Cyprus pushes ahead with minimum wage reform despite disputes

Cyprus moved a step closer this week to adopting a long-delayed EU directive on adequate minimum wages, as the updated draft law was presented to social partners, with key disagreements between employers and unions still unresolved.

The proposed Adequate Minimum Wages Law of 2025 aims to improve living and working conditions by ensuring that statutory minimum wages are sufficient to secure a decent standard of living, contribute to upward social convergence and reduce wage inequality.

The revised bill was discussed before representatives of employers and trade unions, following earlier meetings in January under the auspices of the director of the Department of Labour Relations, when strong reservations were first voiced by employer organisations.

At that stage, the Labour Ministry was racing to align Cyprus with the EU directive on adequate minimum wages, as the country remains among the few member states yet to formally adopt it, with the government targeting submission of the bill to parliament before the May elections.

The legislation establishes a comprehensive framework covering the adequacy of statutory minimum wages, the promotion of collective bargaining as a key wage-setting mechanism and the strengthening of effective access to minimum wage protection for employees.

Central to the reform is the creation of a Minimum Wage Adjustment Committee, appointed by the Cabinet.

The committee will be comprised by three representatives of workers, three representatives of employers drawn from organisations participating as full members of the Labour Advisory Body, and three independent academics or recognised experts in labour matters, one of whom will chair the committee.

The committee will prepare a recommendation report at least two months before any revision of the statutory minimum wage, taking into account a broad range of economic and social indicators and providing justification for the weight assigned to each parameter.

These include purchasing power and the cost of living, employment trends and unemployment rates, economic growth and productivity levels, as well as wage developments and their distribution.

The committee will also take into account the potential impact of any adjustment on employment, poverty indicators, living costs and overall competitiveness, alongside any other relevant macroeconomic developments.

The committee will also define and apply clear update criteria in line with national law, practice, competent authority decisions or tripartite agreements, seeking to ensure adequacy, reduce in-work poverty and narrow the gender pay gap.

In guiding its assessment, it may use internationally recognised indicative reference values, including 60 per cent of the gross median wage and 50 per cent of the gross average wage, as well as benchmarks comparing the net minimum wage with the poverty threshold and its purchasing power.

These references have already sparked concern among employer organisations, which argue that the figures are not binding under the directive but rather long-term recommendations.

Public procurement provisions in the draft law further require the competent authority, in cooperation with contracting bodies, to ensure that contractors and subcontractors comply with wage and benefit obligations in line with standard rules governing labour provisions in public contracts awarded within the Republic.

Companies convicted within the previous three years for breaching either the new law or the existing Minimum Wage Law would be barred from submitting bids for public projects.

The bill also introduces enhanced monitoring measures, requiring employers to register prescribed information in an information system established by ministerial decree and published in the Official Gazette.

The competent authority will be required to submit a report to the European Commission every two years, before October 1 of the reporting year, detailing the rate and evolution of collective bargaining coverage and data on statutory minimum wages, including coverage levels, variations and deductions and the reasons for them.

Where minimum wage protection is provided solely through collective agreements, the report must also include the lowest wage levels set for low-paid workers, or estimates where exact data are unavailable, along with comparative information on wages of workers not covered by collective agreements.

The law mandates that information on statutory minimum wages and universally applicable collective agreements, including available legal remedies, be made publicly accessible in a comprehensive and user-friendly manner, including for persons with disabilities.

If collective bargaining coverage falls below 80 per cent, the competent authority will be obliged to establish enabling conditions for bargaining, strengthen the capacity of social partners, promote constructive wage negotiations and adopt measures protecting both workers and union representatives from discriminatory treatment linked to participation in bargaining processes.

It must also develop and periodically review, at least every five years, an action plan with a clear timetable to gradually increase collective bargaining coverage, ensuring full respect for the autonomy of social partners.

Inspectors appointed by the competent authority will be empowered to conduct investigations, enter workplaces without prior notice, request police assistance where necessary and carry out inspections, examinations and inquiries to verify compliance.

Employers’ organisations have voiced strong objections, particularly regarding data collection obligations.

“The specific approach does not derive from an obligation to comply with the Directive, nor is it directly linked to its purpose, while at the same time it creates risks of overregulation, administrative burden and unilateral expansion of employers’ obligations without prior social dialogue or documented impact assessment,” the Cyprus Chamber of Commerce and Industry (Keve) stressed.

The chamber has called for the deletion of specific provisions concerning mandatory data uploads to the ERGANI digital system, arguing that they go beyond the requirements of the directive and duplicate obligations already regulated under the 2023 Transparent and Predictable Working Conditions Law.

It has also urged the removal of Article 25, maintaining that the existing national Minimum Wage Law serves a distinct and complementary role, allowing greater flexibility through structured social dialogue and adaptation to Cyprus’ specific economic and social conditions.

“The maintenance of the existing framework is considered necessary, as it is not limited by the directive’s adequacy framework but operates complementarily, ensuring practical and functional solutions, substantive participation of social partners and smooth implementation of the relevant regulations,” the chamber said.

Trade unions, by contrast, have broadly welcomed the bill, while seeking clarification that statutory minimum wages should incorporate minimum hiring rates agreed in sectoral collective agreements.

According to Politis, which cited union sources, there are indications that “employers continue to refuse sectoral collective labour agreements”.