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State payroll in Cyprus steadily swelling

January 24, 2020 at 7:18am
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Cyprus’ state payroll which has grown by 12% over a decade seem to swell with every new year due to the automatic indexation of wages with the cost of living (COLA), pay increments and the filling of vacant posts.

In 2010, a total of €2.5 billion went to salaries and pensions but the figure is expected to rise to €2.88 billion by end of 2020. And comparable figures over a longer period of time – that is from 2008 to 2022 – show that in the 14-year period the state payroll will increase by €900 million.

State payroll costs are likely to rise further if the Supreme Court upholds the ruling of the Administrative Court that found laws on freezing surcharges, reducing civil servants’ remuneration and paying 3% to a pension scheme unconstitutional.

The Treasury has indicated that the overall financial impact would be €844 million by 2023. Brussels and international rating agencies have repeatedly warned of the need for salary costs in the public and wider public sector to be to contained and reduced.

The cost of a civil servants’ salary in 2019 increased by around 5% within the framework of an agreement providing for a gradual reinstatement of wages by 2023 and the reinstatement of COLA based on an agreed formula between the government and the unions.

In terms of data analysis, actual personnel expenditure in 2008 was €2.19 billion. It increased to €2.39 billion in 2009, and in €2.5 billion in 2010. In 2011, when the fiscal consolidation crisis had intensified, the state payroll’s real spending was €2.62 billion, increasing to €2.73 billion in 2012.

In December 2012, Parliament approved by majority a memorandum bill that changed the way in which public employees’ pension rights were calculated. And when Cyprus joined an economic adjustment programme in 2013, the state payroll contracted to €2.60 billion, down to €2.56 billion in 2014, €2.39 billion in 2015 and €2.32 billion in 2016.

 

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One third of state expenditure goes to salaries