Malta: Social partners involvement in unemployment benefit regimes

  • Observatory: EurWORK
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  • Published on: 20 December 2012



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Country:
Malta
Author:
Louis Grech
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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.

The unemployment benefits regime did not experience significant changes in the last decade with social partners' involvement being kept to a minimal level. Trade Unions were more concerned with saving jobs, in particular in times of economic recession. Nonetheless, social partners collaborated with the Employment and Training Corporation in the management of training programmes for the unemployed. At the same time, social partners showed concern about benefit fraud with government implementing a number of measures to tackle this issue. Recent changes in the unemployment benefits regime were mostly targeted to increase the female participation in the labour market.

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?

If yes, please specify what has been changed / which innovations have been introduced, focusing more on the most recent/ most relevant transformations of the Unemployment Benefit (UB) system:

  • Regarding the Unemployment Insurance (UI):
  • Payment of national insurance contributions by government for 1 year (Government of Malta, 2009).
  • Waiving of national insurance contributions for registered unemployed persons who engage on a temporary job (Government of Malta, 2009).
  • A choice for women about the method to pay social security contributions on a pro-rata basis of 15 % on their income in place of a contribution based on the minimum wage (Government of Malta, 2011a).
  • Regarding the Unemployment Assistance (UA):
  • Introduction of the Justification Process (Employment and Training Corporation, ETC, 2007)
  • The he means testing system was revised in order to encourage women whose husbands receive unemployment assistance to take on employment (Government of Malta, 2011a). This measure also applies to women whose husband is on social assistance on the basis of being incapable of work due to medical reasons.
  • Regarding the Social Assistance (SA) (if relevant):

Not relevant.

1.1.2. For each of these changes/innovations indicate:

Table 1

Initiative

Date of Introduction

Who took the initiative (government, unions, employers’ associations, other organisations):

The content of the change / of the new programme

The aim pursued

Introduction of the Justification Process

2006

Government

Notification in advance served by ETC to jobseekers about to be struck off the unemployment register for failing to register or to participate in an employment/training scheme or service and given fifteen days to submit justification. Justifications are then vetted by ETC and in cases where the justification is not accepted the person is removed from the register but will still have the right of appeal to the National Employment Authority

Curbing unemployment benefit abuse

Payment of national insurance contributions by government for 1 year

2008

Government

The measure is directed at those unemployed who are 45 years and older and were unemployed for five years or more on becoming self-employed.

Decreasing long-term unemployment of vulnerable persons

Waiving of national insurance contributions

2009

Government

The initiative targets registered unemployed persons who engage on a temporary job of which duration does not exceed 13 weeks. On termination of the job they get credited with the relative national insurance contributions.

Encouraging persons seeking work to take up employment even if for short periods

Revision of the means testing system

2010

Government

The system was revised in order to encourage women whose husbands receive social assistance to take up employment. The wife can earn up to €54.53 per week (according to 2012 rates) without affecting the amount of social assistance received by her spouse. She can however earn more but then deductions in the social allowance will start to be effected. If her earnings will exceed the amount of social assistance received by her husband the benefit will be withdrawn

Increasing the female participation in the labour market

A choice for women about the method to pay social security contributions.

2011

Government

Women can opt to pay the social security contributions on a pro-rata basis of 15 % on their income in place of a contribution based on the minimum wage

Increasing the female participation in the labour market

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:

There was no resistance for the implementation of these measures from social partners and thus it can be assumed that they were in favour.

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

1.2.1. Unemployment Insurance.

  • Coverage: (a general view of the groups that could potentially receive the UB) who is covered by the programme? Are all workers covered? Are there specific categories of workers (for instance, economically dependent and/or self-employed) who are not covered? Are there specific programmes dedicated to specific categories of workers?

Employed persons having paid Class 1 contributions, and registering for employment under the Part I register kept by the ETC. The short-term unemployment benefit system is based on two types: the unemployment benefit (UB) and the special unemployment benefit (SUB). The SUB is paid at a higher rate than the UB.

  • Eligibility:

Claimant should satisfy contribution test for Unemployment Benefit, should be head of household and must satisfy the means test carried out for Unemployment Assistance.

  • Eligibility: (turning to the individual level) indicate the criteria which have to be met by the potential beneficiaries in order to receive support (monetary or other).

UB: Beneficiaries must have a minimum of 50 Social Security paid contributions (weekly), and have paid or have been credited with, at least 20 contributions in the last two years, prior to the year in which the claim for the unemployment benefit is made. Beneficiaries must also accept to involve themselves in any training or employment programme organised by the ETC.

SUB: The Beneficiary must be an insured person and satisfies the UB criteria above and in addition must be a head of household and meets the criteria of the Social Assistance means test.

  • Duration: indicate the minimum and the maximum duration of time during which workers can avail of the unemployment insurance.

A beneficiary is entitled to one day benefit per Class I contribution paid up to a maximum payment period of 156 days (Ministry of Education and Employment, 2012)

  • Replacement rates: indicate the benefits’ amount in proportion with previous work-related earnings (minimum and maximum).
  • UB:

Single parent or a married person maintaining a spouse not in full-time employment;

Based on the minimum wage for 18 year olds and over (2012): 44.5%;

Any other person;

Based on the minimum wage for 18 year olds and over (2012): 29.1%

  • SUB:

Single parent or a married person maintaining a spouse not in a full-time employment;

Based on the minimum wage for 18 year olds and over (2012): 74.8%;

Any other person’

Based on the minimum wage for 18 year olds and over (2012): 48.8%;

(Calculations done by author)

  • Financing: indicate the source of funds, describing, if that is the case, the structure of the funds according to their origin (i.e. X% from the state, Y% from employees, W% from the employers’ organisation, Z% from other, etc).

Paragraph 7 of the Social Security Act (Chapter 318 of the laws of Malta) states that for every person who is employed in insurable employment, three contributions per week shall be payable as follows:

  • one from the employee (33.33%),
  • one from the employer (33.33%)
  • one from the state through the Consolidated Fund (33.33%). The rate is based on the income (Government of Malta, 2012).
  • SP involvement: Yes/No. If Yes, specify briefly:

No.

  1. who are the organisations involved and at which level do they operate? (e.g. trade unions, sectoral or national confederations, etc)

Not applicable.

  1. why are these organisations involved (legitimacy)? Is it because they are representative?

Not applicable.

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

  • Coverage:

Heads of household that register under Part 1 of the Unemployment Register kept by ETC.

  • Eligibility:

The claimant must be registering for work under the Part 1 register and have exhausted the 156 day period associated with the short term benefit system above. The claimant must abide by ETC regulations such as enrolment in training programmes and participate in employment programmes and satisfies the means and the capital resources test.

  • Duration:

The unemployment assistance is withdrawn completely once the beneficiary finds employment, including a part-time job. The same is applicable in case the wife of the beneficiary finds employment and earnings exceed the amount of social assistance received.

  • Replacement rates:

One Person Household:

Based on the minimum wage for 18 year olds and over (2012): 62.8%

Every additional unemployed person in the household: + 5.4%

(Calculations done by author)

  • Financing:

From the Consolidated Fund which is made up of all state revenues including National Insurance Contributions.

  • SP involvement: Yes/No. If Yes, specify briefly:

No.

  1. who are the organisations involved and at which level do they operate? (e.g. trade unions, sectoral or national confederations, etc)

Not applicable.

  1. why are these organisations involved (legitimacy)? Is it because they are representative?

Not applicable.

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.

No Social Assistance programmes present.

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?

The contribution of social partners in Malta related to Unemployment Benefits per se is very limited. Trade unions seem to be concerned about social benefits fraud, where for instance the Union Haddiema Maghquding, UHM, in its proposals for the Budget 2010 encouraged government to tackle this matter (Business Today, 2009). On the other hand the Malta Employers Association (MEA) is represented on the ETC board of directors through its director general. In one of its proposals for Budget 2006 the MEA urged government to consider decreasing employment benefits in order to expand the income gap between unemployment benefits and employment. The Association expressed its satisfaction about ETC employment schemes such as the Training and Employment Exposure Schemes (TEES) that made training compulsory for registered unemployed of over 40 years of age (MEA, 2005). The MEA director general was the chairman of the Joint Management Consultative Committee (JMCC) of the TEES scheme that included representatives of the Association of General Retailers and Traders (GRTU), Malta Workers' Union (UHM) and the GWU.

Information on social partners’ participation in the phases of implementation, management and monitoring of the unemployment benefit system is not available.

3. Final observations

3.1. Public debates and policy discussion:

Not available.

3.2. Research:

Not available.

3.3. Other issues:

No other issues are available.

4. Commentary

Social Partners' involvement in the unemployment benefit regime is very limited. It usually consists of pre-budget proposals that revolve around the need to control unemployment benefit fraud as in the case of UHM, GWU and MEA. Government heeded such proposals and have in recent years upgraded its control systems to minimise undeclared work (Debono, 2011), such as the set up of a Benefit Fraud and Investigation Directorate in 2006. The absence of social partners involvement is reflected in the initiatives concerning the unemployment benefit system mentioned earlier, which were all launched by the government. Government's policies are increasingly being directed to make work pay and recent initiatives were particularly catered for the encouragement of more women to enter the labour market, for instance through tax and National Insurance incentives.

4.1. Assessments and comments:

Please see 4.2 below.

4.2. Perceived strengths and weaknesses:

The limited participation of social partners’ involvement in the unemployment benefit regime is without doubt the major weakness. Vassallo (2009, p.22) pointed out that decision making related to social security is usually based “on the social sensibilities of politicians and policy makers”. Besides, the unemployment benefit regime in Malta did not experience any fundamental changes for many years.

On the positive side, social partners’ involvement in the Joint Management Consultative Committee (JMCC)dealing with ETC training and employment programmes for the registered unemployed proved effective. Trade unions seem to be more concerned with safeguarding the employment of employees particularly in times of crisis. For instance, the GWU collaborated with the government when a number of manufacturing firms faced severe shortage of orders and in occasions these resorted to a four day working week in order to prevent collective redundancies (MT1010029Q). The relative low unemployment rate in Malta, which according to ETC records in September 2011 stood at 4.2%, and of those registering on the Part 1 register was 3.7% of the labour supply (NSO, 2012), gives credit to Government and SP efforts so far in tackling unemployment. This leads to a situation in which expenditure on unemployment benefits is manageable, so much so that in 2010 it was €2,851,091 which makes 0.4% of the total expenditure on Social Security Benefits that reached €729,383,240 (Government of Malta 2011b).

References

  • Business Today, Unions cautious approach to Budget, 11 November 2009. Available at: http://www.businesstoday.com.mt/2009/11/11/t4.html
  • Debono, M., Adapting unemployment benefit systems to the economic cycle, European Employment Observatory, 2011. Available at: http://www.eu-employment observatory.net/resources/reviews/NationalArticles/Malta-UBRvw2011.pdf
  • Employment and Training Corporation, Annual Report 2006-2007. Available at: http://etc.gov.mt/Resources/file/Resources/Annual%20Report%202006-2007.pdf
  • Government of Malta (2009), National reform programme 2008-2010. Annual progress report 2009, 2009. Available at:http://finance.gov.mt/image.aspx?site=MFIN&ref=Maltas%20Annual%20Progress%20Report%202009
  • Government of Malta (2011a), Malta National Reform Programme under the Europe 2020 strategy, 2011. Available at: http://ec.europa.eu/europe2020/pdf/nrp/nrp_malta_en.pdf
  • Government of Malta (2012), Social Security Act (Chapter 318), 2011. Available at:
  • http://www.mjha.gov.mt/DownloadDocument.aspx?app=lom&itemid=8794&l=1
  • Government of Malta (2011b), Social Security Department Annual Report for 2010. Available at: https://secure2.gov.mt/socialpolicy/SocProt/social_benefits/publications/annual_reports.aspx
  • Malta Employers’ Association (2005), National Budget Proposals -2006. Available at: http://www.maltaemployers.com/Portals/22/Budget%20Proposals%202006.PDF
  • Ministry of Education and Employment (2012), Unemployment Benefit. Available at: https://secure2.gov.mt/socialpolicy/SocProt/social_benefits/short_term_ben/unemploy_ben/faq_unemploy_ben.aspx
  • National Statistics Office, http://www.nso.gov.mt/statdoc/document_file.aspx?id=3254
  • Vassallo, M., Malta - Minimum income schemes: A study of national policies. Peer review in social protection and social inclusion and assessment in social inclusion, 2009. Available at: http://www.peer-review-social-inclusion.eu/network-of-independent-experts/reports/2009-first-semester/malta-1-2009

Louis Grech, Centre for Labour Studies

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