Background information

Due to the seasonal nature of tourism, an instrument is in place for the tourism sector that provides partial unemployment benefits to employees whose employment has been temporarily suspended due to seasonality reasons. This measure, known as the 'Temporary suspended employment in tourism/catering industry', is based on an agreement between the Ministry of Labour and Social Insurance, the employer organisations and the unions. It aims at preserving the bond between employers and employees over the winter months. The suspension of unemployment applies for tourism-related enterprises which suspend their operations fully or partially from 1 November until 31 March.

Due to the lockdown imposed by the government to all hospitality, catering and other tourism related activities due to the COVID-19 pandemic, the eligibility period of the instrument has been extended to 12 June 2020. The extension of the instrument concerned all tourism employees, who were registered as unemployed due to suspension of employment.

Content of measure

Since 2003, the employer pays 2.8% of the basic salary (including cost of living allowance) to the employee during the suspension period. The employer and the employee contribute proportionally (on the basis of the 2.8% payment) to the social insurance scheme. The employee is entitled to unemployment benefits during the suspension period, reduced by the amount received from the employer. The instrument was firstly introduced in the late 1980s and significantly reformed in 2003. The reform related mainly to the share of salary payable by employers to suspended employees. The previous agreement provided for a payment of 25% of the basic salary during the suspension period.

There is a similar arrangement applying to restaurants and recreational centres in place, which is part of the multi-employer collective agreement between OSIKA for the employers and SYXKA-PEO and OYXEB-SEK for the trade unions, and also endorsed by the Ministry of Labour, Welfare and Social Insurance. In this case, the employers are committed to continuing paying part of the employees’ salary amounting to 10% of the basic salary during the suspension period. The suspended employees are then entitled to unemployment benefit reduced by the amount receivable by the employer. The agreement applies only in Ayia Napa and Protaras; two touristic areas with most of the enterprises suspending their operations during winter time.

Use of measure

The instrument is particularly popular in the hotel industry, which accounts for approximately 81% of the affected employees. Restaurants and recreational centres' employees account for 12%, while other related activities for only 7%. As far as nationality is concerned, in the winter of 2022/2023 the share of Greek Cypriots was 69.9% of the suspended employees; third country nationals had a share of 6.5%, EU nationals 32.3% and Turkish Cypriots 0.3%.

Since its initial introduction, it has contributed to employment security for a considerable number of employees in the tourism sector. In the winter of 2022/2023 a total of 7,156 employees received unemployment benefit on the basis of the instrument's provisions; this represents a reduction of 16.3% compared with the previous year, 2021/2022. In the last four years the instrument is increasingly used, compared with the years 2012/2013 to 2018/2019 where in average 5000 employees were receiving the benefit.

Target groups

Workers	Businesses	Citizens
Employees in standard employment	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
Trade unions Employers' organisations Public employment service Social insurance	Companies National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Agreed (outcome) incl. social partner initiative	Agreed (outcome) incl. social partner initiative
Form	Consultation through tripartite or bipartite social dialogue bodies	Consultation through tripartite or bipartite social dialogue bodies

Social partners' role in the implementation, monitoring and assessment phase:

• Social partners jointly
• Main level of involvement: Sectoral or branch level

Involvement

It is a well-established tool underpinned by collective agreements and enjoying the endorsement and facilitation of the Social Insurance Services. The instrument is not legally binding and its implementation depends very much from the general willingness of employers of adhere to the provisions of the sectoral collective agreements, which is observed to have lessened in the last two decades.

The reform of the instrument in 2003 aimed at extending the employment period of employees in the hotel industry. However, the reform did not bring the anticipated impact. Hotel enterprises still proceed to a considerable number of layoffs or to suspended employment during the low season in winter. Despite the drastic reduction of the employers’ cost (from 25% to 2.8% of the basic salary) when resorting to suspended employment, the instrument is observed in the last years to loose attractiveness: in winter 2009/10 the employees who received unemployment benefit on the basis of the instrument made up 74% of the total unemployed persons in the tourism sector (suspended employees + dismissed employees), while in winter 2018/19 this number decreased to 44% of all sector’s unemployed persons.

Views and reactions

The sector’s trade unions have repeatedly pointed out that the instrument is not any more adequate to address the need for continuous employment in the tourism sector. Other measures should be put in place providing incentives to enterprises to extend the annual duration of their operation or to stop suspending their operations during winter. For example, trade unions claim that the 2003 reform of the instrument had a reverse impact on the effectiveness of the instrument as relates to its initial intension to lengthen employment in the tourism industry during winter time. With the reduction of the employer’s share on the employee’s salary from 25% to 2,8% it became rather cheaper for employers to suspend the operations of their businesses during low season. Additionally, trade unions claim that the access of the industry’s employers to European labour markets has eased the seasonal recruitment of personnel and therefore employers prefer to dismiss seasonal employees than to resort to the provisions of suspended employment.

Sectors and occupations

This case is not occupation-specific.

Sources

• 01 January 1988: Collective Agreements and Memorandum of Agreement between Workers Unions and Employers Organisations in the Hotel Industry of Cyprus (2003). (www.sek.org.cy)
• 01 January 1988: Ministry of Labour, Welfare and Social Insurance (2020), Support Program for Coping with the effects of COVID-19 (Greek). (www.coronavirus.mlsi.gov.cy)
• 10 November 2003: Eurofound (2003), Agreement on winter unemployment benefits for hotel workers. (www.eurofound.europa.eu)
• 03 May 2005: Eurofound (2009), Social dialogue on winter suspension of hotel workers' employment, EIRO. (www.eurofound.europa.eu)
• 01 January 2008: Eustathopoulos, Y. (2009), National background paper Republic of Cyprus, Anticipating and managing restructuring in enterprises: 27 national seminars, ARENAS Report, Brussels, European Commission. (www.eustathopoulos.gr)
• 04 July 2019: Social Insurance Department, Unemployment benefit: Applications and beneficiaries (Statistics, in Greek). (www.mlsi.gov.cy)
• 30 March 2020: Ministry of Labour, Welfare and Social Insurance (2020), Support Program for Coping with the effects of COVID-19. (www.coronavirus.mlsi.gov.cy)
• 15 November 2022: Social Insurance Department, Unemployment benefit: Applications and beneficiaries (Statistics, in Greek) (www.mlsi.gov.cy)