Agreement on winter unemployment benefits for hotel workers

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In October 2003, following consultations, a draft agreement was reached by the Cypriot government and social partners which reforms the payment of unemployment benefits to hotel employees whose employment is suspended for the winter season.

Following tripartite consultations, it appears that government, employers’ organisations and trade unions have agreed on a new arrangement with regard to the payment of unemployment benefits to hotel employees whose employment is suspended for the winter season. On 20 October 2003, the Industrial Relations Service of the Ministry of Labour and Social Security, together with the competent employers’ organisations and trade unions, reached a draft agreement amending arrangements for the payment of unemployment benefits to hotel employees. The draft agreement - the technical drafting of which was undertaken by the Ministry of Labour - is the result of social dialogue among the Ministry of Labour, the two employers’ organisations - the Pancyprian Association of Hoteliers (PASYXE) and the Association of Cyprus Tourist Enterprises (STEK) - and the trade unions - the Union of Hotel and Recreational Establishment Employees (SYXKA) affiliated to the Pancyprian Federation of Labour ( PEO), and the Federation of Hotel Industry Employees (OUXEB) affiliated to the Cyprus Workers ' Confederation ( SEK). The draft agreement must now be ratified and adopted by the three parties.

In the Cypriot tourism and catering sector, the customary practice has been that the owners of hotels that close for the winter pay employees whose services have been suspended during the period of closure a sum equal to a quarter of their basic pay, plus a price-indexation allowance, from the date of closure for the winter until the beginning of the new tourist season. After the employer has paid any days owed to the employees, it pays them 25% of their basic wage plus price indexation, and the employee also receives unemployment benefit from the Social Security Fund at a rate reduced by 25% (ie 75% of full benefit). The period over which such payments are made is usually from 1 November until 31 March, excluding any unforeseen circumstances, in which case consultations take place. This practice, known as 'suspended employment', is based on an agreement between the Ministry of Labour, the employers’ organisations and the unions and has been applied for at least 20 years, with the basic aim of extending the period of employment and continuing the employment relationship between employer and employee.

Over the past few years, however, the employers’ organisations in the sector have objected strongly to this practice and have repeatedly demanded that hotel owners be relieved fully of their obligation to pay 25% of employees' basic wage. The main argument of the employers’ organisations is that unemployment benefit should be paid in full by the state. In an effort to find a compromise solution aimed at both satisfying the hotel owners’ demand, and not abolishing this benefit to the detriment of the employees, the Ministry of Labour was called upon to investigate whether payment of part or all the unemployment benefit could be considered a state subsidy to hotel owners and thus contrary to the 'acquis communautaire' (ie the body of EU law that acceding countries must adopt and implement) in this area (Cyprus is to join the EU in 2004). Following assurances by the competent authorities that payment of the benefit is not a form of state aid to the hotel owners, and therefore does not contravene EU law, the three parties formulated the following draft agreement:

• the employer will inform employees in writing regarding the period during which their services will not be required and determine the date of their return to work. The letter in question must also include the number of days of time off owed by the employer to the employee, as well as the number of deferred and due days of leave arising from work on Sundays and holidays pursuant to the relevant collective agreement;
• in order for unemployment benefit to be paid in accordance with current legislation, all employees in a state of suspended employment must register as unemployed at the District Labour Offices;
• the employer will pay a basic 2.8% of the basic wage and price indexation as well as the corresponding contributions to the Social Insurance Fund, so that the period of suspended employment can be counted as actual service for redundancy purposes;
• in the event of unfair dismissal, employers will recognise the worker’s employment with another employer during the period of suspended employment; and
• all benefits specified in accordance with collective agreements will be secured by the employers, as has been the practice to date.

This proposed arrangement would satisfy a strong demand by the employers while at the same time securing the social insurance and labour rights of workers in suspended employment. If this agreement is ratified by the three parties, the Ministry of Labour will henceforward be entitled to refer hotel employees in suspended employment to other work, with priority being given to another hotel or recreational establishment, a procedure followed for all who registered as unemployed.