Minimum Wage Increases Set from 2027 – Safeguard Mechanism to Prevent Cuts in Crises

Purchasing power, the general level of gross earnings, their growth rate, and labor productivity will be the four variables based on which the minimum wage in the private sector will be determined from 2027 onwards.

The new criteria are being introduced as part of the EU Directive 2022/2041 on “decent” minimum wages, which is expected to be transposed into national law in October or November at the latest. The scientific committee set up at the Labour Ministry to draft the directive will propose safeguards and objective criteria in the way the minimum wage is set to ensure that wages are in line with the general trend of the economy, while at the same time supporting the most economically vulnerable households.

The committee, which is expected to deliver its findings to Labour Minister Niki Kerameos soon, will “construct” a mathematical formula for setting the minimum wage, which will take into account objective and transparent economic data, as is the case in other European countries. Thus, based on this algorithm, scientific and social bodies will be invited to draw up their findings on the minimum wage.

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According to reports, the minimum wage set through the new system will not be allowed to be reduced to ensure the general level of protection afforded to workers. The safety valve for a possible reduction seems paradoxical in the positive phase of the economy that the country is experiencing, but “let’s not forget,” Labour Ministry circles stress, “that our country had a difficult time during the decade of the crisis when it was forced to reduce the minimum wage. We must never allow a repetition of such a painful experience, both economically and socially.”

“The introduction of a more structured way of setting the minimum wage,” the same sources explain, “leads to greater predictability in the future wage path, reducing uncertainty for workers and employers and thus supporting workers’ planning and business operations, while strengthening the country’s overall economic credibility.”

When will the new minimum wage formula be implemented? The goal is to be implemented in 2027 after the Prime Minister’s commitment to a minimum wage of €950 in 2027 has been implemented, a goal the government expects to “inspire” employers so that, with a clear picture of the economy in front of them, they can “open up” to hiring and wage increases.

According to the committee’s rationale, under which the Directive in question is expected to be transposed:

Each EU member state is free to choose the number and weighting of the criteria it will use to determine basic pay in the private sector. But it should certainly take into account at least the following specific points:

■ The purchasing power of minimum wages. ■ The general level of gross wages and their distribution. ■ The rate of growth of gross wages. ■ Developments in labor productivity.

These four basic forecasts, used appropriately, will largely be able to set future minimum wages, and hence the evolution of the average private sector wage.

Deviations

In practice, is the legislated minimum wage of €830 for 2024 being applied? In general, yes, it is applied. However, according to the results of audits by the Labor Inspectorate, about 10% of workers do not receive the minimum wage.

Specifically, from the audit of 1,170 enterprises and 8,518 workers, 286 enterprises and 1,949 workers had not adapted to the law. Following the intervention of the Labour Inspectorate, compliance was achieved, and fines totaling 49,200 euros were imposed in 43 cases.

At the same time, the leadership of the Labour Ministry is also considering interventions in the field of Collective Bargaining, with the preparation of a roadmap to increase the percentage of workers covered by collective bargaining to increase average wages. The Community directive sets the objective of increasing the percentage of workers covered by collective agreements in the European Union to 80%. In Greece, the percentage of workers covered by a contract ranges from 25% to 30%.

Within the framework of the Community Directive, the role of the social partners is also upgraded, with the first step being the extensive social dialogue between the Minister of Labour and Social Security and the social partners, after the committee’s conclusion is delivered and before the final regulation makes its way to Parliament. We note that Greece is among the 22 EU countries that have a legislated minimum wage.

Only in five EU member states (Austria, Denmark, Finland, Finland, Italy and Sweden) is the minimum wage determined by collective bargaining.

In the EU Directive, regarding the active participation of the social partners in setting the legal minimum wages, there is a provision for the imposition of sanctions on employers in case of non-compliance. However, although the social partners are involved through recommendations in the process of setting the minimum wage, the government has the final say.