Subcontracting in construction to be regulated in new three-year agreement

In July 2008, agreement was reached on the renewal of the collective agreement for the construction sector. Although the pay increases granted for the next three years are not substantially different from those paid in 2006–2007, the new agreement will bring about important changes on the non-pay front – mainly regarding the regulation of contracting in the sector.

On 17 July 2008, employers and employees accepted the mediation proposal put forward by the Ministry of Labour and Social Insurance (Υπουργείου Εργασίας και Κοινωνικών Ασφαλίσεων, MLSI), and reached agreement on the renewal of the collective agreement for the construction sector. The new three-year agreement will be effective retroactively from 1 January 2008 and will expire on 31 December 2010. It covers over 40,000 workers in the sector, about 25,000 of whom are organised in trade unions.

Signatories of agreement

On the employers’ side, the final agreement was signed by the Federation of Building Contractors Associations of Cyprus (Ομοσπονδία Συνδέσμων Εργολάβων Οικοδομών Κύπρου, ΟSΕΟΚ), which is affiliated to the Employers and Industrialists’ Federation (Ομοσπονδία Εργοδοτών και Βιομηχάνων, OEB). On the workers side, the agreement was signed by the Cyprus Building, Wood, Mine and General Workers’ Trade Union, a member of the Pancyprian Federation of Labour (Παγκύπρια Εργατική Ομοσπονδία, PΕΟ), along with the Federation of Builders, Miners and Relevant Professions, which is affiliated to the Cyprus Workers’ Confederation (Συνομοσπονδία Εργαζομένων Κύπρου, SΕΚ).

New framework for regulating contracting in sector

One noteworthy aspect of the agreement – apart from its basic terms, mainly on pay-related issues – is the achievement of a special memorandum of understanding, which is considered to be extremely important for the sector. This memorandum sets out, for the first time, the framework for regulating contracting in the sector. It should be noted that failure to reach agreement on subcontracting has repeatedly been among the main reasons why bargaining in the sector has reached a deadlock (CY0607029I, CY0404101N).

Pay issues

With regard to the pay-related part of the agreement, the increases agreed upon represent an average across-the-board pay rise of about 2.3% for 2008. The increases for 2009–2010 will be slightly higher, amounting to about 2.5% for 2009 and 2.7% for 2010. It should be noted that the final rates of increase depend on the cost-of-living allowance amount, which is calculated on the basis of average weekly pay; in contrast, the previous agreement (CY0607029I) stipulated that the total increase (basic and cost-of-living) would raise minimum wages by 100%. As at August 2008, the average minimum wage in the construction industry is calculated at approximately €400 a week, or €1,720 a month.

Non-pay issues

New category of semi-skilled workers created

On the non-pay front, besides the special memorandum of understanding which regulates, among other things, the question of outsourcing, the provision regarding the creation of a new category of semi-skilled workers is considered of particular importance. This category will include, in accordance with the provisions of Article 2 of the basic agreement, workers employed as electrical machine operators for most of the time they are employed. Up until now, these workers have been classified as unskilled workers. The creation of the new category of semi-skilled workers is significant, as it will allow for the earnings of workers falling into this new category to be substantially improved.

Contracting provisions

In accordance with the provisions of the special memorandum of understanding – apart from the two sides’ commitment to work together to make the terms of the collective agreement universally applicable to all workers in the construction industry – they have also agreed that outsourcing should take place within the framework of the collective agreement, as well as on the basis of labour legislation provisions. Specifically, the two sides agree that there must be a written delegation agreement between the contractor and subcontractor, which should include the following:

  • a description of the services provided by the subcontractor;
  • provision for mandatory observance by the subcontractor of the terms of the collective agreement for all staff, whether organised in trade unions or not;
  • an obligation on the part of the subcontractor to implement the Health and Safety Scheme;
  • an obligation on the part of the main contractor for any defaults or omissions by the subcontractor in relation to the staff it employs.

In order for someone to be considered a subcontractor, they must be a registered employer hiring paid staff, be covered by employer’s liability insurance, have met all obligations regarding the Social Insurance Fund and observe the terms of the sectoral collective agreement. Such conditions are similarly applicable to contractors, the only difference being that the number of permanent staff in the case of contractors will depend on the size class of the delegated project.

Undeclared work

As regards undeclared work, a phenomenon which plagues the construction sector, both sides agreed in principle that all workers in the sector must have special identity cards. This measure should be taken forward by MLSI, together with other measures to be agreed upon.

Government welcomes agreement

The Minister of Labour and Social Insurance, Sotiroula Charalambous, considers that the renewal of the collective agreement for the construction sector is of decisive importance for the Cypriot economy as a whole. Ms Charalambous also believes that the special memorandum of understanding will help prevent the phenomena of social dumping and unfair competition.

Eva Soumeli, Cyprus Institute of Labour (INEK/PEO)

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