agreement.
Panayiotou stated in September that the government’s policy is to “modernize” COLA with key parameters, including “universal extension to cover all employees” and “fair return to restore the payment rate with an emphasis on low income and middle class employees.”
The agreement was announced by President Christodoulides at the Presidential Palace on November 13.
The agreement included the following:
- Gradual full restoration of COLA, starting at 80% on 1/1/2026, then at 90% from 1/7/2026 and finally at 100% from 1/7/2027.
- COLA will be paid provided that the annual percentage of growth rate in the previous year is positive.
- For the first time, a maximum inflation ceiling of 4% in the previous year was set for the calculation of COLA.
- Extension of COLA for those receiving the National Minimum Wage.
The annual Inflation rate in 2024 was 1.8%. In the first 10 months of 2025 it was just 0.3%. The wage adjustments were relatively small, but the COLA was fully restored.
Who will receive COLA?
The total number of employees and workers in Cyprus based on the most recent data provided by the Cyprus Statistical Service (second quarter of 2025) is 515,600: 443,325 in the private sector and 72,275 in the public and broader public sector.
The following will benefit from COLA:
- The total number of employees in the public and broader public sector: 72,275 people.
- Approximately 100,000 people in the private sector – based on data provided by trade unions (SEK, PEO, DEOK, ETYK) for the year 2024 – who are covered by collective workers agreements with their employers. The sectors where workers have collective agreements are mainly large industries, hotels, ports, airports, banks, the health sector) and construction.
- Based on the November agreement, the 55,000 recipients of the National Minimum Wage.
Thus, based on our calculations, the total number of beneficiaries of the COLA agreement is estimated at 44% of employees and workers, approximately 227,000 people.
Those not covered by COLA are all in the private sector, amounting to 288,325 and corresponding to 56% of the total workforce and 65% of the private sector: mainly employees, self-employed, small and medium-sized entrepreneurs, craftsmen, part-time workers, etc.
Is it a reform?
COLA agreement of November 2025 does not constitute a reform since it concerns the restoration of a pre-existing mechanism, the philosophy of which has not changed. It is a complete reinstatement of the wage adjustment mechanism with some individual changes. Despite the addition of the minimum wage recipients, it still does not cover a significant portion of the private sector.
Does it provide for “fairer distribution”?
The data does not confirm this. A certain portion of employees and workers (44%) is covered while more than half (56%) is not covered. For those who are not covered, COLA magnifies inequality. Specifically, it covers all workers in the public sector (100%), but only 35% of workers in the private sector.This causes a further divergence in the existing public-private sector wage gap.
The way COLA is calculated also exacerbates the unfairness. The increase COLA provides is a percentage proportional to an employee’s salary.
For Example:
An employee with a €2,000 gross salary will receive €60 through COLA – in a year with 3% inflation when COLA is fully restored.
An employee with a €5,000 gross salary will receive an increase of €150.
Before the COLA payment, the wage gap between the two employees was €3,000. After the COLA, the gap increases to €3,090.
Therefore, the adjustment is not fair, not even for those who have the benefit of the COLA. For employees with a very high salary, COLA is not simply an adjustment to the cost of living but a scandalous privilege.
Privileges of high-ranking officials
The agreement does not consist of measures to limit the unfairness.
Economist Ioannis Tirkidis, president of the Cyprus Economic Society, argues that “COLA agreement exacerbates inequalities between high- and low-wage earners within the eligible groups.” In an article in the newspaper “Politis” on November 23, Tirkidis also argues that “the alternative would be a system that would operate with an income ceiling, where COLA is applied up to a maximum amount, a proposal that was not recognized during the negotiations” between the parties involved, namely the government, the employers’ associations and the trade unions.
Let’s take the example with 3% inflation and full restoration of COLA, which in the case of state officials is calculated based on their gross salary plus extra allowances.
The President of the Republic will receive an increase of €5,510 (from €183,667 to €189,177).
The members of the Council of Ministers €3,572 (from €119,088 to €122,660).
A judge €3,447 (from €114,929 to €118,376)
Commissioners €3,058 (from €101,952 to €105,010)
Members of Parliament €2,939 (from €97,982 to €100,921).
Based on their respective high gross salaries, state undersecretaries and directors in the public and broader public sectors will also receive high increases through COLA.
This does not contribute to the consolidation of a sense of justice, social cohesion and the strengthening of low and middle income classes.
The Verdict: Misleading
Not a reform: The COLA agreement restores a pre-existing mechanism rather than introducing a structural change. Its scope and philosophy remain the same, with limited modifications.
Not a fairer distribution of income: Only 44% of employees and workers in the public sector and some in the private sector will be benefiting. The remaining 56% of employees and workers, who are in the private sector, are totally excluded.
Does not help social cohesion: Perpetuating the unfairness, COLA is proportional to salary, resulting in higher increases for high-wage earners and lower increases for low-wage earners. This widens income gap in the society and undermines “social cohesion”.
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