The Greek Social Security (Insurance) SystemKatharina Fuduli
This contribution has the aim to give a descriptive overview of the structure of the social insurance system in Greece, without providing further explanatory information about its formation and its particularities, or information about theoretical aspects of the Greek welfare state. It will first refer to the emergence of the institution of the Greek social insurance, as well as to the structure of the system and its main characteristics. Furthermore, it will refer to the main constituents of the system, the primary insurance system, especially the IKA system, and the supplementary insurance system, to the financing of the social insurance system, as well as to the crisis of the system.
In general, the term social security refers to both social insurance and social assistance. In Greece the term social security is mainly used to describe the system of social insurance. A general social assistance scheme does not exist. Social assistance is restricted to specific groups of the population, the so-called traditional clients of assistance. There are public welfare schemes for unprotected children, uninsured elderly people, persons with special needs, repatriated persons of Greek origin, etc. However, a general guaranteed minimum income scheme providing benefits for everyone in case of financial need does not exist (Sissouras and Amitsis, 1994).
The system of social security consists of the pension insurance (old-age, disability, and survivors pensions), the sickness insurance (health care, maternity and delivery benefits), the unemployment insurance (unemployment benefit, conscription benefit, occupational accidents), the protection of families and children (family allowances, additional payments to families), housing benefits and social assistance (orphans, foster care, old people, disabled people).
1. Short history of the development of the Greek social security system
The institution of social insurance emerged almost in parallel with the foundation of the modern Greek state (1830). However, although a number of professional insurance funds were established - initially providing insurance only against sickness and accidents, and some of them also providing pensions - the number of insured persons remained limited until the end of the 1920s. The 25 insurance funds in operation during this time period covered only 20 thousand employed persons. A very important legislative measure in the history of the Greek social insurance was therefore the establishment of the Institution of Social Insurance (IKA) according to Law 6298/1934, aimed at covering all employees in the private sector.
In the time period from the emergence of the social insurance system until the end of World War II the development of social insurance was marked by limited state intervention in social security matters, as well as by a series of efforts by workers and professionals unions to compensate for the state indifference and to meet the increasing needs. These unions and workers organizations had therefore created autonomous, self-governed, and self-financed insurance funds for each professional sector or enterprise. This kind of development shaped the social security system and gave it certain characteristics that still exist today.
First of all, there is a diversity of funds and relevant schemes. We cannot talk about a unified system of social insurance, because almost every one of these insurance funds has a different organization and administration.
Second, there are strong social inequalities between professional groups or even between sections of the same professional group due to the splitting up of social insurance into various schemes. There are inequalities with respect to the contribution rates of the insured, as well as inequalities regarding the quality of the provisions. It is worth mentioning that until the 1980s a great gap existed between the quality level of insurance provisions - mainly in the health care sector - for the population in urban areas and the population in rural areas. Only in the 1980s and 1990s, through a series of regulations and especially through the creation of the National Health System, these differences started to disappear.
Third, although this is not only characteristic for Greece, the financing of the insurance system is based primarily on employees and employers contributions. The principle of tripartite financing, which is at present the most efficient form of financing, has not yet been realised. The level of financial support of the state is primarily defined on the basis of the access professional groups and their unions have to the state machinery, rather than on the basis of the needs of these groups. Financial support given to IKA, for instance, hardly amounts to 0.5% of the total receipts of the institute, while financial support given to the Fund of Engineers, Architects and Surveyors amounts to 55% (Petmesidou, 1991).
Fourth, the main provision within the Greek social insurance system refers to retirement benefits. These may be provided by primary insurance institutions (primary pension), by supplementary insurance institutions (supplementary pension), by provident funds (lump-sum benefit upon retirement), or by mutual aid societies (lump-sum benefit upon retirement).
2. Structure of the Greek social insurance system
According to the ministry of Labour and Social Insurance (Social Budget, 1996) one can distinguish between five main categories of social insurance institutions:
Primary insurance funds
Among the public insurance schemes these funds were the first ones to develop, several prior to World War II and most of them until 1950. They were set up to provide old-age pension and covered only specific and usually smaller groups of people either employed at an enterprise (e.g. the insurance company "ETHNIKI") or belonging to an occupational group (e.g. the newspaper sellers of Athens). This led to a very fragmented and rudimentary system.
Supplementary insurance funds
They were created only after World War II in order to supplement the benefits provided by the primary funds, mainly in the field of old-age pensions. The coverage of these supplementary funds, also organized along enterprise or occupational lines, was not identical with that of the primary funds, however. This led to a further increase in the complexity and fragmentation of the system.
Sickness insurance funds
Until 1955 the setting up of insurance funds was possible due to the conclusion of collective agreements. These insurance funds covered individuals who were not IKA-insured, usually against sickness. Some of them still exist. Since the enactment of a special law in 1955 it has been prohibited for enterprises through collective agreements to take decisions or undertake changes regarding social insurance matters. Sickness insurance funds were aimed at a higher quality of sickness benefits for their insured members in comparison to the provisions made by the statutory insurance system. Sickness funds often do not only have sickness insurance branches, but also providence insurance branches, and one of them also has a retirement insurance branch.
They were created according to collective agreements to provide their insured members with lump-sum benefits upon retirement. The largest and one of the oldest provident funds is the Provident Fund of Civil Servants, created in 1926. In general the lump-sum benefit is related to the salary and to the number of contribution years. The autonomous regulations of some provident funds constitute deviations from this rule; their lump-sum benefits range in average from 1,500,000 DR to 2,400,000 DR (KEPE, Social Insurance, 1990).
Mutual aid societies
These organisations are based on private law and were created by professional groups to provide additional benefits. There is only little information available about the development of these organizations. About 50 of them were in operation in 1996.
The primary and the supplementary insurance funds are the main constituents of the Greek social insurance system. All primary insurance funds and the majority of the supplementary insurance funds, sickness insurance funds and provident funds are institutions based on public law, whereas the mutual aid societies, set up by professional organizations, are based on private law, as well as some of the supplementary insurance funds, the sickness funds and provident funds, set up according to collective agreements.
Besides these categories of insurance funds there also are funds for other provisions, with the most important ones being OAED, the Organisation of Labour Force Employment, OEK, the Workers Housing Organisation, and EE, the Workers Social Welfare Fund. OAED, also known as the Manpower Employment Institute, was founded according to the Legislative Decree 212/1969 (1. Act: 2961/1954). This organization replaced and reorganized the governmental employment offices that existed previously. OAED is the main organ of governmental employment policy responsible for ensuring the precondition of balancing the supply of and the demand for labour. OAED has a broad range of responsibilities, with the most important one being the matching of the supply of and demand for labour, vocational guidance and the provision of unemployment benefits, family allowances and other social security allowances, such as maternity benefits. The OAED insurance is compulsory for all independent employees who are Greek residents. The economic sources of OAED are contributions from the employers and the workers for: a) the fund assisting those workers who do their military service, b) the Unemployment Fund, and c) the Fund of Family Assistance, DLOEM (founded in 1958). The OAED contributions for the unemployment insurance and the family allowances are being collected by IKA.
The Workers Social Welfare Fund (EE) is aimed at promoting the welfare of employees/workers as well as pensioners and members of their families through recreation programmes, holiday camps for children, cultural programmes, etc.
The Workers Housing Organisation's (OEK) primary object is to provide subsidised housing units for workers and employees. OEK also grants low-interest loans to workers and employees who meet the preconditions for buying a house or an apartment.
Distribution of the social insurance funds among the responsible ministries
According to the Official Social Budget of 1996, there are 236 social insurance funds which are supervised by different ministries. The main responsible ministry, however, is the Ministry of Health, Welfare and Social Insurance (renamed Ministry of Labour and Social Insurance), which supervises 215 funds:
The insurance funds under the supervision of the Ministry of Labour and Social Insurance can be categorised by occupational groups into 9 categories (mutual aid societies and funds for other provisions are not included):
Categories of insured persons
As already mentioned, social insurance coverage in Greece depends on the employment classification. We can therefore distinguish between the following categories of insured persons:
Private sector employees
All private-sector urban employees, i.e. about 1.8 million insured persons, are covered by IKA.
Public sector employees
Employees of state banks, public enterprises, etc., are insured at enterprise-based funds, for which the employer bears directly or indirectly the largest part of the pension-financing costs (Psomiades). The primary insurance for these employees is directly taken over by the state. The eligibility criteria for the insurance provisions tend to be more lax than those of IKA.
They do not really have a fund of their own. They do not pay any contributions, and their pensions are entirely financed from the state budget. Retirement age and eligibility conditions resemble those of banks (Psomiades, 1993).
The insurance coverage of the rural population was introduced with the foundation of the Agricultural Insurance Organization (OGA) in 1961. All farmers are insured at this organization, as well as all persons living in areas with less than 5,000 inhabitants. Until 1997, the OGA-insured persons essentially did not have to pay contributions. They received a uniform low pension (barely a sixth of the mean private sector pension) financed by the state budget (by direct and indirect taxation of the non-agricultural sector of the economy, as well as state subsidies). The OGA provides: a) medical care, b) old-age, disability or survivors pensions, c) crop insurance, mainly against frost and hail. The philosophy of this fund is fundamentally different from that of the rest of the system and rather resembles the so-called "demogrant" concept of a pension system (related to need and financed from general revenue). (Psomiades, 1993). From 1 January 1998 onwards, however, a restructuring of OGA has been aimed at improving its provision system.
Since 1934 all employees in trade and industry have a compulsory insurance with the "Professional and Handicraftsmen Fund of Greece" (TEBE). TEBE is funded from the contributions of the people insured. The contribution rate is calculated according to 5 insurance categories with respect to the annual income of the insured persons. Additionally, the insured persons pay social contributions. The insurance coverage of TEBE provides hospital, medical and medicinal care, old-age, disability and survivors pensions.
The liberal professions (e.g. doctors, lawyers, etc.) are insured by various insurance funds. The funding of these funds is, in principle, provided by the insured persons. They pay, however, a low graduated contribution which is grossly unrelated to their income. Some of these funds appear to be financially sound due to large government grants or the allocation of earmarked taxes to them (e.g., any real estate transfer requires that a percentage of the sale price is contributed to the lawyers fund) (Psomiades, 1993). The insurance provisions depend on the regulations of each insurance fund.
3. Primary and supplementary insurance institutions: the main constituents of the Greek social insurance system
Primary insurance funds
As already mentioned, the creation of most of the primary insurance funds was aimed at compensating for the shortcomings of the system of social insurance during the time when the statutory insurance schemes, mainly IKA, were not yet able to provide universal and complete insurance coverage. Since the improvement of the IKA system in 1951 (Law 1846/1951), when IKA extended its activity to cover almost the whole country, these primary insurance funds have been permitted to continue their activities, but under the auspices of the Ministry of Social Insurance and in co-operation with IKA. The same law prohibited the creation of new primary insurance funds. These funds have operated since then as substitute/compensation funds, and their provisions must at least correspond to the IKA pro-visions. Since 1955, policy efforts to create a unified social insurance system and to abolish social inequalities have provided for the absorption of these funds by the IKA system. In spite of this, some professional groups with strong negotiation power have created independent primary insurance branches for their employees, thus offending against the law (e.g. the employees in DEI and in ETBA in 1965). The three largest insurance funds for primary insurance in respect of the number of insured persons in 1996 were:
- IKA with 1,840,000 insured
- TEBE with 545,100 insured
- OGA with 1,149,000 insured persons.
Given that in 1996 the total number of persons insured at primary insurance funds was 4.1 million, it is obvious that the number of persons insured at IKA, TEBE and OGA accounted for 85% of the total population insured in primary insurance funds.
The setting up of the Social Insurance Organisation (IKA), according to Law 6298/1934, was a major turning point in the history of the Greek social insurance. The aim of this law was the compulsory insurance coverage of all white- and blue-collar workers within Greece. Many authors consider this legislation to be the foundation stone of the welfare state in Greece. For the first time one third of the Greek population was covered by a unified insurance scheme. The IKA insurance covered sickness and retirement due to old age, death or disability. IKA first began its activities in Athens in 1937. The scheme was gradually extended to cover Piraeus and Thessaloniki in 1938, Patras, Volos and Kalamata in 1939. Other regions followed with a delay. Only in 1951, according to Law 1846/1951, began the extension process of IKA to cover all white- and blue-collar workers and their dependants in the whole country. The insurance risks covered by IKA, according to law 1846/1951, are: sickness, death of the head of the family, inability to work due to old age, mental illness or accident. Subsequently, three insurance branches were created within the IKA system:
There is no insurance branch for occupational accidents and occupational injuries in the IKA system. In case an accident or an occupational disease results in sickness, it is covered by the sickness branch of IKA. In case it results in disability or death, the insured/dependent persons are covered by the IKA pension branch. As already mentioned above, OAED is responsible for unemployment insurance. The provisions are granted at the end of a specific insurance period. There are the following types of provisions:
Benefits in kind
Supplementary insurance funds
They are a creation of the time after World War II, as the primary insurance system provided only limited insurance protection. The supplementary funds were created in a similar way as the primary funds; however, their aim was not to substitute social insurance provisions, but to supplement them. The group of persons insured at these insurance funds may cover all employees of an enterprise or all employees in a certain profession within an industrial sector (e.g. the supplementary insurance fund for the staff of EIDAP or the supplementary insurance fund for the employees of stores). Supplementary provisions can be provided either by a supplementary branch within a primary insurance fund (e.g. IKA-TEAM; IKA-ETEAM) or by different insurance branches within a supplementary insurance fund, such as providence/assistance branches, pension branches and sickness branches (e.g. the supplementary fund for the staff of cement companies with its pension branch and providence branch). Supplementary insurance funds may have different titles, depending on the type of the structure the fund has: there are relief funds (tameia arogis), provident funds (tameia pronoias), supplementary accounts (epikourika tameia), etc. The provision of supplementary insurance usually refers to retirement benefits and sometimes to lump-sum benefits due to retirement (provided by the providence/assistance branches). Supplementary pension plans are compulsory and they are subject to the regulatory framework of social security. This means that they are closely linked to primary statutory plans. A person must be insured at a primary insurance fund corresponding his or her job classification before he or she can join a supplementary plan (Petridou, 1996). In the 1980s the supplementary insurance coverage was extended to cover all dependent employees through the establishment of a Supplementary Insurance Fund for Employees, the IKA-TEAM/IKA-ETEAM fund (Law 997/79). IKA-TEAM is the general employees supplemen-tary scheme, and IKA-ETEAM is the supplementary scheme for staff employed by public bodies. After this legislation, the creation of new supplementary insurance funds was prohibited. Due to this fact the development of the number of the supplementary insurance funds and branches was marked by a tendency to decrease, in contrast to the development of the number of insured persons. Today there is compulsory supplementary coverage for 80% of the countrys labour force (Petridou, 1996). On the other hand, the number of supplementary insurance funds and branches has decreased from 162 in 1990 (with roughly 2 million insured) to 45 funds and 14 branches in 1995 (with 3.5 million insured). This development still continues, as the law provides for the absorption of each supplementary insurance scheme that is unable to pay out the minimum benefits offered by IKA-TEAM or IKA-ETEAM.
Supplementary social insurance covers five employment cate-gories:
Financing of the Greek social insurance system
The social insurance system is mainly funded by employees and employers contributions. Regarding the private sector employees, the contributions are paid by the employees and the employers. Regarding the self-employed and the liberal professions, the contributions are paid by the employees themselves. Some insurance funds receive additional state subventions and social sources. In 1996 the contributions of the insured made up 33.1% and the employers contributions 31.0% of the total receipts of the insurance institutions under the auspices of the Ministry of Labour and Social Insurance. The ratio between the contribution of employees and the contribution of the employers is between 1:1 and 1:6. This form of financing entails certain problems which are, among other things, responsible for the bad financial situation of the insurance system in Greece today.
The social insurance contributions of the employees in the private sector are calculated on the basis of their wages. The contribution rates for this category are shown in the table below. It should be noticed that in the industrial sector the employers pay an additional contribution to the Social Security Organization (IKA) for occupational accidents, which equals 1% of their gross earnings. If a person has an occupation that is considered to be unhealthy or dangerous, additional contributions making up 3.6% of their gross earnings are paid (1.4% by the employer and 2.2% by the employee), so that the insured can receive a pension five years earlier than usually. Regarding the self-employed, their contributions do not depend on their salary; they are constant and uniform, and they are divided into categories depending on the profession of the insured person. The contribution rates for all insured persons (employees in the private sector, as well as self-employed and liberal professions) also depend on the type of risk in respect of which they are paid. The contribution rates for the employees in the private sector, for instance with respect to primary pension, is between 6.67% and 11%. The contribution rates for the self-employed and the liberal professions differ according to the insurance category of the insured. With respect to supplementary pensions, the contribution rates for the employees in the private sector range from 3% to 9%, with respect to sickness from 0.5% to 4%, and with respect to lump-sum benefits from 4% to 8%.
Apart from employees and employers contributions, there also are other funding sources, such as the state participation within the tripartite financing scheme, the social sources in the form of state subsidies or special contributions, the estate receipts of the insurance institutions, and various other receipts (e.g. through the payment of fines due to offences against the Law).
5. The crisis of the Greek
|Public Electricity Corporation|
|Fund for Family Allowances|
|Institute for Workers Welfare (Workers Centre)|
|Athenian Water Supply and Drainage Company|
|Hellenic Industrial Development Bank|
|Social Security Organisation|
|Centre of Planning and Economic Research|
|Merchant Seamens Fund|
|Manpower Employment Organisaton
(Organisation of Labour Force Employment)
(Organisation of Workers Employment)
|Agricultural Insurance Organisation
(National Crop and Social Insurance Agency-NCSIA)
|Workers Housing Agency
(Institute for Housing for Workers)
|Tradesmens Insurance Fund|
|Supplementary Insurance Fund for the Salaried (Insurance branch of IKA)|
|Professional and Handcraftsmen Fund
(Professional and Handicraft Insurance Fund)
(Professional and craftsmen Fund)
OAED (1996), Present and Future. Publication of the Manpower Employment Organisation, Athens: OAED.
Petmesidou, M. (1991), Statism, Social Policy and the Middle Classes in Greece. Journal of European Social Policy 1 (1), pp. 31-48.
Petraki-Kottis, A. and G. Kottis, eds. (1996), Labour Market Studies - Greece, Athens: The Research Centre Athens University of Economics and Business.
Petridou, H. (1996), Supplementary Pensions in Greece In E. Reynaud, L. apRoberts, B. Davies and G. Hughes, eds., International Perspectives on Supplementary Pensions: Actors and Issues, Westport Connecticut: Quorum Books, pp. 24-32.
Provopoulos, G., ed. (1985), I Krisi stin Koinoniki Asfalisi: to Provlima tou IKA [The Crisis in Social Insurance: the Problem of IKA], Athens: Institute of Economic and Industrial Research (IOBE). (in Greek)
Psomiades, H.J. and S.B. Thomadakis, eds. (1993), Greece, the New Europe, and the Changing International Order, New York: Pella Publishing.
Raptarhis, Syllogi Nomothesias, Ypourgeio Proedrias Kyvernisis [Law-collection of Raptarhis], Athens: Publication of the Ministry of Prime Minister, Department of permanent code, various volumes:
Robolis, S. (1993), A View from the South: Reforms in Greece. Journal of European Social Policy 3 (1), pp. 56-59.
Sissouras, A. and G. Amitsis (1994), Social Security Policy In P. Kazakos P. and P.C. Ioakimidis, eds., Greece and EC Membership Evaluated, London: Printer Publishers, pp. 248-259.
Social Budget, Ypourgeio Ergasias kai Koinonikon Asfaliseon, Koinonikos Proypologismos [Ministry of Labour and Social Insurance, Social Budget], Athens, various years: 1969, 1975, 1980, 1985, 1990, 1994, 1995 and 1996. (in Greek)
Further information can be obtained from:
MZES, Research Department I, D-68131 Mannheim
E-mail: Katharina.Fuduli @mzes. uni-mannheim.de.
Katharina Fuduli holds a degree in sociology. She is a research assistent at the MZES. She worked on the Greek social security system and is now involved in establishing the family policy database.