Cyprus Wages Continue Rising Amid Slower Euro Area Pay Growth

The European Central Bank (ECB) has released its latest wage tracker data, indicating that negotiated wage growth across the euro area is set to moderate in 2026, reflecting easing pay pressures in the bloc.

The headline ECB wage tracker, which covers active collective bargaining agreements and smooths one-off payments over time, shows negotiated wage growth of 3.2 per cent in 2025, based on a coverage of 49.9 per cent of employees in participating countries, and 2.4 per cent in 2026, with coverage of 33.1 per cent. Compared with the December 2025 release, the 2026 figure has been revised up slightly by 0.1 percentage points.

Looking at the tracker with unsmoothed one-off payments, negotiated wage growth is recorded at 3.0 per cent in 2025 and 2.7 per cent in 2026. Meanwhile, the measure excluding one-off payments indicates a decline from 3.9 per cent in 2025 to 2.7 per cent in 2026, with the latter also revised up by 0.1 percentage points.

The ECB explained the differences between these measures: “The headline tracker is better suited to describing quarterly or monthly dynamics in negotiated wages because it spreads one-off payments over time, while the unsmoothed version is more appropriate for annual comparisons as it avoids double smoothing of one-off payments.”

For 2026, the headline tracker is projected at 2.1 per cent in the first half of the year, rising to 2.7 per cent in the second half. The increase over the year reflects the fading impact of large one-off payments made in 2024 but not repeated in 2025. According to the ECB, “These mechanical effects are expected to virtually disappear over the course of 2026, leading to a convergence between the trackers with one-off payments and the measure excluding them as such payments become less relevant.”

The ECB also highlighted a trend toward more uniform wage growth across euro area countries: “The ECB wage tracker also suggests reduced dispersion in negotiated wage pressures across euro area countries in 2026 compared with previous years.”

Meanwhile, the unsmoothed measure points to a more stable outlook for 2026, with 2.9 per cent growth in the first half and 2.6 per cent in the second half, while the tracker excluding one-off payments remains at 2.7 per cent for both halves, indicating more moderate dynamics in base wages than seen in recent years. Employee coverage for 2026 is estimated at 37.1 per cent in the first half and 29.2 per cent in the second half.

The ECB noted that the forward-looking horizon of the wage tracker currently extends to December 2026, but it is expected to expand to the first quarter of 2027 in the July 2026 release as new agreements are signed. The bank cautioned that the tracker “may be subject to revisions and that its forward-looking component should not be interpreted as a forecast, as it only reflects information currently available from active collective bargaining agreements.” It added, “The tracker does not perfectly replicate the official indicator of negotiated wage growth and deviations may occur over time.”

For a broader perspective, the December 2025 Eurosystem staff macroeconomic projections forecast annual growth in compensation per employee of 4.0 per cent in 2025 and 3.2 per cent in 2026.

Against this backdrop of moderating euro area wage growth, Cyprus continues to see an upward trend at the national level. According to the Cyprus Statistical Service (Cystat), average monthly earnings rose by 4.3 per cent year-on-year in the third quarter of 2025.

Average gross monthly earnings reached €2,452 between July and September 2025, up from €2,352 in the same period of 2024. Seasonally adjusted data showed a further quarterly increase of 0.7 per cent from the second quarter of 2025, reflecting a continued upward trajectory.

Cystat noted that “all data from the first quarter of 2025 onwards remain provisional and subject to revision.” Male employees earned an average gross monthly salary of €2,622, while female employees earned €2,238 in Q3 2025. On a year-on-year basis, earnings rose by 3.8 per cent for men and 4.9 per cent for women. Seasonally adjusted figures indicated a quarterly increase of 0.3 per cent for men and 1.2 per cent for women.

Despite the overall rise, income disparities persist in the Cypriot labour market. A total of 36.5 per cent of employees earned less than €1,500 per month, 39.7 per cent earned between €1,500 and €2,999, 12.7 per cent earned between €3,000 and €4,499, 6 per cent earned between €4,500 and €5,999, and 5 per cent earned €6,000 or more. Among Cypriot nationals, 43.9 per cent were in the €1,500 to €2,999 range, and 30.2 per cent earned less than €1,500. Smaller shares earned between €3,000 and €4,499 (15.5 per cent), €4,500 and €5,999 (6.7 per cent), and €6,000 or more (3.8 per cent).

Non-Cypriot employees had 49.1 per cent earning less than €1,500 and 31.5 per cent in the €1,500 to €2,999 bracket. At the top end, 7.6 per cent earned €6,000 or more, compared with 7.1 per cent earning €3,000 to €4,499 and 4.7 per cent earning €4,500 to €5,999.

By gender, 41.3 per cent of men earned between €1,500 and €2,999, and 33.3 per cent earned less than €1,500. Higher income brackets included 12.8 per cent in the €3,000 to €4,499 range, 6.1 per cent in €4,500 to €5,999, and 6.5 per cent at €6,000 or more. Among women, 40.5 per cent earned less than €1,500, 37.8 per cent earned €1,500 to €2,999, 12.5 per cent earned €3,000 to €4,499, 6 per cent earned €4,500 to €5,999, and 3.2 per cent earned €6,000 or above.

Cystat clarified that “the calculations are based on data from the Social Insurance Services and cover all employees except those working for private households or extraterritorial organisations. Earnings include basic salary, cost of living allowance, overtime, holiday fund payments, bonuses and other allowances paid during the reference period.” Irregular employment, such as limited hours or arrears-only cases, is excluded, while temporary wage deductions and contributions from previous fiscal adjustments do not affect the gross earnings figures, which reflect total remuneration before deductions.

By fLEXI tEAM