The first Social Insurance Scheme in Cyprus was introduced in January 1957. It covered compulsorily the employed persons, with the exception of certain categories of agricultural workers. The self-employed persons and those workers excepted from compulsory insurance were given the right to be insured voluntarily. The benefits of the 1957 Scheme were: marriage, maternity and funeral grants, sickness and unemployment benefits, old age and widow's pensions and orphan's benefit. Both, contributions and benefits, were "flat-rate" irrespective of the insured person's earnings. The Scheme was financed by three equal contributions i.e. from the employed persons, the employers and the State.
In October 1964, substantial changes were effected to the 1957 Scheme, as regards both its personal and material scope. Thus, compulsory insurance was extended to every person gainfully occupied in Cyprus including the self-employed, while the material scope expanded to include maternity allowance and benefits for industrial accidents and occupational diseases.
In January 1973 invalidity pension was introduced for persons permanently incapable of work, irrespective of cause, sickness benefit was extended to self-employed and unemployment and sickness benefits to married women.
Along with the above improvements, benefit rates were increased and by July 1974, their level was by 292% higher than in 1957.
The invasion of Cyprus by Turkey in July 1974 and the occupation of 40% of the island's territory by the Turkish army, not only frustrated any further improvements to the Scheme, but made necessary certain restrictive measures for safeguarding the Scheme against the risk of bankruptcy. Such measures included the reduction of pension rates and the suspension of the rights to unemployment and certain other benefits. The July 1974 levels were restored in 1977. Thereafter, the rates of benefit were increased in 1978, 1979 and 1980 and a new benefit was introduced, the missing persons' allowance, for the families of persons missing as a result of the Turkish invasion.
The current Social Insurance Scheme, which was put into operation on 6.10.1980, has incorporated the previous flat-rate scheme in a modified structure providing in addition supplementary earnings-related benefits. Thus the Scheme is divided into two parts: the basic part, corresponding to the repealed flat-rate scheme, and the earnings-related part.
The Scheme provides for the following benefits:
- maternity, sickness and unemployment benefits,
- marriage, materinty and funeral grants,
- old age, widow's, invalidity pensions and orphan's benefit, and
- employment injury benefits, i.e. injury benefit, disablement benefit and death benefit.
The benefits provided by the Scheme satisfy and exceed the minimum standards set by the International Conventions of the International Labour Organisation and the Council of Europe. In order to maintain the purchasing power of the benefits provided by the Scheme, the benefits are revised each year according to the increase of the cost of living index and the annual survey of wages and salaries.
The structure of the Social Insurance Scheme achieves social solidarity, not only between the young and the old, the employed and the unemployed, the healthy and the sick, but also between the high-income and the low-income earners.
On 9th of July 2010, came into force the Social Insurance Law N.59(I)2010, which consolidates and amends the Social Security Laws from 1980 to 2009 and associated regulations.