On Thursday, November 7, 2024, the draft law of the Ministry of Labor and Social Security, entitled “Incorporation of Directive (EU) 2022/2041 of the European Parliament and of the Council of October 19, 2022 on adequate minimum wages in the European Union-Adjustment of salaries of public sector personnel-Regulations for the determination of the minimum salary for the years 2025, 2026 and 2027”.

As stated in a relevant announcement, the consultation will be completed on Thursday, November 21, 2024 at 2:00 p.m. and the relevant comments, which will be submitted, will be taken into account for the final formulation of the text of the draft law, which will be introduced to the Parliament for discussion and voting.

Here are 12 questions and answers to better understand the bill under consultation:

1. What is the minimum wage today and how is it determined?

The minimum wage today amounts to 830 euros, showing an increase of 28% compared to 2019.

The government’s main priority is to improve workers’ salaries and strengthen their purchasing power. The Prime Minister’s commitment to increase the minimum wage to €950 by 2027 is a national target and will lead to a cumulative increase of the minimum wage by 46% compared to 2019.

The increase in the minimum wage is accompanied by a reduction in non-wage costs for businesses, through the reduction of insurance contributions, giving incentives for investment and hiring. To date, insurance contributions have fallen by 4.4 percentage points since 2019. A further reduction of one percentage point from 1/1/2025 and another half point in 2027 has been announced.

Greece, like other 21 of the 27 member states of the European Union, legislates the minimum wage since 2012.

With the incorporation of the European Directive 2022/2041, the mechanism becomes more predictable and objective, while the role of the social partners is also strengthened.

2. What does the European Directive 2022/2041 define for adequate minimum wages in the European Union?

The European Directive 2022/2041 on adequate minimum wages in the European Union aims to improve the living and working conditions of employees. It establishes a framework for the adequacy of minimum wages and promotes collective bargaining, respecting the role of the social partners.

The Directive focuses on two main axes:

  • Member States are invited to establish clear criteria and objective procedures for determining and updating legal minimum wages, with the possibility of applying an automatic adjustment mechanism.
  • Member states with a percentage of coverage by Collective Agreements below 80% are obliged to prepare an action plan, in order to create favorable conditions for the strengthening of collective negotiations.

3. What preparation has been made for the integration of the European Directive into national law?

A Scientific Committee was formed, chaired by the former minister of Labor and Social Affairs, professor, Patrina Paparrigopoulou, with the aim of incorporating the Directive.

The Committee analyzed the requirements of the Directive, as well as the existing mechanism and, on October 8, 2024, delivered its conclusion to the Minister of Labour, Niki Kerameos, with which it proposes the gradual transition to a new system for determining the statutory minimum wage and daily wage, through mathematical type, which takes into account real economic figures, such as inflation and the productivity of the economy, according to the model of the system applied in France.

The Committee’s conclusion has already been discussed in detail with the social partners (GSEE, GSEVEE, ESEE, SEV, SETE, SBE) and with ELSTAT, in order to record their positions and proposals.

This process will continue, until the completion of the relevant debate in Parliament, with the expectation that proposals will be received to improve this new system.

4. What is the mathematical formula that will be used to raise the minimum wage?

(Percentage change in the minimum wage) = (Percentage change in the Consumer Price Index for households in the bottom 20% of the income distribution) + [(Ποσοστό μεταβολής της αγοραστικής δύναμης του Γενικού Δείκτη Μισθών)/2].

The rate of annual increase in the minimum wage will be the sum of the annual rate of change in the Consumer Price Index, especially for households in the bottom 20% of the income distribution, and half of the annual rate of change in the purchasing power of the general wage index by the same time period.

In simple words, the accuracy for the households in the lowest 20% of the income distribution and the increase in the productivity of the Greek economy will be taken into account.

The mathematical formula for determining the minimum wage is based on the French model and takes into account objective and transparent economic data, while other countries in the European Union, such as Belgium, Luxembourg and the Netherlands, apply similar systems.

The relevant indicators will be calculated by ELSTAT, strengthening confidence in the system.

5. Does the proposed formula ensure the adequacy of the minimum wage to achieve a decent standard of living?

Yes, precisely because inflation will be taken into account, especially for the bottom 20% of the household income distribution, using an adjusted “basket” to estimate accuracy.

Under the proposed system, minimum wage earners at least retain their purchasing power, while, as inflation and the productivity of the economy increases, they increase it.

6. Can the application of the mathematical formula lead to a decrease in the minimum wage?

No. It is expressly provided that the minimum wage cannot be reduced.

In cases of extraordinary circumstances and serious financial problems, the mechanism may deviate from the automatic formula. In these cases, the minimum wage will be determined, through consultation, but the reduction of the minimum wage remains prohibited.

7. What are the innovations of the proposed system?

It enhances security for workers, as it is stipulated that the minimum wage cannot be reduced.

The level of the minimum wage is linked to real economic figures, such as inflation and productivity.

It is based on objective data from ELSTAT, enhancing transparency and trust in the system.

It includes the public sector so that henceforth, for the first time, civil servants are protected from the minimum wage and receive the nominal increase in the minimum wage.

8. What are the advantages of the proposed system?

It is objective, transparent and easy to understand.

Linking the minimum wage to the country’s real economic data ensures employment and long-term economic sustainability and protects the purchasing power of the bottom 20% of the household income distribution.

It enhances the role of the social partners in the process, especially in cases of emergency conditions and serious problems of the economy.

It introduces predictability as to the future course of the minimum wage, reducing uncertainty for workers and employers and overall strengthening the credibility of the country’s economic policy.

It supports the family planning of workers and the operation of businesses, while, at the same time, it promotes investment, economic growth and social cohesion.

9. Why will the new system take effect from the 2028 low? What will apply until then?

The new system is based on a series of elements and data and sufficient adjustment time is required in order to create the new indicators from ELSTAT. The new automatic adjustment mechanism of the minimum wage will apply from 2028.

In order to determine the minimum wage for the years 2025, 2026 and 2027, a transitional procedure is established, with the substantial participation of the social partners and ADEDY, who will participate in the Consultation Committee, which will formulate an opinion in an institutional and unified manner on the raising the minimum wage.

10. Why should the minimum wage be set by law and not by collective bargaining, as was the case before 2012?

First of all, the social partners can, through collective bargaining, agree on more favorable terms of pay and work for employees, if they wish and seek to do so.

However, the social partners do not represent all workers and therefore bilateral negotiations are not representative of society as a whole. For example, the unemployed and the new generations are not represented. The minimum wage protects society as a whole.

The predictability of the future course of the minimum wage helps to reduce the uncertainty of workers and employers and, consequently, supports the family planning of workers on the one hand and the operation of businesses on the other, while favoring investment, economic growth and social cohesion .

The formula ensures that decisions are made based on the real state of the economy and the needs of workers, thus promoting a fair and sustainable wage policy.

It is noted that in 22 of the 27 member states the minimum wage is established by law, while in only five countries is it defined by collective bargaining at the sectoral level (Austria, Denmark, Italy, Finland and Sweden).

Collective negotiations that can lead to more favorable remuneration conditions for employees continue to be provided for in Law 1876/1990, as long as the social partners desire and pursue them.

11. How is the role of the social partners strengthened?

With the new system, the role of the social partners is upgraded and strengthened in the following ways:

During the transitional setting process up to the setting of the floor for 2028, the social partners participate in the Consultative Committee, which formulates an opinion on the minimum wage in an institutional and uniform way, following specific criteria, thus enhancing transparency and participation.

In case of activation of the derogation clause, when there are extraordinary circumstances and serious financial problems, a consultation process is followed with the participation, among others, of the scientific institutes of the social partners, ensuring a thorough approach. And in this case the minimum wage cannot be reduced.

The social partners play a key role in the promotion of collective bargaining, as they are invited to actively participate in the drawing up of the collective bargaining action plan. This ensures that the needs and proposals of all parties are taken into account, enhancing participation and cooperation.

12. What will be done to promote collective bargaining?

The European Directive provides for the drawing up of an action plan to increase the percentage of employees covered by Collective Labor Agreements.

The action plan will be issued within one year of the passing of the law.

The government has made it clear that its intention is to strengthen Collective Bargaining Agreements.

As part of drawing up the action plan, there will be an extensive discussion with the social partners about the necessary institutional actions to strengthen the framework.

It is very positive when employees and employers sit at the same table and agree on the terms of Collective Bargaining Agreements and the government will promote in every way the increase in the rate of coverage from collective bargaining.