The 2010 ‘Social Security’ Act in Greece

The new ‘Social Security’ Act imposed by the IMF-EU-ECB ‘troika’ and the Greek government: A brief description of the most significant recent changes (August 2010)

Layoffs – Compensations – Overtime

• They increased the limit layoffs (from today’s 2%) to 5% per month, and up to 30 employees regarding companies which are staffed with more than 150 workers. Companies with 21 to 150 employees may now lay off up to 6 persons per month, while companies with less than 20 workers have no limit layoffs.

• They reduced the allowances due to redundancy.

For employees who have been working 2 to 12 months, a one-month notice by the employer is now considered sufficient before their dismissal, in order to receive a reduced compensation.

They gradually enforce six-month notice before dismissal in the case of an employee who has fulfilled over 20 years of labor and, as a result, smaller compensation.

Allowances will be paid in installments to redundant! The initial amount will be given on the day of dismissal, while the remainder will be paid in bi-monthly installments. Unless the amount remaining for the full payment of compensation is not lower, each of these installments will be equal to at least two-month wages.

• They reduced overtime allowances and worsened the excessive-work conditions.

Those who work 40 hours a week may not refuse to work 5 hours overtime per week.

Those who work 6 days a week are now forced to work up to 8 hours overtime per week, if so requested by their employer.

In fact, the eight-hour day officially becomes nine- or ten-hour day. Even worse, the Minister for Employment, after an Opinion by the Supreme Council for Employment, will have the right to grant permission to the private and the broader public sectors to impose additional overtime than the above!

Salaries – Benefits

• Employers are now entitled to give 84% of the minimum daily wage or salary to young people under the age of 25 who enter the labor market for the first time. In addition, employers now have the privilege to gain portion of the contributions of these workers by the Manpower Employment Organization (OAED).

Things are even worse for young people 15-18 years old, as the new Act provides ‘special apprenticeship contracts’ of one-year duration. For one-year wage slavery, youngsters shall receive 70% of the minimum daily wage or salary. Unprotected by labor legislation – with the exception of provisions for health care and social security – the younger workers will endure an actual slavery regime.

• They eliminate the 13th and 14th salary in the wider public sector.

Those with gross earnings of more than €3,000 (nearly €2,000 net income) will not get Easter and Christmas bonuses nor vacation allowances.

Employees below this threshold may receive €250 Easter bonus, €250 vacation allowance, and €500 Christmas bonus…

• They enforce extra 8% reduction of benefits and allowances in the narrow public sector.

They abolish all benefits of public servants who have gross earnings exceeding €3,000.

In the case of the wider public sector – where benefits are not provided – the salaries and allowances fell by extra 3%.

• They cut the last installment of the Social Solidarity Benefit for 2010!
  They are examining its short-term abolition!

• They shrinked unemployment benefits; it’s now lower than 60% of the basic salary (instead of 80% of the final salary before unemployment).

• They reduce the number of social security funds to three by the year 2018 (IKA for employees, OAEE for freelancers, OGA for farmers).
  All public sector employees who will be hired from 1st March 2013 will also contribute to IKA (rather than the recent social fund of the public sector).

• They impose three-year freeze of wages and pensions in the wider public sector (until 2013).

There will be no increase in salaries and pensions as long as the Greek State is monitored by the IMF-EU-ECB ‘troika’.

The new measures are those of the first phase (2010 – May 2013) of the ‘bailout and austerity programme’. However, the freeze of wages and pensions can be extended if the close monitoring by the troika will continue in Greece!

As far as the private sector is concerned, the increase will be 1.5% for 2011, and 1.7% for 2012 – well below the official inflation rate!

Pensions

• The so-called ‘basic pension’ will reach… €360 per month (based on 2010 data)! This pension will be given for 12 months a year. Hence, they have abolished the 13th and 14th pensions in all social funds.

Those who receive a pension that does not exceed gross €2,500, will receive €200 Easter bonus, €200 summer allowance and €400 Christmas bonus (that is €800, instead of the former two additional pensions)… This money will be a retirement allowance, therefore in the future could be easily reduced or even eliminated.

• The State’s obligation to retirees is now limited to a pension of hunger.

The so-called ‘guaranteed pension’ for those who have reached 65 years old will be paid provided retirees meet certain income standards. In particular, social security members must have been residing at least 15 years in Greece, and during the preceding financial year their personal income should not exceed €5,040 or their family income should not exceed €10,080.

The height of the so-called ‘basic pension’ will be constantly changing, and it is not at all certain that in the future it will have the current purchasing power. It will be determined by the consumer price index, the evolution of gross national product and the economic situation of the social funds…

Any clause of the legislation in force today, which provided for increases in pensions or adjustments in a different way than mentioned, is being abolished from year 2014 under the new measures!

For those who wish to receive this pension of hunger before reaching 65 years old, the €360 will be cut by 0.5% for each month that remains until the age of 65. Therefore, if someone retires at the age of 60, he or she loses 30% of the retirement and will receive as basic pension €252 per month!

• The ‘proportional pension’ will be calculated from the pensionable earnings and the percentage of replacement.

Firstly, as already mentioned, the State no longer guarantees this pension.

Secondly, the pensionable earnings were formerly calculated based on the last year of labor, the last 2 years, and the 5 best of the last 10 years of labor. They will now be computed on the basis of all the years of contributions (all the years of labor). It is thus clear that the income listed for the pension’s calculation is lower. Meanwhile, the coefficient of readjustment, that is used arbitrarily by the State to calculate pensions, is reduced.

The second factor – after the pensionable earnings – which will be included when calculating pensions are the coefficients of replacement (the percentages by which pensionable earnings are multiplied in order to calculate the final pension), particularly for those who have contributed from 25 to 40 years in labor.

Previously, it reached 70% (80% in the public sector) of the average wage of the 5 best of the last 10 years of labor.

In order for a worker to ensure the same coefficient of the previous regime, he or she now has to work 3 to 5 years in addition. Even so, the worker will not receive the same pension, because it is very doubtful if he or she will have the same pensionable earnings.

Actually, from now on, all pensions will be calculated as determined in the private sector:
For 39 (instead of 40 years of contributions) the proportional pension (other than basic) falls to 55% of the pensionable earnings for the entire working life.
For 35 years of work the pension drops to 45%.
For 40 years it reaches 60%, disregarding the basic pension.

• Supplementary pensions will be formed according to the economic sustainability of each of the plucked social security funds.

The Boards of Directors of these social funds will determine, as of early 2012, the percentages of replacement.

From 2011, the State will not cover any deficit in supplementary funds. Wherever and whenever there is a deficit, pensions will ‘adapt’, that is they will slash!

• From 2011 and every two years, the National Actuarial Authority will plan and publish studies according to which pensions will be ‘redetermined:’ Nothing is ensured for workers, not even the amount of the minimum pension.

• The public sector’s pensions exceeding €1,400 will henceforth be subject to LAFKA tax, where LAFKA is ‘Solidarity Account for Social Security Agencies.’ This extra tax ranges from 3% to 10%, depending on the amount of pension.

They will impose LAFKA tax for the sum of earnings in the case of pensions which exceed €1,400. The total reductions in current pensions range from about €500 a year (for a monthly pension of €1,400) to about €4,200 a year (for a monthly pension larger than €3,500).

• They revised the context of granting disability pensions.

Indicatively, a holder of a disability pension, according to the new Act will be entitled to 75% of the basic pension (€270!) if the percentage of disability ranges from 67 to 80%, and 50% of the basic pension (€180!) if the percentage of disability ranges from 50 to 67%.

• They increase the retirement age of women who work in the public sector, at 65 years gradually until the end of 2013.

In the public sector, the equalization of the retirement age for men and women (always increasing) will begin in 2011 with a three-year adjustment period.

Reduced pension can be granted at 60 years old (instead of 55, as was previously valid).

With regard to early retirement for men and women, 5 years of less labor lead to more than 30% reduction of pensions.

Under the new Act even the age limit of 65 years and generally the limits of the retirement age should not be taken as granted, since they will be ‘redefined by the change in life expectancy of the population’!

• For workers who shall enter the social security system from 31st December 2010, their pension is calculated in two ways:
  The first part is calculated according to the previous system for the years of contributions until the end of 2010.
  The second part, from 1st January 2011 until the date of retirement, will be calculated with the new, far most unfavorable conditions.
  In both cases, the final pension will be reduced up to 50% over the current system.

• Mothers with an under-age child or at least 3 children and 25 years of contributions, may not retire at the age of 50, as was previously valid.

After year 2013 this right is lost:
They may receive a reduced retirement at the age of 60 with more than 5,500 social security stamps, whereas until now they could retire at the age of 50.
In order to get full retirement, they will have to be 65 years old (provided that their child is still underage…) while until now they had the right to retire at their 60.
Women who haven’t reached 50 years old in 2012 but have completed 25 years of service, will have to work 5 more years in order to retire at the age of 55.
From 2013 men and women with 3 children or a child with at least 67% disability, will retire at 65, rather than 56 years as was the case before.
The mothers of 3 children may purchase up to 5 years of the so-called ‘notional time of social security‘. This means that each aspiring retiree will dearly pay her procreation.
Also, the new Act suspends the right of men and women with at least 3 children to retire regardless of age limit.

• The men that have entered the social security system before 1993 and have completed 35 years of full working experience, from 2012 will retire later than expected until now.
  Gradually from 2012 to 2015, they will be forced to work plus one semester per year.
  Thus, from 2015 they will retire with reduced pension at the age of 60 with 40 years of service, rather than at 58 with 35 years’ contributions, as was previously valid.

• They increase the minimum contribution period (of 35 years) to 40 years, gradually until 2013.

Hence, a retiree must have completed 40 years of contributions or have reached 65 years of age.

Up to 7 years of contributions will be recognized, if the years of military service, the period of absence due to illness or regular unemployment, the years of study, sabbatical or leave without pay, etc. will be purchased. This means that the employee is called to pay an expensive ‘notional time of social security.’

• The new SS Act contains cuts in the list of heavy and unhealthy occupations.

In addition, in the public sector the retirement age in these professions is increased gradually until 2013 (from 55) to 60 years for men and 58 years for women.

Here too there is total insecurity, since the new measures provide for the amendment of this list every 3 years!

• From year 2011, unless they are disabled or students, adult unmarried daughters will not be entitled to the pension of their deceased parents.

These pensions are reduced from what they were entitled so far, since the new Act puts strict income criteria. Their gross monthly income (except basic and supplementary pensions) must be less than 30 times the daily wage of an unskilled worker (recently €34). If this income is 30 to 40 times higher, they will receive 2/3 of the pension; if 40-50 times higher, 1/2; if 50-60 times higher, 1/4, while the pension is completely cut if they earn more than about €2,040 (60 times the minimum daily wage).