COLA increase may result in higher shopping bills, employers warn

With the cost of living adjustment pointing towards an increase of €13 per week, employers warn it can lead to higher shopping bills.

Malta Employers' Association Director General Joe Farrugia said some companies will have no other choice but to adjust their consumer pricing to reflect the higher wage bill.

“A number of companies will not be affected by COLA expenses; however, other businesses might need to incorporate the expense into what they charge the customer,” he said on TVM’s Xtra on Monday.

Statutory wage increases are pegged to inflation and despite the government's hefty subsidies on fuel and energy, COLA is still expected to be around €13 per week.

Farrugia said business customers could be common people or companies. In the latter case, the rise in prices could travel through the supply chain, risking higher expenses.

However, no matter the risks COLA poses, Farrugia did not suggest the removal of such a mechanism, which has provided stability and industrial peace over the years.

The mechanism was agreed between unions, employers and the government in the 1990s and has helped to ensure yearly wage increases in line with inflation.

However, the current international scenario has caused inflation to rise extraordinarily leading to record COLA increases this year and next.

Farrugia agreed with other social partners that COLA should not be taxed.

“Malta is among the few countries that mandate employers to compensate for the cost of living. Here, I would concur with Josef [Vella from the UHM] that COLA should not be subject to taxation. When taxed, the employer, instead of paying the employee, is essentially returning funds to the government,” he said.

Originally proposed by the UĦM – Voice of the Workers on Workers’ Day, the proposal calls for the government not to tax the COLA increase.

“As UĦM, what we are proposing, but the government appears unwilling to consider, is not taxing COLA,” UĦM CEO Josef Vella said. “COLA is supposed to help workers manage the rising cost of living. Instead, they are getting an extra expense with their aid.”

He explained that the €13 per week potentially given to workers next January would be spent entirely by the workers, eventually strengthening the economy.

General Workers Union’s Josef Bugeja and Chamber of Commerce CEO Marthese Portelli, also present on the Xtra panel, agreed that COLA should not be taxed.

The social partners also agreed that this is not the time to revise the COLA mechanism.

“In the past, I was one to call for the mechanism to be revised, but this is not the time for revisions,” Josef Vella said.