Filenews 8 October 2022 - by Theano Thiopoulou
The much-discussed issue of the minimum wage in EU countries is back in the spotlight, following the green light given by the EU Council on 4 October to adopt a directive promoting measures to ensure adequate statutory minimum wages in all member states.
The aim is to achieve decent working and living conditions for European workers, while promoting collective bargaining on minimum wage setting. This piece of legislation, mentioned on the Council's website, sends a message of hope to the people who have to tighten their belts due to the energy crisis.
Minimum wages and collective wage setting are powerful tools that can be used to ensure that all workers get wages that allow for a decent standard of living. Member states will have two years to transpose the directive into national law, following its official publication in the OFFICIAL JOURNAL of the EU.
What it provides for
The EU directive adopted provides that Member States should establish a framework for setting adequate minimum wages, based on a set of clear criteria, which should be reviewed and updated at least every two years or at the latest in four years, for countries using an automatic indexation mechanism, to respond to real economic conditions, such as the magnitude of inflation.
According to the communication issued by the European Council on its website, for the assessment of the adequacy of minimum wages, the directive proposes that member states use as a reference value 60% of the gross median wage or 50% of the gross average wage. Although the directive does not force national governments to achieve a specific mandatory wage level, the new framework will encourage an increase in minimum wages across the EU, as benchmark values are well above current wages in the majority of member states. For (five) countries that do not already have a minimum wage, there is no obligation to introduce it.
With regard to the promotion of collective bargaining to set adequate wages, the directive aims to increase the number of workers to be covered by this scheme. If the collective bargaining coverage rate is, for example, below the 80% threshold, Member States should draw up an action plan to promote them, setting out a clear timetable and concrete measures to gradually increase the coverage rate. Currently, collective bargaining is significantly lower than 80% in most EU states, including Cyprus. By extension, the measure is expected to strengthen the rights of trade union members.
Finally, the directive creates the ground for a legal framework that protects workers and ensures the right to an adequate minimum wage. It is therefore foreseen that the competent national authorities should carry out labour inspections, as well as be able to prosecute those employers who do not comply.
The history of the approval
As stated in the text of the Directive, for adequate minimum wages in Europe, in November 2017 the European Parliament, the Council and the Commission proclaimed the European Pillar of Social Rights, with the aim of delivering on Europe's promise of prosperity, progress and convergence and making social Europe a reality for all. Adequate minimum wages should be ensured and wages should be set in a transparent and predictable manner, in line with national practices and respect for the autonomy of the social partners. The Strategic Agenda for 2019-2024, agreed at the European Council in June 2019, called for the implementation of the Pillar at EU and national level.
The European Commission notes that in the majority of Member States the minimum wage is insufficient and/or there are gaps in the coverage of minimum wage protection, even though minimum wage protection exists in most EU Member States, either by legislative provisions ('legislative minimum wages') and/or by collective agreements. In light of this, the European Commission adopted a proposal for a directive on adequate minimum wages on 28 October 2020. The proposal seeks to create a framework to improve the adequacy of minimum wages and increase workers' access to minimum wage protection.
The Commission's proposal aims to promote collective bargaining on wages and to improve the enforcement and monitoring of the minimum wage protection established in each country. In Member States with a mandatory minimum wage, the proposal also aims to establish the conditions for setting mandatory minimum wages at adequate levels: clear and stable criteria for setting the minimum wage, indicative reference values guiding the assessment of adequacy, regular and timely updating of minimum wages and the establishment of advisory bodies advises competent authorities by limiting to a minimum the use of its fluctuations and reductions minimum wage ensuring the effective involvement of the social partners in the statutory setting and updating of the minimum wage.
The European Commission's proposal was submitted to the two co-legislators, the Council of the EU and the European Parliament, on 28 October 2020. The Council agreed its position on 6 December 2021, while the Parliament approved its negotiating mandate on 25 November 2021. On 7 June, after eight rounds of negotiations, the negotiators of the Council and the European Parliament reached an agreement on a common position. On 14/9/22 the European Parliament adopted the directive.
The setting of a minimum also in Cyprus
When the debate intensified in the summer about the level of the minimum wage in Cyprus, guilds and employers' organizations found themselves in the trenches, with disagreements being intense. Finally, the Minister of Labor Kyriakos Kousios proposed to the Council of Ministers and this approved the proposal, the national minimum wage to be set at €940 gross, with effect from 1/1/2023. The disagreements, however, remained. Opposition MPs last Tuesday criticised the Government for taking a decision without taking into account the current economic situation, the purchasing power of wages and inflation, which is eating away at household budgets. For his part, the Minister clarified that the existing dynamics of businesses to cope with the new data were taken into account, in order to avoid the closure of some of them and, consequently, to find workers unemployed. We did not want, he said, to kill the milk-producing cow.
