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Cyprus Social Insurance
The five-year development plans adopted by the
government of
Cyprus increasingly stressed that a developing economy was
the best
means to improve the welfare and living standards of all
sectors of
the population. The plan covering the 1989-93 period had
as its
major objectives improving living standards, attaining
higher
levels of social welfare, and having a more equitable
distribution
of national income and economic burdens.
Beginning with independence, the state, trade unions,
and the
employers' associations had cooperated in establishing an
extensive
network of social security that included social insurance,
death
benefits, medical treatment and hospitalization,
education, and
housing. The crowning success of this effort was the
national
Social Insurance Scheme. As introduced by colonial
authorities in
1957, it was limited with regard to both the number of
persons
covered and the benefits it could provide. In 1964 the
plan was
improved and expanded to cover every person gainfully
employed on
the island, including even the self-employed. The welfare
program
included maternity leave and assistance for sickness and
workrelated injuries. Legislation providing for annual paid
vacations
was introduced in 1967. By 1987 Cypriots working five days
a week
were entitled to fifteen days of annual leave a year;
those working
six days a week had the right to eighteen days. Supporting
this
entitlement was a central vacation fund to which all
participating
employers were required to contribute 6 percent of
insurable
earnings.
A system of unemployment compensation was introduced in
1968.
Its main objectives were protecting employees against
arbitrary
dismissal, regulating how much advance notice was required
before
dismissal, and setting the amount of unemployment
compensation.
The Social Insurance Scheme was fundamentally improved
in 1973.
For the first time, the plan included a disability
pension, and
coverage of the self-employed was extended. The social
insurance
program now included a whole range of benefits. Some
benefits were
short-range, such as unemployment, sickness, or injury
benefits,
marriage and maternity benefits and disablement and
funeral grants.
Long-term benefits included pensions for elderly widow,
and
invalids, and payments to orphans and survivors.
In June 1974, social insurance payments were increased
25
percent to reach West European standards and meet relevant
International Labor Organisation criteria. The economic
crisis
stemming from the Turkish invasion, with its 30 percent
unemployment, compelled the government to reduce all
pensions by 20
percent and suspend the payment of unemployment benefits,
as well
as marriage, birth, and funeral grants. By 1977 benefits
were
restored to their preinvasion levels, partly through the
establishment of a separate fund for unemployment
benefits.
The Social Insurance Law of 1980 set contributions and
benefits
according to the incomes of the insured. The new program
maintained
the previous flat-rate principle for basic benefits, but
introduced
supplementary benefits with contributions directly related
to the
incomes of insured persons. In addition to compulsory
coverage of
all gainfully employed persons, the new program allowed
those
formerly employed to continue their social insurance on a
voluntary
basis. In the second half of the 1980s, participants had
amounts
equal to 15.5 percent of their insurable earnings paid
into the
central fund. For employees, the contributions came from
three
sources: 6 percent from employees themselves, 6 percent
from
employers, and 3.5 percent from the government. For the
selfemployed , the government paid 3.5 percent, and the insured
the
rest.
Apart from the state Social Insurance Scheme, an
increasing
number of insurance or pension funds were being registered
with the
Income Tax Department of the Ministry of Finance. In 1987
there
were 1,065 such funds, with a total of C£ 5.1 million
Cyprus pounds
(C£; for value of the
Cyprus pound--see Glossary) in
benefit
payments. The number of insured contributors to all funds,
public
and private, amounted to 214,522 in 1987, compared with
183,000 in
1973. In this period, the government's annual contribution
increased from C£ 1.7 million to C£ 23.7 million. In 1986,
the
government's payments of social insurance benefits
constituted 4.5
percent of GNP, compared with 1.6 percent in 1970.
Data as of January 1991
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