EMCC European Monitoring Centre on Change

Tackling the recession: Cyprus

  • Observatory: EMCC
  • Topic:
  • Published on: 12 July 2009

Yannis Eustathopoulos

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

On the whole, there have definitely been no sweeping changes observed in employment conditions over the last few months in Cyprus. This is largely due to the fact that up until now the crisis has had a limited impact on the economy. The few cases that were recorded are of a temporary nature and involve export-oriented industrial plants. Overall, businesses, government authorities and trade unions seem to be facing the impact of the crisis on the basis of consensus in order to fight unemployment, support business activity and protect full-time employment.

1. Measures taken by government to assist businesses and protect jobs

Support to businesses

What formal or legal arrangements (such as job subsidies, bank guarantees, loans or special credit facilities) are in place in your country for supporting firms which are at risk of having to reduce employment? (Please include only measures which are aimed principally at maintaining employment as opposed to those which are aimed, for example, at increasing competitiveness or supporting investment.)

No legal arrangements (such as job subsidies, bank guarantees, loans or special credit facilities) for supporting firms which are at risk of having to reduce employment are in place in Cyprus. In recent years however, there have been two restructuring cases in which the government guaranteed a loan so that the companies concerned could meet their short-term financial obligations and maintain jobs. The two companies, Cyprus Airways and the Central Slaughterhouse of Kofinou (both companies belonging to the Semi-Governmental Sector of Cyprus) faced serious financial problems after Cyprus’ entry into the European Union.

Are the arrangements or measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession? Please give an indication of the number of firms receiving support of this kind and the number of jobs protected as well as the source of funding.


Do the measures apply generally across the economy or are they specific to particular sectors or regions? Please indicate the sectors and/or regions concerned.


Is there government support available for companies which introduce short-time working arrangements, give a temporary period of leave to workers or implement similar measures to enable workers to retain their jobs where there is insufficient work for them to do? If so, please give an indication of the extent of the support concerned and the number of companies, and the workers they employ, receiving support.

The Human Resource Development Authority, under the Ministry of Labour and Social Insurance, has drafted a Special Plan of Action, with the aim of warding off unemployment. The Single-enterprise Initial and Continuous Vocational Training Programme (one of the four programmes in the aforementioned plan), is meant for businesses in Cyprus, regardless of their field of economic activity. This specific plan, among other things, seeks to preserve jobs in businesses that are facing economic difficulties due to the crisis, by covering a substantial part of the expenses for the training of their staff.

Are there are plans or proposals to introduce measures of the various kinds indicated above in order to assist businesses and protect jobs? If so, please describe them briefly.

The Cyprus Employers and Industrialists Federation (OEB) presented a set of proposals on 18/5/2009 aimed at supporting employment for the duration of the crisis. These proposals (in the event that the rate of unemployment exceeds 5.5%) focus on bringing labour unions to committing themselves not to claim any pay rises for the next two years and businesses not to increase prices on their goods and services.

In addition, ΟΕΒ suggested achieving three targets to help reduce unemployment:

  • Using the reserves of the Redundancy Fund to cover employer contributions, on condition that jobless individuals are hired within the first two or three months since the day they became unemployed.
  • Distributing benefit payments to unemployed individuals joining the Human Resource Development Authority’s vocational training programme. The benefit will be equivalent to 75% of their previous earnings.
  • Announcing the establishment of a state prize for corporate social responsibility based on the hiring of unemployed individuals.

Support to workers

What formal or legal measures (such as partial unemployment benefit or similar kinds of social transfer) are in place in your country to support workers who have been put on to short-time working by employers or who have been given temporary leave with reduced rates of pay (i.e. who still formally have jobs but who are either not working or working reduced hours)? Please describe the measures concerned and indicate the scale of support provided. Please also give any figures available for the number of workers receiving payments of this kind as well as the source of funding.

Due to the low level of unemployment in Cyprus, there are no benefits supporting workers who have been put on short-time work or on temporary leave. The only exception is the tourist sector but this is due to the seasonal nature of tourist activities (during the first months of 2009, approximately 3400 employees from the tourist sector were registered with the unemployment benefits office). This measure, known as 'suspended employment', is based on an agreement between the Ministry of Labour and Social Insurance, the employers’ organisations and the unions and aims at preserving the employment relationship between employer and employees during the winter (from 1 November until 31 March). According to the Union of Hotel and Recreational Establishment Employees of Cyprus (SYXKA-PEO)- affiliated to the Pancyprian Federation of Labour (PEO)- changes to the current system are being considered in order to provide incentives to employers in the tourist sector to keep on seasonal employees.

Are the measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession?

The ‘suspended employment’ measure in the tourist industry has been applied for at least 25 years. There have been no changes regarding the terms of entitlement to benefits or to their extent and duration.

Has the coverage of the social benefit system which provides income support to workers who lose their jobs been widened in the present recession in order to ensure that those concerned are protected (such as, for example, through a relaxation of the rules and regulations governing the payment of unemployment benefits or other forms of social transfer or through an extension to workers not previously entitled to support)?

No, there have been no changes regarding the terms of entitlement to benefits or to their extent and duration. Overall, the policies in Cyprus aiming at countering the effects of the crisis on employment fall into four basic initiatives:

  • Intensified efforts by the Public Employment Services to find job placements for the unemployed.
  • Evaluation and reassessment of employment policies regarding non-EU citizens.
  • Intensified campaigning to combat undeclared employment.
  • Plans for the further education and training of the unemployed.

2. Action taken by companies to maintain workers in employment

What action, if any, has been taken by companies during the present downturn to keep workers in jobs in situations where the work for them has declined? Please describe briefly cases where companies have introduced short-time working (such as fewer hours per days or fewer days per week), temporary periods of leave or other means of maintaining people in jobs.

Solutions to the crisis take on different characteristics depending on the sector being considered.

Industrial Sector

According to a management proposal, part of the 250 workers at the manufacturing branch of the Muskita Aluminium Industries will work 2 to 3 weeks less in total, for a period of six months (until August). The decision was taken due to decreased demand from the United Kingdom, which is the company’s primary export destination. Workers at the Alco automobile filter industry will be working four days a week from March until 31 June 2009. The decision was taken, as in the case of Muskita, because of decreased demand from the United Kingdom. Labour unions have accepted the decision based on two reasons. Firstly, the workforce at the specific plant is made up of highly-skilled female employees, a fact that makes it particularly difficult to place them in corresponding work positions in other factories in Cyprus. Secondly, at the request of labour representatives, the management has accepted to continue paying the workers’ social contributions (social insurance and benefits fund) based on the usual five-day working week.

Tourist Industry

According to their collective agreement, all seasonal employees should have been back in their job positions by April 1st. Due to reduced activity (official sources have stated that the influx of visitors is down by 10%), there were problems in reinstating workers. After conferring with labour unions, certain companies chose to give their employees early vacations in order to avoid redundancies.

Construction Sector

Despite the slowdown of the activity in the construction sector, no changes in the terms of employment have been recorded. The most visible sign of the crisis in construction has been a drastic reduction in overtime, which in the past would reach up to 5 hours a day, due to the rapid development of the Cypriot construction industry in recent years. Overall, the solutions being sought to reduce unemployment do not intend at reducing workers’ income. On the contrary, the measures being taken aim to increase the labour supply thanks to the earlier implementation of public works. Furthermore, the initiative taken, for example, by the Cyprus Building, Wood, Mine and General Workers Trade Union- affiliated to the Pancyprian Federation of Labour (PEO)- for the reduction of unemployment is noteworthy. The union maintains an ‘employment office’ which deals with finding jobs for the unemployed. The office’s activities are based on the daily contacts between unionists and employers. Due to the crisis, the office’s services have been upgraded.

How extensive has such action been in terms of the number of companies and workers concerned and the sectors in which it has occurred?

In the industrial sector, instances of this kind of action have been extremely limited up until now and mainly concern larger export-oriented manufacturing units.

Have particular types of company (e.g. multinationals or domestically-owned firms) or firms in particular sectors been more prepared to take this kind of action than others?

This kind of action has mainly been taking place in the export sectors of the economy such as tourism or specific export-oriented manufacturing companies.

Has the action in question typically entailed a reduction in pay? If so, please give an indication of the typical extent of this.

Yes and in both cases in the industrial sector, workers have been subjected to a reduction in salary but not in social benefits. The reduction has been proportional to the reduction in the hours of work. Based on the examples we have up till now, these reductions, due to their relatively small scale and duration, do not cause any significant changes in the total income of employees. In the tourist sector, around 10 cases have been recorded by the Union of Hotel and Recreational Establishment Employees of Cyprus (SYXKA-PEO) in which hotel managers have proposed to employees (on an individual basis) a reduction in their salaries.

To what extent has this kind of action been accompanied by the provision of training or education to the workers concerned – i.e. how far have companies taken advantage of the lack of work to improve the skills of their work force?

Both companies in the industrial sector have not taken advantage of the relevant Single-enterprise Vocational Training Programme offered by the Human Resource Development Authority. According to union representatives, this is due to the fact that employees already possess a high level of specialisation. In the tourist sector, the programme is also yet to be put to use. Nevertheless, the use of this specific programme by enterprises remains an essential goal for labour unions as one of the main initial targets of the programme was the training of seasonal workers in the tourist industry during the winter period.

3. Joint action taken by companies and trade unions to maintain jobs

How far has the kind of action described in Section 2 above been the subject of collective agreements between companies and trade unions? Please give summary details of the content of some of the most important collective agreements.

In both of the aforementioned industrial plants, the agreement on the reduction of work-hours was not incorporated into each company’s collective agreement due to the temporary nature of the specific measure. There was however, a written and clearly defined agreement reached at by both sides. We shall have to await the renewal of the collective agreement in the tourist sector this year, in order to find out whether special clauses will be introduced as a result of the impact of the crisis on employment.

To what extent has other action been taken under collective agreements to reduce business operating costs so as to avoid job losses? Has there been an increase in instances of trade unions, or worker representatives, agreeing to accept cuts in pay, or to work longer hours without additional pay, in order to maintain employment levels? If so, please give an indication of the extent of such agreements and describe briefly typical cases.

No. There have been no such cases in Cyprus.

Are such agreements more prevalent in some sectors than others?

As mentioned earlier, some proposals for wage reductions were made in the tourist sector. These proposals were made to various employees on an individual basis and have been rejected by trade unions.

What other forms of action have trade unions taken, apart from strikes and other action designed to put pressure on employers, in order to try to prevent job losses and maintain employment levels? How effective has such action been?

Labour unions in the tourist industry, when notified by their members about the specific incidents, reacted immediately, either by asking the Ministry of Labour’s Department of Labour Relations to intervene, either by opening direct discussions with employers. In the construction sector, labour unions are demanding that government authorities assign public works to contractors under strict labour and social criteria. This initiative is aimed at preventing deterioration in the terms and conditions of employment due to the crisis.

4. Measures to provide income support

To what extent do collective agreements include provision for higher rates of compensation in the event of workers being made redundant than they are entitled to under national legislation? How far do collective agreements providing more generous compensation than the statutory amount vary between sectors?

In the industrial sector, collective agreements do not foresee higher compensations than those provided for by the law. Nevertheless, after negotiations between labour unions and employers, the sums paid out in cases of dismissal are usually higher. The same applies to the tourist sector. Nevertheless, union representatives of the sector have noted unwillingness on the part of employers to pay out extra compensation in recent cases of dismissal. On the contrary, in the manufacturing sector in general, the collective agreements of certain companies provide for the payment of higher compensations. A characteristic example is that of the Cyprus Forest Industries Ltd. Similar provisions also exist in the collective agreements of large companies in the mining industry or the cement industry. A common characteristic found in all the companies above is their high labour union membership.

Has there been an increase in the number of collective agreements which include such provision during the present downturn?


To what extent are redundancies being concentrated on older workers, i.e. taking the form of early retirement, in the present downturn? Is there any evidence that the use of early retirement as a means of effecting reductions in employment has increased in importance during the present downturn?

There is no evidence that redundancies are being concentrated on older workers.

5. Lessons from research studies

Have any studies been undertaken in the past in your country on the effectiveness of attempts made in previous periods of recession to maintain employment levels similar to those covered here? If so, please outline the studies concerned and their main findings.


If partial unemployment benefit, short-time working or similar schemes which provide income support to those working short hours are a permanent part of the social security system in your country, please briefly describe any studies which been undertaken on their effects and the main conclusions to emerge from them.


Yannis Eustathopoulos, INEK PEO

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