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.
For more information, feel free to contact:
Georgios Gregoriou
Payroll Specialist
Eurofast Taxand Ltd
george.gregoriou@eurofast.eu
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