Cost-of-living adjustments should be capped at €6 weekly for the next five years, employers said, warning that more than half of companies will be impacted by this year’s expected increase. 

The Malta Employers Association on Tuesday suggested that a five-year maximum and minimum COLA adjustment should be set. 

This should come into force in 2024 and be a minimum of €2.50 weekly and a maximum of no more than €6 every week. 

Employers are bracing for the highest ever COLA adjustment as the war in Ukraine and the lingering COVID pandemic have sent prices through the roof.

The COLA, awarded to all employees, is worked out on a formula that considers the prices of a basket of items and services, many of which have spiralled this year.

It is paid by employers as part of their workers’ salary.

Over the past 10 years, with inflation fairly stable, COLA hardly ever exceeded €4. This year and in 2020, the adjustment was of €1.75. Since 1990, it has only gone beyond the €5 mark on three occasions.

Last month, Times of Malta reported that the cost-of-living adjustment is likely to approach €10 per week by the post-summer budget.

On Tuesday, MEA head Joseph Farrugia said he wants to have an agreement in place for a minimum and maximum COLA with all social partners to be in place by 2024. 

Known as the social partners, the Malta Council for Economic and Social Development, made up of unions and associations, will meet with Finance Minister Clyde Caruana and government whip Andy Ellul on Tuesday afternoon. 

Impact on businesses

Farrugia also unveiled the findings of an MEA survey which found that more than half of local businesses are concerned about the expected COLA adjustment. 

Conducted among some 400 businesses and representatives of the local economy, the survey found that 55% of businesses will be negatively impacted by the forecast COLA increase for next year. 

Some 38% saw the increase as a medium burden.

The survey also found that around 50% will partially pass the increased costs of operation to their customers.

Some 22% will fully pass on the cost to customers. 

Businesses geared purely towards the domestic market are more likely to pass on the full cost to their consumers. 

Many of those who said they will not be passing on any cost to customers operate in sectors which are highly competitive with players unable to risk increasing prices without losing market share, Farrugia said. 

No tug of war

The association said it does not want a “tug of war” between social partners to raise or lower COLA adjustments.  

Instead, it wants an agreement that is subject to a consensus to be effective for COLA in two years. 

This agreement would be subject to revision after five years. 

“The political parties have not been consistent in their positions regarding COLA.” 

“When in opposition, a political party will claim that COLA is insufficient to compensate for inflation, with this position being reversed when in government,” the MEA said.

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