The Cypriot government has officially approved an increase to the national minimum wage, sparking a lively discussion between trade unions and employer groups. This development highlights the ongoing challenge of harmonising economic realities with the pursuit of social fairness. Following extensive discussions led by the Ministry of Labour and Social Insurance, the Cabinet finalised the adjustment on Tuesday. The new rates are scheduled to take effect from January 1, 2026, and are expected to benefit around 50,000 low-wage employees across the island.
Under the revised decree, the monthly minimum wage for employees with over six months of continuous service will rise from €1,000 to €1,088 gross. For those with less than six months of employment, the figure will increase from €900 to €979 gross. This represents a significant 8.8% increase for longer-serving workers. The government asserts this measure aims to enhance the purchasing power of vulnerable households, thereby strengthening social cohesion and reducing poverty risks. Simultaneously, the government believes this increment has been carefully calculated to maintain business competitiveness and future job creation.
This decision was informed by a thorough examination of current economic indicators and future forecasts. The Ministry of Labour and Social Insurance considered the 2024 inflation rate of 1.8% and a projected 0.2% for 2025, totaling a 2% inflation consideration. Economic growth also played a crucial role, with a robust GDP expansion of 3.9% in 2024 and a projected 3.4% for 2025. Furthermore, the unemployment rate, currently at 4.9% for 2024, is anticipated to decrease to 4.3% in 2025, a level the government considers indicative of near-full employment.
However, labour unions have expressed considerable dissatisfaction with the announcement. Before the decision, union leaders had warned the President that any figure below €1,125 would trigger "dynamic reactions." Their prior demands had aimed for a benchmark closer to €1,170, reflecting a desire for a more substantial rise in minimum earnings. The current 8.8% increase has been deemed insufficient by some to adequately address the cost of living challenges faced by low-income workers.
Conversely, the Employers and Industrialists Federation (OEB) has voiced strong objections, describing the 8.8% hike as "unprecedented." The OEB contends that this adjustment will position Cyprus’s minimum wage disproportionately high relative to the median salary, potentially exceeding that of established economies like Germany or the Netherlands. They express concern that businesses, particularly small and medium-sized enterprises, may find it difficult to absorb the increased labour costs. This could, they argue, jeopardise business viability or lead to higher prices for consumers, thereby diminishing the real income gains for workers.
In defending the government's position, Labour Minister Marinos Mousiouttas highlighted the inherent complexity of setting a national minimum wage. "The establishment of a single minimum wage always requires a delicate balance between social protection for workers and the viability of businesses," he stated. The government remains optimistic that this increase will not trigger inflationary pressures or negatively impact the competitiveness of Cypriot enterprises. Looking ahead, the Minimum Wage Adjustment Committee is set to continue its discussions throughout 2026, aiming to align the minimum wage framework with hourly productivity metrics, suggesting a potential move towards a more sophisticated approach to wage setting in the future.