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Cyprus Social Insurance Law

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Information on the Cyprus Social Insurance Law

Theletra Village                                      Photo ©

The Social Insurance Scheme, introduced on 6 October 1980, is an earnings-related scheme that has incorporated the previous flat-rate scheme in a modified structure providing supplementary earnings-related benefits. The scheme is divided into two parts: the basic part, corresponding to the repealed flat rate scheme and the earnings-related part.

The Scheme is based on the following:

(a) Universal coverage which ensures the greatest possible solidarity among the insured persons.

(b) Link of contributions and benefits to income from work.

(c) Preservation of the purchasing power of pensions and improvement of their rates through annual reviews according to the movement of wages and the cost of living.

(d) Provision of an adequate level of benefits in case of invalidity and death, irrespective of the annual period of insurance.

(e) Financing of the scheme on a tripartite basis (employer, insured person and the state).

The Scheme covers compulsorily every person gainfully occupied in Cyprus either as an employed or self-employed person. Persons working abroad in the service of Cypriot employers and persons who interrupt their compulsory insurance, are allowed to be insured voluntarily. The insured persons are classified into three categories: employed persons, self-employed persons and voluntary contributors.

The Scheme is financed by contributions payable by the employers, the insured persons and the State.

For the employed persons the tripartite contribution is 20,2% on their earnings up to a maximum amount, which for 2014 is EUR 1.046 per week or EUR 4.533 per month. The contribution is shared between the employer, the employee and the State in the proportion of 7,8%, 7,8% and 4,6%.

For the self-employed persons the contribution is 19,2% calculated on their “notional” income. The insurable earnings of self-employed persons are fixed by Regulations according to their specific occupational category. The self-employed person is obliged to pay a contribution on the notional income of his occupational category. The contribution is payable by the self-employed person and the State in the proportion of 14,6% and 4,6%.

The rate of contribution for the voluntary contributors is 17,1% on the insurable earnings they opt to pay contributions; 13% is payable by the voluntary contributor and  4,1% by the State.

The contribution of the voluntary contributors who work abroad in the service of Cypriot employers is 20,2%, 15,6% is payable by the voluntary contributor and  4,6% by the State.

The Scheme provides cash benefits for maternity, sickness, unemployment, widows, invalidity, orphans, old age, death and employment injury. The Scheme provides also free medical treatment for persons receiving invalidity pension and for employed persons who endure injuries as a result of an employment accident or an occupational disease.

Bilateral Agreements on Social Security

Cyprus has concluded Bilateral Agreements on Social Security with the United Kingdom, Greece, Egypt, Canada, Quebec, Australia, Austria, the Slovak Republic, Switzerland, the Czech Republic, Bulgaria, the Netherlands, Syria and Serbia.

Coordination of Social Security Systems in the European Union

As of 1 May 2010, the Social Insurance Services are implementing the EU Regulations 883/04 and 987/09 which coordinate the social insurance schemes of European Union member states and replace the Bilateral Agreements on Social Security which have been concluded with the European Union member states. These regulations have replaced the E.C. Regulations 1408/71 and 574/72.

Annual Holidays with Pay Law

The Annual Holidays with Pay Law entered into force on 1 August 1967. The main objectives of this Law are:

To secure annual holidays with pay to employed persons who could not secure such a right within the system of free collective bargaining, and

To provide the means for better utilization of the annual leave of the employees, especially of the low-paid employees.

According to this law, the Central Holiday Fund was established to which employers are liable to pay contributions. However, those employers who provide leave to their employees under more favourable terms than those provided by the Annual Holidays with Pay Law may apply for exception from the obligation to pay contributions to the Central Holiday Fund.

The Central Holiday Fund, in addition to the payment of annual leave, subsidizes the holidays of employed persons at mountain hotels.

Termination of Employment Law

The Termination of Employment Law came into force on 1 February 1968. The main objectives of the Law are:

To protect all employed persons against arbitrary dismissals and redundancy with the payment of compensation,

To assist the interested parties, including the Government, to study and implement special legal measures to deal with problems relating to redundancy,

To provide for a minimum period of notice in cases of termination of employment,

To establish a Redundancy Fund to which employers pay contributions for the purpose of payment of compensations for reasons of redundancy.

Employed persons who become redundant are entitled to compensation from the Redundancy Fund, the amount of which is calculated on the basis of the duration of employment and the amount of earnings.

The redundancy fund is exclusively financed by contributions from employers. The rate of contribution is 1,2% on employees’ earnings up to a maximum amount.

The employer also pays compensation for arbitrary dismissals to the extent that it does not exceed the annual salary of the employed person. If the compensation is higher, the difference is paid from the redundancy fund. The compensation cannot be lower than the amount the employee would receive if that person was dismissed for redundancy reasons. The total compensation cannot be higher than the salary of the employee for two years.

For the calculation of the amount of compensation, the earnings of the employee, the period of employment, the loss of career and the age of the employee are also taken into consideration.

Protection of the Rights of the Employees in case of Insolvency of the Employer Law

The protection of Employees Rights in the case of Insolvency of the Employer Law N. 25(I) of 2001, which entered into force on 9 March 2001, provides for the establishment of a Fund to cover the cost for the protection of employees in the event of insolvency of their employer.

“Insolvent employer” is an employer in relation to whom an application has been made to the competent Court for the issuing of a winding up order, in the case of a legal person and in relation to whom the Court has issued such an order, or the Court has established that the person concerned has ceased to be engaged in any activities, or that the assets of the person concerned are insufficient so as to justify issuing such an order.

An employee is entitled to a payment out of the Fund if:

his employment was terminated because the employer became insolvent, and

he has been continuously employed by the employer for a period of at least 26 weeks before the onset of the employer’s insolvency.

The Fund is financed each month with a transfer of 16,6% of the contributions paid by employers to the Redundancy Fund.

Occupational Retirement Benefits Funds

For the effective supervision of Occupational Retirement Benefits Funds (Provident Funds and Pension Funds), the Law for the Establishment, Activities and Supervision of Occupational Retirement Funds was approved by the House of Representatives and came into effect on 28 December 2012, date of its publishing in the Official Gazette of the Republic. The aforementioned Law abolishes the Provident Funds Law of 1981 (L.44/81) and the Law for the Establishment, Activities and Supervision of Occupational Retirement Funds of 2006 (L.146(I)/2006).

Compensation of Victims of Violent Crimes

The compensation of Victims of Violent Crimes Law N. 51(I) of 1997, entered into force on 13 July 1997. The purpose of the Law is to provide compensation to victims of violent crimes and to the dependants of persons who died as a result of such crimes.

The compensation includes medical treatment in Government Hospitals and Institutions up to €1.708,60, temporary incapacity for work benefit, invalidity pension, widow’s pension, orphan’s benefit and funeral grant.

The compensation is paid out of the General Revenue of the Republic.

Social Pension Law

The Social Pension Law N. 25(I) of 1995 entered into force on 1 May1995. The purpose of this Law is to provide pensions to persons who reach the age of 65 and are not entitled to a pension or other similar payment from any other source, provided that they satisfy the following residence conditions:

Legal residence in Cyprus or in a member State of the European Union, the European Economic Area and Switzerland, for a period of at least 20 years from the date the claimant reaches the age of 40, or

Legal residence in Cyprus or in a member State of the European Union, the European Economic Area and Switzerland, for a period of at least 35 years from the date the claimant reaches the age of 18.

In the case the claimant is entitled to a pension from another source, the amount of which is lower than the amount of social pension, the entitlement to social pension is equal to the difference between the two pensions.

Social Pension is financed by the General Revenue of the Republic.

For more details and updates please refer to: PIO