Lithuania: Social partners involvement in unemployment benefit regimes

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The UI is mostly analysed in the report, as there are no UA schemes in Lithuania and the SA depends not on the employment status, but on the income received and wealth possessed. Over the past decade, the UI system has undergone several phases in Lithuania: significant expansion of social security in case of unemployment entrenched within the framework of the UI reform which started in 2005 was followed by a material reduction in 2009 as a result of the crisis. The role of SP in the area of UI and UB is seen as quite limited. The main mechanisms for indirect participation of the SP in the UI and UB regime are different tripartite councils and commissions. The members of these councils/commissions have opportunities to initiate discussions on relevant issues, including in the area of UI and UB.

1. The characteristics of the UB system in the country

1.1. Recent changes/transformations of the UB system in your country:

1.1.1. In the last 10 years, has the country’s UB regime been modified? Have new forms of interventions been introduced?

Regarding the UI

An unemployment insurance reform was started in 2005.

During the economic downturn the maximum amount of UI benefit was reduced, control of people registered in the Labour Exchange (Lithuanian Labour Exchange, LDB) was tighten and many other amendments tightening the conditions of the receipt of unemployment benefit were introduced.

Regarding the UA

There are no unemployment assistance schemes in Lithuania.

Regarding the SA

Qualifying conditions for benefits were introduced.

The recipients of social allowance were included in the group of LDB beneficiaries provided priority service.

Amendments to the Law on Monetary Social Assistance providing for a number of measures expected to have direct or indirect effects on work incentives/disincentives were adopted in Lithuania.

1.1.2. For each of these changes/innovations indicate date of introduction, who took the initiative, the content of the change/the new programme, the aim pursued

Regarding the UI

The unemployment insurance reform was started in 2005. Within the framework of the reform, the period of insurance required to qualify for unemployment benefit was reduced from 24 months to 18 months; extension of benefit payment period (up to 9 months) was foreseen for unemployed individuals with longer social insurance experience; the amount of unemployment benefit was increased by including in its calculation a component related to the previous wage; the link between payment of unemployment benefits and implementation of active labour market policy measures was reinforced. The reform resulted in a significant increase of average unemployment benefit.

During the economic downturn, which started in Lithuania at the end of 2008, the Government of the Republic of Lithuania (LRV) was placing the key focus on the stabilisation of the national budget. Due to this strategy the maximum amount of unemployment insurance benefit was reduced considerably – from LTL 1,042 (€302) to LTL 650 (€188) – with effect from 1 January 2009.

The reduction of unemployment benefit had negative implications for the income of unemployed families. As a result, many of them were pushed into a situation of applying for social assistance, mainly for social allowance, which directly compensate reduction/loss of income (including unemployment benefit).

As a result of reduced unemployment and social benefits, some unemployed individuals started looking for additional sources of income in the shadow economy. In response to this, the LDB started holding various checks, applying stricter requirements and controlling visits to the Labour Exchange units and participation in active labour market policy measures (ALMPM). In order to tighten control of people registered at the Labour Exchange, the Procedure for Labour Market Monitoring Conditions was amended and updated on 22 July 2010, control over visits to LDB’s units was tightened and registrations with the LDB were cancelled more often for the violation of registration rules. During the past years the LDB also started close cooperation with the State Labour Inspectorate (VDI) in order to improve the identification of undeclared work.

Regarding the UA

There are no unemployment assistance schemes in Lithuania.

Regarding the SA

With a view to budget saving, the government decided (with effect from 1 March 2009) to test family’s income to qualify for benefits to children (LTL 97 (€28) per month for children under 2 years of age and LTL 52 (€15) per month for children under 7 years of age; this benefit used to be a categorical one before). This policy led to reduction in the number of beneficiaries from 500 thousand to 152 thousand and in budget expenditure from LTL 469 million (€136 million) to LTL 127 million (€36.8 million).

In order to encourage unemployed recipients of social allowance not to delay looking for a new job and engage in economic activities, from July 2010 the recipients of social allowance were included in the group of LDB beneficiaries provided priority service, i.e., priority in being offered new jobs or opportunities to participate in ALMPM. Unreasonable refusal of a job offer or failure to appear at the LDB is a basis for the cancellation of registration with the LDB and, as a consequence, loss of the right to receive social allowance.

Amendments to the Law on Monetary Social Assistance (further – Law) were adopted by the Parliament of the Republic of Lithuania (LRS) on 1 December 2011. Among other things, the Law provided for a number of measures that were expected to have direct or indirect effects on work incentives/disincentives in Lithuania. The direct measures included:

• Supplementary social benefit in case of employment. The Law stipulates that a 50% higher social benefit may be granted to a person who gets employed if he/she: a) got employed for a wage that is not lower than one minimum monthly wage and not higher than two minimum monthly wages (further – MMW); b) was registered at the local labour exchange for a minimum period of 12 months prior to the employment; c) received social benefit at least once during the last three months; and d) has children. This amendment to the Law is expected to ensure motivation of working-age people to get integrated into the labour market, actively look for a job and to reduce long-term dependency on the social assistance system.
• Gradual reduction of social benefits to persons who receive social benefits for 36 months or more. The Law stipulates that a social benefit shall be reduced to a family (single person), if at least one member of the family receiving social benefit for a period of 36 months or more is a working-age unemployed person: by 20% to families (single persons) receiving social benefit for a period of 36 to 48 months; by 30% to families (single persons) receiving social benefit for a period of 48 to 30 months; by 40% to families (single persons) with dependent children receiving social benefit for a period exceeding 60 months; payment of social benefit shall be discontinued to families (single persons) without dependent children receiving social benefits for a period exceeding 60 months. The right to full social benefit shall be acquired again after 12 months’ employment during the last 24 months. This amendment to the Law is expected to reduce cases of abuse of social benefits.

The measures with indirect effects on work incentives/disincentives in Lithuania included such measures as delegating the granting of monetary social assistance to the independent functions of municipalities in pilot municipalities; application of the principle of economies of scale in the granting of monetary social assistance; simplifications of conditions qualifying the need for monetary social assistance; legalisation of the right to compensation of heating and water costs for tenants, etc.

1.1.3. For each of these changes/innovations please indicate from the main SP who was in favour or supported and who was against or resisted to it, and why:

As regard UI, one can say that trade unions generally support positions favourable to employees and as a rule call for higher unemployment benefits and longer periods of payment thereof in all discussions.

Employers mainly emphasise linking unemployment benefits to the participation of the unemployed in ALMPM and work incentives.

The most important priority for public authorities in this matter is balancing the budget.

1.2. The main characteristics of the UB system as it is now

1.2.1. Unemployment Insurance

In Lithuania, payment of UI benefits is regulated by the Law on Unemployment Social Insurance and the Regulations on Unemployment Social Insurance Benefits. Pursuant to the aforementioned legislation, persons registered at the local labour exchange as unemployed, who have not been offered a suitable job or ALMPM by the labour exchange, shall be entitled to UI benefit. The following citizens shall be eligible:

The above-mentioned should register with the LDB within 6 months from the date of dismissal from work or discharge from service and, prior to registration at the LDB, have acquired the unemployment insurance record not shorter than 18 months during the last 36 months. The unemployment insurance record includes periods during which unemployment insurance contributions are paid or had to be paid and periods during which the person received unemployment insurance benefits, sickness benefits, occupational rehabilitation, maternity (paternity) benefits as well as benefits for sickness caused by accidents at work or occupational disease benefits. The status of unemployed shall be granted to unemployed persons of working age, not studying under full-time training programmes and ready to participate in ALMPM.

Generally, the UI benefit is granted as of the eighth day after the registration at the LDB. However unemployed persons who are dismissed because of their own fault are granted the UI benefit three months after the date of registration at the LDB. The unemployed persons who have been dismissed from work (service) and received a severance pay or compensation by agreement between the parties are granted the UB not earlier than after such number of calendar months for which a severance pay or compensation in the amount of an average monthly wage was paid after the termination of the employment contract (discharge from the service).

The period of payment of the UB depends on the unemployment insurance record of the unemployed person, acquired prior to the date of the registration at the LDB. In the event the unemployment insurance record is shorter than 25 years, the UB is paid for 6 months, in case it is between 25 and 30 years, the UB is paid for 7 months, in the event it is between 30 and 35 years, the UB is paid for 8 months and in case it is equal to 35 years and longer, the UIB is paid for 9 months. Payment of UB to unemployed person with not more than 5 years below the old-age pension shall be extended for 2 months unless the person has been granted an early old-age pension.

The UB is calculated as the sum of fixed and variable amounts. The fixed part of the UB is equal to the amount of the state supported income valid in the month of payment (currently – LTL 350, €102). The variable part of the UB is equal to 40% of the former wage received by an unemployed person over the last 36 month before loosing the job. Until 2009, the amount of the UB was between LTL 350 and 1042 (€102-302). For the first three months a full UB is paid and for the remaining period the fixed part plus half of variable UB part.

The UB is not granted if, prior to its granting, the unemployed person:

1. refused a suitable job offer;
2. refused for no good reason to participate in the ALMPM provided for in his or her individual employment plan (hereinafter referred to as an “employment plan”);
3. failed for no good reason to arrive at a set time at the LDB to accept a job offer or to participate in the ALMPM provided for in his or her employment plan;
4. refused to undergo a health examination offered by the LDB in order to establish his suitability for work.

UB may be granted repeatedly only after 12 months from the date of passing a decision to disallow or terminate payment of the UB.

The economic recession in Lithuania involved a sharp decrease in employment and growth of unemployment rates (up to 18.3% in the middle of 2010). However, while unemployment was growing, the share of UB recipients was shrinking: at the end of 2008, UB was paid to 34% of unemployed persons registered with the LDB; at the beginning of 2010, this share was only 28% and at the beginning of 2012 – only 16%. The main reasons for the reduction in number of UB recipients inter alia included growth of long-term unemployment (on 1 March 2012, the long-term unemployed accounted for 36% of the total number of registered unemployed individuals).

Social partners are not involved at this stage.

1.2.2. Unemployment Assistance. Are forms of UA present? If yes, please indicate their general characteristics with specific attention to:

There are no unemployment assistance schemes in Lithuania.

1.2.3. Social Assistance. Are SA programmes with a direct relationship with the UB system and/or SP involvement present? If yes, please highlight the factors underlying such a relationship.

In Lithuania, granting of social assistance is subject to testing family’s earnings, while unemployment benefit is included to the family’s income and is thus directly related to the general social assistance scheme. Unemployed persons registered with the LDB receive the following additional social guarantees irrespective of whether or not they are paid UB:

• compensation for heating;
• compensation for hot and cold water;
• benefits for children;
• free meals at school and financial support to start an academic year;
• social allowance.

It should be noted that, until December 2011, poverty trap (mechanism which causes poverty to persist) was incidental to the Lithuanian social assistance system, as increasing income were reducing social support. In December 2011 amendments to the Law on Monetary Social Assistance was adopted by the LRS providing inter alia a number of measures that are expected to have direct or indirect effects on work incentives/disincentives in Lithuania.

2. SP involvement in the UB regime

2.1. The development phase

2.1.1. In your country, did SP participate in the development phase of UB programmes over the last decade?

To the participation of social partners in the development phase of UB programmes one may attribute two mechanisms – participation of social partners in the working groups, usually formed for the preparation of (new) UB programmes, and approval of the proposed UB programmes at the Tripartite Council of the Republic of Lithuania (LRTT).

2.1.2. If yes, please provide detailed information on the SP involvement in the development phase of UB regimes with respect to the following dimensions, distinguishing between UI and UA and reporting any important changes during the decade.

Working groups

As a rule, when certain amendments to the existing laws or systems are anticipated in Lithuania, working groups are formed at national level from representatives and professionals from the concerned public authorities and social partners (employers and employees’ representative organisations).

Such working groups were formed in most cases when the amendments to the system of UI were prepared.

We may say that negotiations and concertation between the SP and the institutions take place during the work of these working groups.

Apparently, through the participation in the aforementioned working groups the social partners enjoy full opportunity to express their opinions and submit proposals. On the other hand, this does not necessarily means that such opinions/proposals are taken into account.

The Tripartite Council of the Republic of Lithuania - LRTT

Draft legislation or their amendments relating to effects on the labour market or social situation are considered at the Tripartite Council. As the LRTT consists of the social partners, they have all opportunities to express their opinion as to the drafts of legal acts or amendments thereto, including those relating to the unemployment insurance.

The LRTT is a national level tripartite social dialogue institution, established in 1995. Representatives of all main national level social partner organisations are present in the LRTT. The sittings of the LRTT take place approximately once per month.

One may say that a kind of negotiation and concertation between the social partners and the institutions take place at the LRTT. All amendments to the Law on unemployment social insurance, for example, were discussed and approved at the Tripartite Council as well. Though this Tripartite Council is considered as an important national level social dialogue institution, its decisions are only of a recommendatory nature for the LRS and/or the LRV.

2.2. The implementation phase

One may say that the main instrument for social partners to participate in the implementation phase is the Tripartite Commission under the Lithuanian Labour Exchange (TKLDB). The TKLDB was established in 1991. The Commission is comprised of 9 members representing trade unions, employers’ organisations and the government (three representatives from each side).

Activities of the Commission are aimed at submitting proposals on the identification of prioritised activity trends for the LDB, reasonability of drawing up programmes on support for employment and delivery of labour market services as well as improving efficiency of the activities. The Commission meets at least twice per year. Tripartite commissions have also been established at each of the 10 local labour exchanges, which analyse and resolve issues related to the implementation of labour market policy at regional level.

The social partners have an advisory role throughout the whole implementation phase.

Both trade unions and employers’ representatives are trying to solve the problems of labour supply and demand in the labour market.

2.3. The management phase

Social partners are not actually involved in the management phase.

2.4. The monitoring phase

2.4.1. SP involvement in monitoring/evaluating the UB performance

Two aforementioned instruments – the LRTT and TKLDB (as well as 10 counties’ tripartite commissions functioning under the local labour exchanges) might be attributed to the indirect instruments of SP involvement in monitoring/evaluating the UB performance (for more details see Chapters 2.1.2 and 2.2.1). No special monitoring structures are established.

Which aspects of UI/UA functioning are put under evaluation?

The members of aforementioned council/commissions might monitor developments inter alia in the area of UI and – if decided – might initiate discussions on any aspect of UI in any of the aforementioned council/commissions.

Who is in charge of such monitoring/evaluation?

No special monitoring/evaluation structures are established.

How and when the monitoring process take place?

As no special monitoring/evaluation structures are established SP may intervene at any phase and with any frequency.

Which is the output of such process and which the possible outcome?

Discussions at the LRTT/TKLDB/local tripartite commissions and possibly – decision (of a recommendatory nature for the LRS or LRV.

How extensive and relevant is the SP’ role in the assessment process?

As there are no studies/research evaluating the extension and relevance of the SP’ role in the assessment process, it is rather difficult to provide an objective evaluation. Appealing to the own experience we may say that it should be treated as rather modest.

2.4.2. monitoring the SP involvement in the UB system

The SP role within the UB system is not subject to evaluation and monitoring.

3. Final observations

3.1. Public debates and policy discussion:

To summarise the material above, one can say that the main and leading role in the unemployment insurance and unemployment benefit regime (development, implementation, management and monitoring) is vested upon the State, namely upon the Ministry of Social Security and Labour (SADM) and the LDB. The role of the social partners in these processes appears to be quite limited.

We can say that there actually are no public debates on the issues, since UI and UB are basically regarded as a prerogative of the State. The social partners usually interfere with these processes only in certain specific cases: trade unions – in order to protect the interests of employees (and, for example, to this effect calling for longer duration of UB payment or higher UB), and employers – in order to link tighter the payment of UB to ALMPM and bigger incentives for work.

3.2. Research

There actually is neither research on SP involvement in the UB regime, nor academic contributions and/or documents stating the official position of the SP regarding the existing UB. The only exception might be the following article:

Blaziene, Inga (2011). Employers and government promote incentives to work. EIROnline, available at: /ef/observatories/eurwork/articles/undefined/employers-and-government-promote-incentives-to-work

3.3. Other issues:

There are no other issues.

4. Commentary

4.1. Assessments and comments

We can say that the existing situation where the role of the SP in UI and UB is rather modest is not satisfactory. While actually playing the leading role in the above-referred to processes, the State cares more of its own interests and this leads to the interests of the SP being disregarded. For example, in response to the crisis, the State focused on a priority to balance the budget and public finances with ensuing reduction of unemployment benefits, tighter conditions for payment of the unemployment benefit, considerable cuts of funds assigned for ALMPMs, etc. These processes resulted in a notable reduction of support for jobless people. On the other hand, it is quite probable that more active involvement of the social partners in the aforementioned processes would have enabled them to oppose the reduction of the support more seriously, encouraged better participation of unemployed individuals in ALMPM, etc.

4.2. Perceived strengths and weaknesses

As it was mentioned above, the main weakness lies in rather weak participation of SP in the UI and UB processes. On the one hand, the practice shows that if SP take initiatives, then they have capacity to initiate one or another amendments to legal acts or existing schemes, or, at least, to initiate debates at national level on the issues important to them (LT1012019I). Therefore, the main potential for a breakthrough in this area has to do with activity and initiatives of the social partners. On the other hand, it should be mentioned that in Lithuania the social partners lack resources (both financial and human resources) to assume certain additional functions, including those in the area of UI and UB.

Inga Blaziene, Boguslavas Gruzevskis, Institute of Labour and Social Research