As of 1st January 2018, companies that grant Cost of Living Allowance (COLA) should incorporate the allowance into their current base salary, as per the Cyprus Chamber of Commerce and Industry’s decision dated December 13th 2017.

The above mentioned transitional decision applies to any agreement where at the time of the agreement COLA was to be granted.

Please see below an example below of the current and new way of calculating COLA contributions:

Currently:

Base Salary = €100
COLA = 30%
Gross Salary = Base Salary + COLA
= Base Salary + (Base Salary * 30%)
= €100 + €30
= €130

New Method:

Base Salary = €100
COLA to be incorporated = 30%
New COLA percentage after incorporation = 0%
New Base Gross Salary = €100 + (€100 * 30%) = €130
Gross Salary = New Base Gross Salary + (New Base Gross Salary + New COLA percentage)
= €130 + (€130 * 0%)
= €130

While there is no financial difference between the methods, it is important for employers to accurately implement the adjustment and amend the base salary in order to maintain compliance.