EMCC European Monitoring Centre on Change

Cyprus: ERM comparative analytical report on Public support instruments to support self-employment and job creation in one-person and micro enterprises

  • Observatory: EMCC
  • Topic:
  • Published on: 12 January 2012



About
Country:
Cyprus
Author:
Yannis Eustathopoulos
Institution:

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.

The rationale for job creation policies seems to be different between policies aiming at self-employment and those aiming at micro enterprises and SMEs. By and large, policies for self-employed were existing before the crisis and have been addressed to vulnerable and specific social groups (female, youth, disabled persons, repatriated Cypriot) as a tool for labour inclusion. In contrary, a number of job creation policies for micro enterprises and SMEs have been implemented to mitigate the impact of the crisis. These recession-specific schemes provide on the job training for the unemployed and wage subsidies.

QUESTIONNAIRE

Part 1: Overall policy context

1. General policy approach in the area of self-employment, one-person and micro enterprises at the national level


1.1. Has there been a policy focus/debate on the specific challenges facing entrepreneurship as tool for job creation before the global recession? If so, since when and for how long?

Table 1: Presence of policy focus/debate on entrepreneurship as facilitation for job creation before the crisis
 

Yes, continuously since xx? (Please indicate year)

Yes, on and off in the last 10 years

(Please indicate ‘X’ where it applies)

Yes, has been in focus, but since xx it is no longer part of the policy focus (Please indicate year)

No, it has never had policy focus before the recession

(Please indicate ‘X’ where it applies)

Self-employment  

X

   
Hiring the first employee      

X

Hiring additional employees/creating additional jobs in micro enterprises      

X


1.2. What is the main focus in policy documents or strategies in relation to public or social partner based support instruments for fostering self-employment or job creation in one-person and micro enterprises? (Please indicate ‘X’, multiple answers possible)

Table 2: Main focus in the policy documents or strategies
 

Entrepreneurship (Business development in general)

Job creation (Employment)

Growth (Competitiveness)

Others (please specify)

Self-employment  

X

 

X (labour inclusion of vulnerable groups)

Hiring the first employee

-

-

-

-

Hiring additional employees/creating additional jobs in micro enterprises  

X

Χ (i.e. on the job training for university graduates)

 

1.3. Please elaborate on the answer given above (with a focus on those developments aimed at employment creation and growth) and indicate if the financial recession has caused a change of focus:

Public policies in Cyprus for female and youth entrepreneurship seek to provide solutions to specific problems met by these groups (e.g. unemployment). Other vulnerable groups targeted by schemes supporting entrepreneurship and self-employment are repatriated Cypriots and persons with disabilities. The crisis has not changed noticeably the situation concerning this category of measures.

Scheme for Female Entrepreneurship.

Scheme for Youth Entrepreneurship.

Scheme for the self-employment of persons with disabilities.

Self-employment Scheme for University and Higher Education Graduates.

In contrast to these policies (which existed before the crisis), a set of policies has been introduced after 2009 to mitigate the impact of the crisis. It should be noted that this schemes are not addressed explicitly to micro enterprises and SMEs. However, implicitly, the above categories of business are the main beneficiaries due to their primary importance in the productive system of Cyprus. According to the last Census of Establishment and Enterprises of the Statistical Service of Cyprus of 2005, micro enterprises employing less than 10 persons accounted for 94.1% of the total number of enterprises.

Table 3: The policy content and significance of the financial recession
Self-employment
Elaboration of content (please describe and also indicate whether it is treated explicitly/implicitly)

Self-employment as a tool for the labour inclusion of vulnerable social groups (female, youth, disabled persons, repatriated Cypriots).

Change due to the financial recession

Please tick:

Yes: □

No: x

If ‘Yes’, please elaborate:

Hiring the first employee
Elaboration of content (please describe and also indicate whether it is treated explicitly/implicitly)

No policy focus.

Change due to the financial recession

Please tick:

Yes: □

No: □

If ‘Yes’, please elaborate:

Hiring additional employees/creating additional jobs in micro enterprises
Elaboration of content (please describe and also indicate whether it is treated explicitly/implicitly)

Several schemes exist for creating jobs (but not explicitly for micro enterprises).

Change due to the financial recession

Please tick:

Yes: x

No: □

If ‘Yes’, please elaborate:

New recession-specific schemes have been introduced after 2009 in order to foster job creation through wage subsidies or in-company training.

2. Disincentives for self-employment and job creation


2.1 Have public measures (e.g. with the aim to increase public revenue or cut public spending) led to disincentives for self-employment or job creation in one-person or micro enterprises before the financial recession? (Please briefly describe the major developments/initiatives (max. 300 words)

Efforts to increase entrepreneurial spirit among young people and promote access to new technology and finance have been realised by the Cypriot government since the adhesion to the European Union. However, Cyprus has not yet reached the implementation of an integrated entrepreneurship policy focused on new high-tech activities (Hadjimanolis, 2008). This seems to be one of the main disincentives to labour market integration through self-employment as the vast majority of companies in Cyprus are low-tech enterprises that usually operate in saturated markets (e.g. retail, catering). In other words, entrepreneurship, especially for very small businesses and the self-employed, responds primarily to a necessity rather than to business opportunities associated with innovative industries.

Other factors considered to limit the development of entrepreneurship and job creation in micro enterprises and small firms are:


  • The legal and institutional framework for the operation of SMEs according to the Cyprus Federation of Professional Craftsmen and Shopkeepers (POBEK).
  • High electricity prices for businesses have been blamed as a barrier to entrepreneurship. These prices are higher than the European average. According to the Electricity Authority of Cyprus (EAC), this is due to the fact that the electric system of Cyprus is small and isolated (no interconnection with other electric systems as in other European countries). Employers’ organisations stress that reducing the electricity prices is possible through further market liberalisation and removal of cross-subsidies.
  • POVEK indicates the need to improve administrative and legal procedures for starting and operating a SME. However, it should be noted that, according to the result of business surveys, perceived administrative complexity is considered less of a problem against the EU average (Hadjimanolis, 2009).

2.2 Have public measures (e.g. with the aim to increase public revenue or cut public spending) led to disincentives for self-employment or job creation in one-person or micro enterprises as a result of the financial recession? (Please describe – max. 300 words)

No reactions have been reported as regards this issue.

3. Representation of/lobbying for self-employed and micro enterprises


Are self-employed and micro enterprises in your national context explicitly or implicitly (e.g. entrepreneurs or SMEs in general) represented by the following types of organisations (e.g. for lobbying, defending their interest etc.)?

Table 4: Representation of self-employed and micro enterprises
 

Self-employed

Micro enterprises

Employers’ organisations

Yes, explicitly: the Cyprus Federation of Professional Craftsmen and Shopkeepers (POBEK) (Παγκύπρια Ομοσπονδία Βιοτεχνών Επαγγελματιών Καταστηματαρχών, ΠΟΒΕΚ)

Yes, explicitly: the Cyprus Federation of Professional Craftsmen and Shopkeepers (POBEK) (Παγκύπρια Ομοσπονδία Βιοτεχνών Επαγγελματιών Καταστηματαρχών, ΠΟΒΕΚ)

Employees’ organisation

No.

No explicitly.

Not-for-profit organisations

No.

No.

Others

-

-

Part 2: Identification and description of relevant recent support instruments

1. Selection of region(s) when total coverage of the entire regional and local level is too comprehensive

Table 5: Administrative level/region(s) covered for the following research (max. 50 words per region)

Administrative level relevant for the rest of the questionnaire

National level

If a specific regional/local are is selected, please provide the following information

Name of region

 
Motivation for selecting this region

Territory-based policies are rather limited in Cyprus. Labour inclusion policies for vulnerable groups and policies targeting SMEs do not form part of broader territory-based regional development policies. Thus, the appropriate level for the research is the national level.

Facts about the region e.g.

- Geographic location

- No. of inhabitants

- Business structure (sector, size)

- Labour market

- Specific characteristics if applicable

 

2. Brief overview of recent instruments to foster self-employment or job creation in one-person and micro enterprises


2.1. Please provide a brief description (max. 800 words) of public or social partner based instruments recently initiated (2008 onwards) to support self-employment and job creation in one-person or micro enterprises.

Overall, three main programmes for the creation of jobs in micro enterprises and SMEs can be distinguished:


  • On-the job training measures: schemes are being implemented in Cyprus to support in-company training for the unemployed. The ‘Emergency Scheme for the Support of Employment through in-company individual training of the unemployed’, implemented by a partnership of various public agencies, provides job placement and training of the unemployed (3-6 months). More specifically, the scheme provides tailor-made training programmes and wage subsidies. The coordination of the partnership, between the Cyprus Productivity Centre, the Higher Hotel Institute of Cyprus (HHIC) and the Department of Labour of the Ministry of Labour and Social Insurance, is implemented by the Human Resources Development Authority (HRDA) (Αρχή Ανάπτυξης Ανθρώπινου Δυναμικού, ΑΝΑΔ). A similar scheme is implemented by the Human Resources Development Authority aiming at on the job training for University Graduates.
  • Job creation for the long-term unemployed and other vulnerable groups:  The Department of Labour of the Ministry of Labour and Social Insurance (Τμήμα Εργασίας του Υπουργείου Εργασίας και Κοινωνικών Ασφαλίσεων)  is responsible for the implementation of a scheme aimed at providing incentives to businesses for hiring unemployed persons from vulnerable social groups (including the long term unemployed).
  • Provision of incentives to hire unemployed persons: Until December 2010 the Department of Labour of the Ministry of Labour and Social Insurance has been implementing a subsidy scheme for employers for them to hire unemployed persons for a period of 6 months (with mandatory employment for two additional months).

According to an announcement of the Department of Labour of the Ministry of Labour and Social Insurance, more than 3,000 job placements have been achieved since October 2009 for the above mentioned schemes (i.e. job creation for vulnerable social groups and incentives to hire unemployed persons).

Table 6: List of recent instruments

Title

Έκτακτο Σχέδιο Στήριξης της Απασχόλησης με Εξατομικευμένη Κατάρτιση Ανέργων στις Επιχειρήσεις.

Emergency Scheme for the Support of Employment through in-company individual training of unemployed.

Aim/objective

Job placement and training of unemployed (3-6 months) to fill vacancies and to substitute labour from non EU countries (tailor-made programmes).

Description of support

Subsidy for the cost of training and employee wage for training time.

Target group

All businesses (implicitly micro enterprises and SMEs).

Initiator and other actors involved

Partnership between the Cyprus Productivity Centre, the Higher Hotel Institute of Cyprus (HHIC) and the Department of Labour of the Ministry of Labour and Social Insurance. The coordination of the partnership is implemented by the Human Resources Development Authority.

Duration (please also indicate whether the measures has been initiated due to the recession)

From 1/1/2011 until 31/12/2011.

Measure initiated due to the recession in the frame of the Special Action Plan of the Human Resources Development Authority.

Title

Έκτακτο Σχέδιο Παροχής Κινήτρων για Απασχόληση Ανέργων.

Emergency Incentive Scheme for Hiring Unemployed.

Aim/objective

Subsidy scheme for employers for them to hire unemployed persons for a period of 6 months (with mandatory employment for two additional months). This scheme concerns all businesses (implicitly micro enterprises and SMEs).

Description of support

Subsidy scheme: Wage subsidy (60% of the wage for a period of 6 months, maximum subsidy of € 7,200 per semester and person).

Target group

Unemployed persons

Initiator and other actors involved

Department of Labour of the Ministry of Labour and Social Insurance

Duration (please also indicate whether the measures has been initiated due to the recession)

Until December 2010 (recession-specific tool).


Title

Σχέδιο Παροχής Κινήτρων για Πρόσληψη Ατόμων που Ανήκουν στις Ευπαθείς Κοινωνικά Ομάδες.

Subsidy Scheme for Hiring persons from Vulnerable Social Groups

Aim/objective

Hiring unemployed persons, including the long term unemployed, from vulnerable social groups. 

Description of support

This project encourages employers to hire people from disadvantaged social groups by providing a wage subsidy (65% of the wage for one year). Implementation period: from 19/03/2010 until 30/06/2014. Approved budget: €6,000,000.

Target group

Vulnerable social groups.

For the purpose of this scheme disadvantaged individuals are considered those who have not completed the upper secondary education or vocational training , aged 15-24, aged 50 and more, live alone and have one or more dependents under their care (single parent families), are members of a national minority of Cyprus who need to develop their language skills, vocational training or professional experience in order improve their chances in having easier access to stable employment, receive public aid, are/were under the care/supervision of the Social Welfare Department’s Director, are members of families with mental problems, are ex-prisoners, are ex-users of drug substances, are people with disabilities and are recognised victims of human trafficking.

This scheme concerns all businesses (implicitly micro enterprises and SMEs).

Initiator and other actors involved

The Department of Labour of the Ministry of Labour and Social Insurance is responsible for the implementation.

Local Authorities have the right to participate in this programme as employers.

Duration (please also indicate whether the measures has been initiated due to the recession)

From March 2010.

Until mid-May 2011, 1.343 jobs have been created through this specific programme (947 employers in total).


Title

Ενίσχυση Ανταγωνιστικότητας Μικροεπιχειρήσεων με Απασχόληση 1-4 άτομα.

Enhancement of competitiveness for Micro enterprises employing 1-4 persons.

Aim/objective

Provision of specialised training services to micro enterprises employing 1-4 people, with the aim of increasing their competitiveness. More specifically, this scheme includes the following measures:

- Identification of needs and diagnosis of the company’s weaknesses.

- Managerial skills development programmes for the owner / manager of the enterprise.

- Medium-term business plan for the development of the enterprise.

The above services are provided by consulting firms and training organisations. Training programmes are designed specifically for the needs of small businesses and include the following topics (20 hours in total):

- Strategic Planning.

- Sales and Marketing.

- Organisation and Human Resources Development.

- Production Management.

- Financial management of micro-enterprises and business plan.

Description of support

Subsidy scheme. Subsidies for the cost of the business plan and training services.

Target group

Micro enterprises

Initiator and other actors involved

Human Resources Development Authority.

Duration (please also indicate whether the measures has been initiated due to the recession)

Duration (2007-2013).


2.2. In-depth description of ‘Good Practices’

Some specifications concerning this choice:

- It is difficult to talk about ‘good practices’ in Cyprus concerning the creation of jobs in micro enterprises, etc. This is due mainly to A) the fact that these policies are rather recent (Cyprus before the crisis has experienced a period of almost full employment). Most of these instruments are still being implemented so there is a lack of data/evaluation documents enabling us to characterise a practice as ‘good’. B) The Republic of Cyprus is a very small country, so the ‘few’ practices are inevitably ‘good’ practices.

- In comparison with the other instruments, the main criteria for choosing this specific scheme is that its implementation has been completed in December 2010. It might be too early to talk about an instrument as ‘good practice’ before its completion.

Table 7: Description of ‘Good Practice’ examples of recent support instruments

Name of the programme/instrument

In national language and English

Έκτακτο Σχέδιο Παροχής Κινήτρων για Απασχόληση Ανέργων.

Emergency Incentive Scheme for Hiring Unemployed

Is the instrument explicitly addressing any of the following:

Self-employment

Hiring the first employee

Hiring additional employees/creating additional jobs in micro enterprises

Please ‘X’ and/or describe if relevant

   

X

Operational level

Local

Regional

National

Please ‘X’ and/or describe if relevant

   

X

Rationale/motivation for the instrument

(please describe)

The project aimed at mitigating the impact caused by the global economic crisis in the labour market through job creation. The goals are: 1. Strengthening income and stimulating demand and economic activity. 2. Creation of new jobs (full-time employment). 3. Social rehabilitation of the unemployed facing social exclusion problems.

Purpose and aims for the instrument (please describe)
Initiator
Please ‘X’      
Other stakeholders actively involved in implementation (please name them and describe their roles)
Target groups        
Please describe the target groups (sector, age, level of education, gender)

Unemployed (no age, level of education or gender specification).

Funding        
Please describe the funding of the instrument/programme (national and European sources, budget available)

Approved budget: €6,000,000.

Activities    
Please describe the activities of the programme or institutional initiative as detailed as possible
Results (Effectiveness)      
Please describe the results e.g. number of beneficiaries, advised enterprises

- 5 calls.

- 1,112 businesses participating in the scheme.

- 1,978 job applications.

Challenges in order to reach the objectives e.g. for the organisation offering the instrument, the entrepreneurs (Please describe); and if available how these have been overcome

Assessments of the effectiveness e.g. investments made in order to reach the objectives of the programme (outcome vs. investment) (Please base this assessment on evaluations when possible)

Outcomes (Efficiency)  
Increasing self-employment, growth and employment e.g. number of start-up and/or jobs created etc. (please describe, preferably based on evaluations, otherwise on experts’ assessment)

- 5 calls.

- 1,112 businesses participating in the scheme.

- 1,978 job applications.

Please provide link to evaluation documents if possible

Link to evaluation document: http://www.stockwatch.com.cy/media/announce_word/%CE%88%CE%BA%CF%84%CE%B1%CE%BA%CF%84%CE%BF%20%CF%83%CF%87%CE%AD%CE%B4%CE%B9%CE%BF%20%CE%BA%CE%B9%CE%BD%CE%AE%CF%84%CF%81%CF%89%CE%BD%20%CE%B3%CE%B9%CE%B1%20%CF%80%CF%81%CF%8C%CF%83%CE%BB%CE%B7%CF%88%CE%B7%20%CE%B1%CE%BD%CE%AD%CF%81%CE%B3%CF%89%CE%BD.doc

Table 8: Additional information on specific instruments to the EEO national report on self-employment:

Title of the instrument

 
Additional information

No additional information

Table 9: Please add any other comments to the EEO national report on self-employment:

Table 10: Please indicate ‘X’ if you have no additional information to the EEO national report on self-employment:

Please indicate ‘X’ if you have no additional information to provide

X

Commentary

Overall, three categories of policies for job creation in micro enterprises or SMEs can be distinguished:

- programmes for the inclusion of specific social groups in the labour market through self-employment

- programmes providing on the job training to unemployed and to university graduates

- programmes providing financial incentives for hiring unemployed people or people from vulnerable social groups (e.g. long-term unemployed, people with disabilities)

Overall, the main tools for tackling the crisis (both in terms of policy focus and public discussion) seem to be the second and third category rather than policies which focus on self-employment.

References:

Hadjimanolis, A. (2008), ‘Entrepreneurship policy in Cyprus’, Int. J. Entrepreneurship and Small Business, Vol. 6, No. 4, pp.562-582.

Hadjimanolis, A. (2009), ‘Entrepreneurial attitudes and self-employment in Cyprus: a government policy perspective’, 9th IFERA World Family Business Research Conference Global Perspectives on Family Business Developments: Theory - Practice – Policy, Limassol, Cyprus, June 24th- 27th, 2009.

Yannis Eustathopoulos, Cyprus Labour Institute (INEK PEO).



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