Social partners have accepted the €4.08 weekly cost-of-living-adjustment set through a mechanism which they endorsed over the years but all called for immediate action to change the way it is worked out.

All the members of the Malta Council for Economic and Social Development contacted yesterday agreed on the need to change the mechanism, which they described as “old and outdated”.

Both the unions and the employers appeared to be in agreement that the way it was calculated needed to be changed although their reasons varied.

The unions wanted changes to be made to the basket of products on which the formula is based, insisting that it did not necessarily reflect the lifestyle of a modern, average Maltese family.

The employers, on the other hand, wanted the adjustment to be pegged to productivity.

The social partners admitted that the COLA adjustment was a computation based on a formula and not something they could negotiate. However, this did not mean they could not disagree with the result.

For the General Workers’ Union’s general secretary, Tony Zarb, the €4.08 rise was not enough to cover the extent to which workers and pensioners had seen their expenses increase.

He said the entire COLA system needed to be “brought up to date” because the way it was being calculated was based on products families did not even use.

Mr Zarb said that apart from changing the items, the union was also after awarding the compensation every six months rather than every year because this would better reflect price movements.

Moreover, families would receive their compensation six months in arrears rather than a whole year.

In addition, the Government should also ensure such an allowance was tax free.

He cited the report drawn up by an MCESD working group that was tasked to look into changing the mechanism but added that, although there was agreement in principle on the way forward, this still had to be discussed by each organisation.

His comments were echoed by Forum president John Bencini, who also thinks the COLA rate established this year was not enough to cover expenses.

“What I’m sure about is that it doesn’t cover inflation. The mechanism is what it is. This is why we want to change how it is calculated,” he said.

The general secretary of the Union Ħaddiema Magħqudin, Josef Vella, also called for changes to the items being sampled which, he said, did not really reflect what families were using. Items like mobile phone use and eating out are not taken into account.

“Society is changing its lifestyle and items used in the past are not necessarily used today. This mechanism we have can never be 100 per cent correct because you are averaging a Maltese family’s lifestyle when there are many who are below that average,” he said.

Asked whether he agreed with the GWU’s proposal for compensation to be granted biannually, Mr Vella said he did but expressed his concern on whether such a measure would have a negative impact on firms and their cash flows half way through the financial year.

The employers – albeit not all of them – insisted on pegging the COLA to productivity.

The €4.08 weekly compensation would cost a small micro enterprise with five employees nearly €1,061 a year.

A large firm with 250 employees could see its yearly wage costs shoot up by €53,000.

Both the director general of the Chamber of Commerce, Enterprise and Industry, Kevin Borg, and his counterpart at the Malta Employers’ Association, Joe Farrugia, called for changes to be made in the formula to incorporate productivity.

The president of the Malta Hotels and Restaurants Association, Tony Zahra, also expressed this line of reasoning. All three said that the wage increases were bound to increase the burdens on the employers.

“An increase of €4.08 seems correct according to our projections but what we are concerned about is the lack of a link to productivity. Unfortunately, it seems we are going to waste another year without this link. Malta is the only EU state with a wage indexation system when other costs are increasing too, so we have to be careful with wage increases,” Mr Borg said.

Mr Farrugia said employers had long been calling for wage increases to be indexed to productivity instead of inflation.

Mr Zahra insisted that “productivity was the name of the game” and the country’s completiveness depended on productivity.

Vince Farrugia, the director general of the Chamber for Small and Medium Enterprises – GRTU, said that the COLA adjustment mechanism was the best solution that the country has had so far enabling it to compensate for cost of living increases.

He said linking it to productivity was easy on paper but, when put into practice, it caused difficulties on the way to measure productivity in one firm as opposed to another.

“When you’re averaging, somebody is going to suffer. This is why COLA is the best solution we have found so far.”

Unions have called for changes to the items being sampled to establish the COLA rate. Photo: Chris Sant Fournier