Cyprus: Annual Review-2010

  • Observatory: EurWORK
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  • Published on: 17 Novembre 2011



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Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

This annual review, compiled in February 2011, looks at industrial relations developments in Cyprus during the course of 2010.

1. Political developments

During 2010, the present Cyprus’s government, headed by the President of the Republic Demetris Christofias, continued its third five-year term. The four parties that currently form the government coalition are the Progressive Party of the Working People of Cyprus (AKEL), the Cyprus Democratic Party (DIKO), the United Democrats (EDI) and the Ecologists/Environmentalists.

The next parliamentary elections are scheduled to take place in May 2011.

2. Legislative developments

No substantial legislative changes were noted in 2010. Nevertheless, of particular interest is the government’s draft bill on modernising industrial relations that was submitted to the social partners in November 2010. In short, the draft bill includes a number of provisions that seek to strengthen rights to bargain collectively and to give trade union representatives access to workplaces, while still respecting employers’ rights. For this purpose, the Ministry of Labour and Social Insurance (MLSI), carried out a meticulous study of existing legislation, guided mainly by a clarification and full understanding of the rights emanating from the ratification of specific International Labour Organisation’s (ILO) Conventions, as interpreted by the competent ILO committee (the Committee on Freedom of Association). On this basis, the ministry feels obliged to amend the laws ratifying Conventions 98 and 135 to strengthen the fundamental rights ensured by the two conventions. Although the social partners have not yet commented on the ministry’s proposal, all parties agree that any legislative amendments are by no means intended to alter the underlying philosophy of the existing industrial relations system, the basis of which remains free collective bargaining and tripartite cooperation (CY1011019I).

On 16 April 2010, in the framework of Chapter 183 of the Minimum Wages Law, minimum wages were readjusted. In particular, according to the most recent Order (No. 156/2010) that is effective retroactively from 1 April 2010, the minimum monthly salary for new job entrants in eight of the nine occupational categories - excepting that of cleaners - is set at €835 from €791 in 2009, while for employees who have worked for the same employer for six consecutive months, the minimum wage is set at €887 from €840 in 2009. With regard to the field of application of the existing legislation, beginning in April 2010 the decree also covers the occupation of cleaners, for which the minimum is set at €791 and €840 accordingly. Minimum wages are gross earnings and are readjusted on an annual basis, following consultation with the social partners (CY0808019Q).

3. Organisation and role of the social partners

There were no notable developments during 2010 regarding the organisation and the role of the social partners. At organisational level, according to data provided by the Trade Union Registrar, among the few unions that were established in 2010, only two have more than 50 members, the Pancyprian Union of Air Traffic Controllers (PASEEK) with 80 members and the Union of Technical Personnel in Cyprus Telecommunications Authority (CYTA) with 250 members. PASEEK’s members were formally organised in the Pancyprian Public Employees Trade Union (PASYDY). However, PASEEK left the trade union confederation due to a dispute over the manner in which PASYDY was promoting their interests. It is important to mention that, at company level, the Union of Technical Personnel in Cyprus Telecommunications Authority is not yet recognised for collective bargaining purposes. In terms of union density and membership, despite a slight increase in total union membership 2010 has seen a further decline in trade union density. According to preliminary statistics (data for 2009 are due in April 2011) Trade Union Registrar estimates that union density will drop below 50% (CY0901029Q).

4. Collective bargaining developments

The concept of collective bargaining at central national level, setting minimum terms and conditions of a binding nature for all employees, does not exist in Cyprus. In this context, collective bargaining is considered to be decentralised, with most agreements concluded at enterprise level. However, despite the numerical strength of enterprise level agreements, the sectoral level is considered to be just as important, if not more important as far as coverage is concerned. As in previous years, there are no data available on the precise number of agreements signed in 2010 as both employers’ organisations and trade unions failed to submit the relevant data to the Ministry of Labour and Social Insurance (MLSI) as provided under the Industrial Relations Code. Nevertheless, according to provisional data provided by the unions affiliated to the Pancyprian Federation of Labour (PEO) out of approximately 178 labour agreements that have expired in late 2009 or early 2010, around 108 agreements were renewed during 2010 covering around 31.000 employees, compared to approximately 140 agreements in 2009 covering around 10.000 employees. It is worth mentioning that as a result of the financial crisis many agreements have either delayed or reached a deadlock both at the stage of direct negotiations and the stage of mediation.

As far as labour disputes are concerned, according to official data provided by the Department of Labour Relations of the Ministry of Labour and Social Insurance for the year 2010, 250 labour disputes were referred to mediation, involving a total of 30.965 workers, compared to 229 labour disputes in 2009, involving a total of 41.871 workers (according to the revised data for the year 2009). As regards the distribution of labour disputes by sector of economic activity, out of the 250 labour disputes, 90 took place in services, 40 in commerce and the hotel industry, 37 in the transport and communication sector, 32 in financial organisations, 21 in the construction industry, 17 in manufacturing, 11 in electricity, one in mining and one in agriculture.

Pay

In contrast to the past two years, in which the average collectively agreed basic pay increase, in line with unions’ pay demands, exceeded the productivity rate, in 2010 pay bargaining reflected unions’ decision to adopt a moderate wage policy. This decision was deemed necessary under the specific conditions created by the global financial crisis and more particularly the high unemployment rate, the reduced rate of economic growth, the sudden reduction in state revenues and the higher fiscal deficit and public debt. Against this background, important sectoral agreements provide either for low increases or for no increases at all. For instance, the sectoral agreement for the employees in the hotel industry that covers over 16.000 skilled and unskilled workers, stipulates a total increase of about 1.5% for 2010, while the metalworking agreement that covers around 9.000 workers does not provide for any pay rises in 2010 apart from a €120 lump sum for every worker in employment on 31 December 2009. Although not signed into law or collective agreement, but rather an informal agreement between the government and the trade unions, a pay freeze will apply to the public and the semi-public sector that will be in effect until the end of 2011.

Working time

No substantial changes were noted in relation to working time arrangements in 2010, with the current average collectively agreed normal weekly working time remaining 38 hours.

In the area of new forms of work, the most significant development refers to the banking sector. In particular, the sectoral agreement that is valid until the end of 2010 provides for the extent of the system of outsourcing. More specifically, according to Article 8 of the agreement, the list of existing services which may be outsourced is to be extended to areas including scanning, blue-collar work, research at the Registrar of Companies, the safekeeping of files and introduction of new technology (CY0807049I).

5. Responses to economic downturn

During 2010, responses to economic downturn refer almost entirely to the continuation of a series of measures undertaken by the government in 2009 aimed on the one hand at mitigating the effects of the crisis and stimulating the economy, and on the other at protecting employment and creating new jobs (CY0912019I and CY1004019Q).

When it comes in particular to the effects of the crisis on employment, following a further increase in the unemployment rate that rose from 6,1% in October 2009 to 7,3% in October 2010 (males 7,2% and females 7,5%), the government intensified its efforts in the area of training and retraining. Given however that most of the measures are a continuation of previous initiatives, have been extended until the crisis eases, are readjusted and redefined depending on how the crisis develops. This redefinition refers mainly to the amount of expenditure that is allocated for each action, whilst when necessary additional measures are also introduced. Additional measures target mainly young workers, and primarily seek to prevent and eliminate unemployment, by making use of training and retraining possibilities (CY1101019Q). During the last two years a particularly worrying aspect of the economic recession is the level of youth unemployment rate (under 25) that rose from 17.2% in October 2009 to 20.8% in September 2010, exceeding this way both the euro area and the EU27 levels that in September 2010 were 20.1% and 20.4% respectively.

6. Pensions

In July 2010, a new Social Insurance Law was put into force (Law 59(I)/2010) that amends and unifies the Social Insurance Laws of 1980 to 2009. In particular, the new law abolishes and substitutes the law of the 6th October 1980, incorporates all the amendments adapted from 1980 to 2009, simplifies the provisions referred to the insurance conditions and the calculation of the benefits and for the first time is published in modern Greek. The new legislation was the result of a social dialogue between the social partners and the Ministry of Labour and Social Insurance (MLSI).

A previous important amendment that was put into force in March 2009 refers to the long-term sustainability of the Social Insurance Fund up to year 2048. The amended Law 22(I)/2009 that was also the result of a social dialogue between the social partners and the ministry, provides for the increase of the contribution rates of the Social Insurance Fund every five years, starting as from the 1st of April 2009 and ending in 2039. It also concerns the adaptation of stricter insurance conditions in order to be entitled to an old-age pension as well as a lump-sum of old-age pension.

A social dialogue on the matter of modernising the Survivors benefits paid out of the Social Insurance Fund is currently being conducted.

7 Developments in working conditions

According to LFS data for the year 2010, the employment rate dropped from 69.9% in 2009 to 69.7 % in 2010, with the respective percentage for males at 77.6% in 2009 and 76.6% in 2010 and for females at 62.5% and 63% respectively. Part-time employment that increased for both males and females in comparison to 2009, comprised 9.3% of total employment (males 6.5% and females 12.7%), while the main reason that was put forth for part-time employment was for other personal or family reasons and the second reason because of not finding a full-time job. In 2009 the percentage for part-time employment was 8.4% (males 5.2%, females 12.5%).

A particularly worrying aspect of the economic recession has been the level of youth unemployment rate (under 25) that rose from 17.2% in October 2009 to 20.8% in September 2010. Against this background, a number of measures have been promoted with beneficial effects on youth employment as well. The majority of targeted measures however (CY1101019Q), primarily seek to prevent and reduce unemployment, by making use of training and retraining possibilities, an approach that reflects to a great extent the position of the government with regards to the challenges for young workers but also the importance that both the government and the social partners attribute to the role of vocational training and the development of skills in dealing with effects of the economic crisis (CY1010029Q).

8. Major conflicts and restructuring cases

At national level, the trade union movement opposed the government’s intention to take forward a package of fiscal recovery measures without any prior social dialogue, announced in early December 2010 a number of planned strike action to take place in mid-December. Nevertheless, with the exception of the education unions, all other unions in both the public and the private sector called off strikes, after a framework agreement was reached between the unions and the government (CY1012039I). At sectoral level the most important conflict between the social partners refers to the sector of metalworking. Representatives of employers were locked in a serious dispute with the trade unions on the pay-related part of the agreement, which led to bargaining deadlock and industrial action (CY1012029I). The basic point of disagreement involved pay – specifically increases in the level of basic pay, with employees asking for pay increases of around 2% for 2010 and another 2% for 2011, and the employers counter-proposing that no pay increases be granted in either of the two years. An agreement, although not signed yet, was finally reached on 23 February 2011 based on a mediation proposal that was made by the Ministry of Labour and Social Insurance. The new agreement that will be effective retroactively on a three-year rather than a two –year basis, from 1 January 2010 until 31 December 2011, provides for an across-the-board increases of around 2,4% for the whole three-year period, but only from its second year. For 2010, no pay rises are provided, apart from a €120 lump sum for every worker in employment on 31 December 2009.

In November 2010, after the European Commission has rejected the merger of Cyprus’s two airlines, Eurocypria and Cyprus Airways (CY1010029I), Eurocypria entered into a creditor liquidation process which will lead to 265 direct dismissals. The government seems to be working on various options for managing the impact of restructuring:  

  • Implementation of a social plan with compensations above those provided for by the law.  
  • Recruitment of Eurocypria's former employees by Cyprus Airways from the labour market as the company will try to gain the market shares of Eurocypria.
  • Implementation of an early retirement plan for Cyprus Airways employees. This will allow a recruitment of Eurocypria's workers from Cyprus Airways as they currently receive lower wages compared to employees in Cyprus Airways.
  • Recruitment in the public sector according to the specific skills and qualifications of Eurocypria's staff. 

9. Other relevant developments

No further significant developments affecting employment relations are reported during 2010.

Eva Soumeli, INEK/PEO

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