Cyprus bosses to pay more Social Insurance

— Retirement at 63 / 65 “a must”, NHS “not viable”

 

Cyprus employers will soon be called to start paying more to the near-bankrupt Social Insurance Fund in order to ensure that future generations will have a pension to receive at retirement age.

But a 2.55% contribution on wages to the troubled National Health Service (NHS) may be avoided for now as despite all the good intentions of the Minister of Health, this plan will be delayed further, beyond the mid-2008 target set by Charis Charalambous.

Social Insurance contributions, on the other hand, will be increased very soon and are expected to rise by 1% a year over the next five years, with employers, employees and the state sharing the cost equally.

Labour and Social Insurance Minister Andreas Vasiliou is expected to continue his negotiations with all social partners over the next few weeks in a dialogue where employer organizations will insist on some fundamental issues in order to secure the public pension fund’s viability.

The most important issue according to the Cyprus Chamber of Commerce and Industry (KEVE) and the Employers and Industrialists Federation (OEV) is the increase of both the retirement and pensionable age to 63 and soon after to 65 for all, including sectors of the civil service who are considered a privileged labour force and refuse to discuss the issue.

“Civil servants do not make contributions to the SIF equal to what the private sector employees do, and they get double the pension than in the private sector,” said KEVE Director General Panayiotis Loizides.

He told the Financial Mirror that some of the issues put to the minister for discussion are the unutilized provident funds, the use of the rate of productivity (1.3% at present) as a benchmark for wage increases and the unfair situation where self-employed professionals (lawyers, doctors, etc.) contribute less than blue-collar workers.

Loizides added that the methods of payment of a basic contribution in order for someone to be able to receive a basic pension must also be reviewed, while a big problem lies in the fact that civil servants get a 6-month unemployment benefit after they have retired, an unfair benefit that private sector employees have never enjoyed.

Michalis Antoniou of OEV echoed the same concerns but was much more vocal, as he often appears in public or televised debates trying to argue the case for employers in the face of adamant union leaders.

“We must increase the retirement and pensionable age for civil servants to 63 and then to 65 for the SIF to survive. It’s that simple,” he said, adding that parallel to increased contributions from this category, the state must also consider granting some relief to the private sector employers.

“We are presently negotiating the renewal of the collective labour agreements for ten different sectors and wage hikes are at the top of the agenda of all the union leaders, who are not taking into consideration the additional costs imposed on the employers,” said Antoniou. “Demands even go beyond the logic of the rate of productivity and their demands are most unreasonable.”

He said that two simple measures would go a long way to relieving a heavy wage and cost burden from the employers.

“First, we have asked for the abolition of the 2% contribution to the Social Cohesion Fund, one that replaced the 2% Defence levy, but of which we have no information about amounts it contains and how these are utilized.

“The second is the reduction of the contributions to the state Redundancy Fund which must go down from the present 1.2% back to the pre-1996 rate of 0.6%, when the Fund only had CYP 300,000,” Antoniou said. At present the Fund has a surplus of CYP 130 mln (EUR 224 mln) that is rising steadily and monthly contributions can be reduced, he said.

 

— NHS not viable before mid-2008

 

KEVE’s Loizides and OEV’s Antoniou were united in their views that the NHS cannot get off the ground by the mid-2008 target set by the Health Minister.

“We have always had our reservations about the NHS, and in particular about the viability of the system,” said Loizides.

He said that the most important issue that needs to be resolved is the autonomy of the state hospitals, a matter that is often raised by the KEVE representative at the preparatory council meetings to establish the NHS.

“Without the autonomy of the public hospitals and fair competition between the private and public health sectors, there can be no discussion about the introduction of the NHS,” Loizides said.

OEV’s Antoniou said that there are unstable factors in the whole equation.

“We believe in the good will of the Minister of Health and he is a man who has shown us good work so far. But without the autonomy of the state hospitals and with the intense objections raised by the medical unions, the NHS cannot be implemented,” he said.

If the NHS goes ahead as planned, employers will be called to contribute 2.55% of an employee’s wages per month, while the worker will contribute 1.5%. In the case of the employee already having a medical fund, then the payment for NHS will be mandatory and any other contributions will be voluntary.