While the majority suggested a revaluation of the COLA mechanism to align it with current economic conditions and the changing needs of employees, a shared concern was expressed on how a significant increase in COLA levels could potentially fuel further inflation.

And while their planned approach to address any ensuing challenges varies, where different strategies will be adopted based on their specific circumstances and industries, the government is also expected to contribute its fair share in managing the situation.

But while concerns about the impact of increased COLA on businesses prevail, there is also a recognition of the need to ensure fair compensation for employees.

Nick Xuereb, CFO, TOLY

“The principle of adjusting take-home pay to compensate for a reduction in purchasing power is something we agree to. In the current circumstances where we have had a period of extraordinarily high levels of inflation, the question is whether businesses should pick up the full cost. From our end, where possible, we will try to pass on the increase in cost to our customers,” says Nick Xuereb, CFO, Toly Group.

“We operate in an international market, where competition is tight and all our products are sold outside of Malta. This will result in an estimated 2% increase in our cost base,” explains Xuereb who estimates an impact of roughly €1,000 per employee, once wages, social security and overtime rates are considered.

“Government could contribute by revising tax bands, especially in view that an increase in wages will result in an increase in income tax for the government which would alleviate further wage pressure on companies and reduce an otherwise spiral inflation effect,” he added.

Melo Hili, CEO HILI Ventures

“The COLA mechanism is just one economic measure which balances inflation with spending power. Ensuring that we attract, retain and grow our talent pool takes more than walking along a tightrope of government-mandated wage increases,” adds Melo Hili, CEO of international group Hili Ventures, which employs nearly 11,000 people, with 1,000 employees working in Malta in four diverse businesses.

“COLA increases will cost our business in the region of half a million euros in 2024 but we have budgeted for marked increases beyond that for performance-based incentives. The more noticeable impact will be the rising cost of doing business.”

A substantial increase is going to be very difficult for companies to handle especially if they employ significant numbers

“Over the short-term, we are more concerned about prevailing price pressures, the lack of solid direction on energy prices which could destabilise local businesses, and high interest rates that may slow the private sector’s appetite for further investment,” added Hili.

Simon Naudi, Corinthia Group

Simon Naudi, CEO of Corinthia Group explained how with over 1,000 colleagues in Malta, material changes to the overall wage bill will definitely impact the business “as with other inflationary pressures which we are taking into our stride through efficiencies in our work practices and appropriate pricing strategies of our services.”

Naudi however, highlighted that the COLA mechanism is a technical process that requires in-depth assessments before pronouncing oneself in favour, or not, of any changes.

“We have been around for over 60 years and have seen our fair share of inflation and change. What will count most for our industry is that we continue to work hard, that we remain creative and forward-looking and that we preserve Malta’s attractiveness. As for COLA, we are confident that Malta’s social partners will strive for social harmony and well-being on all fronts,” he added. 

Charles Borg, CEO, PG Group

COLA has been with us for a number of years now and it has served us well in the past, however, our economy has evolved and therefore this mechanism needs to be revised to be more relevant to the new economic reality of today,” said Charles Borg, CEO, PG Group.

“A substantial increase is going to be very difficult for companies to handle especially if they employ significant numbers. I am already envisaging that a substantial increase in the COLA will have a negative impact on the Group’s results of a few hundreds of thousands per year.”

“Certain companies will try to pass this increase on to consumers but this carries risks of market share loss. From our end, it is not our intention as a Group to pass this increase on to our customers. On the contrary, we have adopted a strategy of sourcing most of our products directly from the manufacturers to get better prices without jeopardising the quality we offer.”

Mark Aquilina, Founding Partner, NOUV

“Businesses, especially SMEs, will feel the pinch but given that Malta’s minimum wage is one of the lowest in the EU, this could be the right time to reconsider an adjustment of the COLA mechanism in alignment with current economic conditions to ensure fair compensation for rising living costs,” points out Mark Aquilina, Founding Partner at NOUV.

“However, revisiting the model as a stand-alone solution is not enough and a more industry-targeted approach is needed and at the same time, continuously introducing new business incentive measures to encourage investment and growth.

With NOUV currently employing over 70 people, Aquilina admits that the impact of an increased COLA on his organisation, which operates within an industry characterised by relatively higher salary structures, is unquestionable, and that this will push the company to proactively develop a strategy to address it.

“The extent of the impact of COLA will also depend on broader economic and exterior political factors as well as government policies aimed at managing inflation. Monitoring and careful adjustments may be necessary to strike a balance between fair compensation for employees and inflation control.”