The European Directive on Well-Functioning Collective Bargaining for Wage Determination has become a pressing issue for the Cypriot government, as the country must align with its requirements between 2025 and 2027. The directive aims to ensure worker protection through adequate minimum wages, reinforcing the role of collective bargaining agreements in wage setting and improving living and working conditions.

The directive emphasizes three key principles:

1. Minimum wages should be secured exclusively through collective bargaining.

2. The level of minimum wages and the percentage of protected workers should be directly influenced by the collective bargaining system.

3. A high coverage rate through sectoral or cross-sectoral collective agreements strengthens both the adequacy of minimum wages and the percentage of workers covered by them.

In Cyprus, trade unions aim to expand collective bargaining coverage by advocating for institutional measures that would make sectoral agreements mandatory for all employers in a given industry.

Union organizations propose the adoption of standardized collective agreements, which would become a prerequisite for approving work permits for third-country nationals, ensuring fair employment terms and benefits.

A union representative told Brief that minimum wage protection through collective agreements benefits both workers and businesses, adding that EU member states should take measures to promote collective bargaining for wage determination. Such measures could include facilitating union representatives' access to workplaces.

The Cyprus Workers' Confederation (SEK) views the establishment and improvement of the minimum wage as a significant and positive step toward enhancing the labor market, improving employment conditions, and reducing unfair competition.

The Pancyprian Federation of Labour (PEO) argues that reforming the minimum wage framework is essential to ensuring a fair wage structure and basic employment conditions for the most vulnerable workers who are not covered by collective agreements.

On the other hand, CCCI (Cyprus Chamber of Commerce and Industry) and OEB (Employers and Industrialists Federation) stress the need for an impact assessment study to evaluate the economic effects and identify potential challenges in specific industries and job sectors.

The directive outlines specific obligations for member states:

• Countries where collective bargaining coverage is below 80% must implement measures to strengthen collective agreements.

• Nations falling below this threshold must establish a legal framework to support collective bargaining and develop an action plan to gradually increase coverage.

• Coverage rates across EU member states vary significantly due to historical, legal, and economic factors.

A specific provision affecting Cyprus states that countries using an automatic indexation mechanism (such as a semi-automatic system ensuring minimum wage adjustments) must conduct mandatory wage updates at least every four years.