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Working in Albania/National insurance
Albanian families with low or inadequate income receive benefits

 
 
Social Security Program in Albania


Old Age, Disability and Survivors

  • First law: 1947.
  • Current law: 1993 (social insurance), with 1995 amendment.
  • Type of program: Social insurance system.
  • Note: Means-tested social assistance benefits are payable to persons who are not eligible for social insurance benefits.

Coverage

  • Employed persons, self-employed persons, and university students.
  • Voluntary coverage is possible.
  • Special systems for civil servants and military personnel.

Source of Funds in Albania

  • Insured person: 8% of gross monthly earnings.
  • Voluntarily insured persons contribute 3,742 ALL.
  • The minimum earnings for contribution purposes are equal to the minimum monthly wage (11,800 ALL).
  • The maximum earnings for contribution purposes are equal to five times the minimum monthly wage.
  • The insured's earnings also finance sickness and maternity benefits.
  • Self-employed person: 39.2% of the minimum monthly wage.
  • The minimum earnings for contribution purposes are equal to the minimum monthly wage (11,800 ALL).
  • The maximum earnings for contribution purposes are equal to five times the minimum monthly wage.
  • The self-employed person's contributions also finance sickness and maternity benefits.
  • Employer: 19.1% of monthly payroll.
  • The minimum earnings for contribution purposes are equal to the minimum monthly wage (11,800 ALL).
  • The maximum earnings for contribution purposes are equal to five times the minimum monthly wage.
  • Government: Any deficit; pays contributions for persons in compulsory military service and credits contributions on behalf of the unemployed contributes as an employer; covers the costs of the special state pensions for those who have contributed to the political and cultural development of Albania.

Qualifying Conditions

  • Old-age pension: Age 65 (men) or age 60 (women) with at least 35 years of contributions. Retirement from economic activity is necessary.
  • Age 50 with 30 years of contributions for a mother with six or more children older than age 8.
  • Partial pension: Age 65 (men) or age 60 (women) with between 15 and 35 years of contributions.
  • Early pension: There is no early pension.
  • Deferred pension: A deferred pension is possible.
  • Old-age benefits are not payable abroad.
  • Disability pension: Incapable of any work, blind, or severely disabled.
  • The minimum insurance coverage period varies according to age but must be equal to at least 50% of the difference in years between the claimant's age and age 20.
  • The degree of disability is assessed by the Medical Experts Committee. At pensionable age, the claimant may choose to take the old-age pension if the amount is greater.
  • Partial disability pension: Incapacity to perform work in the last job but capable of work under special working conditions as determined by the Medical Experts Committee.
  • The minimum insurance coverage period varies according to age but must be equal to at least 50% of the difference in years between the claimant's age and age 20.
  • Disability benefits are not payable abroad.
  • Survivor pension: The deceased was an old-age pensioner or disability pensioner or was insured at the time of death or insurance coverage ceased not more than 1 year before death.
  • Eligible survivors include a surviving spouse caring for a dependent child younger than age 8; a disabled spouse; an aged spouse (aged 50 or older for a widow or aged 60 or older for a widower); dependent orphans younger than age 18 (age 25 if a student, no limit if disabled from childhood); dependent parents and grandparents aged 65 or older who lived with the deceased for the last 12 months; and dependent grandchildren.
  • Survivor benefits are not payable abroad.

Old-Age Benefits

  • Old-age pension: A basic flat-rate pension (equal to the minimum standard of living) is payable to all insured persons, plus an earnings-related pension for employed persons equal to 1% for each year of insurance coverage multiplied by the insured's average assessed wage for which contributions were paid.
  • The minimum standard of living is 3,960 ALL a month (2003).
  • The maximum monthly pension is twice the basic pension amount or 75% of the insured's average net earnings in 3 of the last 10 years of employment, whichever is less.
  • Partial pension: A percentage of the full pension is paid, corresponding to the number of years worked.
    The minimum pension is 7,850 ALL.
  • Early pension: There is no early pension.
  • Deferred pension: The pension is increased by 0.34% for each month of deferral after the normal retirement age.
  • The maximum deferred pension is equal to 80% of the insured's average net earnings in 3 of the last 10 years of employment.
  • Benefit adjustment: The basic flat-rate pension is indexed annually according to price changes of selected commodities.

Permanent Disability Benefits

  • Disability pension: A basic flat-rate pension (equal to the minimum standard of living) is payable to all insured persons, plus an earnings-related pension for employed persons equal to 1% for each year of coverage multiplied by the insured's average assessed wage for which contributions were paid.
  • The minimum standard of living is 3,960 ALL a month (2003).
  • The maximum monthly pension is twice the basic flat-rate pension or 80% of the insured's last average net earnings, whichever is less.
  • Partial disability pension: 50% of the insured's full disability pension (the basic flat-rate pension plus the insured's earnings-related pension) is paid.
  • Constant-attendance supplement: The monthly supplement is equal to 15% of the insured's average assessed earnings for contribution purposes.
  • Child's supplement: 5% of the basic flat-rate old-age pension is paid for each dependent child younger than age 15. The maximum supplement is equal to 20% of the basic flat-rate old-age pension.
  • Benefit adjustment: Benefits are adjusted annually according to changes to the old-age pension.

Survivor Benefits

  • Survivor pension: The surviving spouse receives 50% of the deceased's old-age pension; each orphan and each other dependent receives 25% of the deceased's old-age pension.
  • The survivor pension for a spouse ceases on remarriage.
  • The maximum monthly pension is equal to 100% of the deceased's old-age pension; 50% if the surviving spouse is working or receiving a pension in his or her own right.
  • Full orphan's pension: 50% of the deceased's old-age pension is paid for a single full orphan provided there are no other eligible dependents. Full orphans are eligible for the pension entitlements of both parents.
  • Death benefit: A lump sum equal to 1 month's basic flat-rate old-age pension is paid.

Administrative Organisation

Ministry of Labor, Social Affairs, and Equal Opportunities and a tripartite Administrative Council provide general supervision.

Social Insurance Institute (http://www.issh.gov.al) administers the program.


Sickness and Maternity

Regulatory Framework

  • First law: 1947. Current laws: 1963 (medical care), with 1993 amendment; and 1993 (social insurance).
  • Type of program: Social insurance (cash benefits) and universal (medical benefits) system.

Coverage

  • Cash sickness benefits: Employed persons.
  • Voluntary coverage is possible.
  • Cash maternity benefits: Employed persons, employers, and self-employed persons.
  • Voluntary coverage is possible.
  • Medical benefits: All persons residing in Albania.

Source of Funds

  • Insured person: For cash benefits, see source of funds under Old Age, Disability, and Survivors, above; 1.5% of earnings for medical benefits; persons living in urban areas contribute 1.7% of earnings.
  • Self-employed person: See source of funds under Old Age, Disability, and Survivors, above.
  • Employer: 0.8% of payroll (sickness benefits), 2.3% of payroll (maternity benefits), and 1.5% for medical benefits.
  • The minimum earnings for contribution purposes are equal to the minimum monthly wage (11,800 ALL).
  • The maximum earnings for contribution purposes are equal to five times the minimum monthly wage.
  • Government: 1.7% of payroll for employees (medical benefits). The total cost of medical benefits for persons not currently in the labor force.
  • The minimum earnings for contribution purposes are equal to the minimum monthly wage (11,800 ALL).
  • The maximum earnings for contribution purposes are equal to five times the minimum monthly wage.

Qualifying Conditions

  • Cash sickness benefits: Must be currently insured.
  • Cash maternity benefits: Must have 12 months of contributions.
  • Medical benefits: There is no minimum qualifying period.

Sickness and Maternity Benefits

Sickness benefit: The benefit is equal to 70% of the average daily wage in the last calendar year if the insured has less than 10 years of contributions; 80% with 10 or more years. The benefit is payable from the 15th day of medical certification (the first 14 days are paid by the employer) for up to 6 months. The benefit may be extended for an additional 3 months if the Medical Experts Committee certifies the likelihood of recovery in that period. The benefit is equal to 50% of the average daily wage during periods of hospitalization, provided there are no dependents. Income compensation is also available for changes of employment due to health reasons.

Maternity benefit: Employees are entitled to 365 days of paid maternity leave (with a minimum of 35 days before the expected date of childbirth and 42 days after). The monthly benefit is equal to 80% of the average daily wage in the last calendar year for the leave period taken before childbirth and for 150 days after; the benefit is equal to 50% of the average daily wage for the remainder of the entitlement period. For multiple births, the paid leave period is extended to 390 days, including a minimum of 60 days before and 42 days after the expected date of childbirth. Benefits are also payable for the adoption of a child. Compensation is payable for changes of employment due to pregnancy.

For employers and self-employed persons, the benefit is equal to the basic old-age pension.

Birth grant: A lump sum equal to 50% of the minimum wage set by the Council of Ministers is payable to either insured parent with a minimum of 1 year's contributions.

The minimum monthly wage is 11,800 ALL.


Workers' Medical Benefits

  • All general medical services are free.
  • Cost sharing: The insured is reimbursed from 35% to 100% of the cost of various essential medicines.
  • The Health Insurance Institute pays 90% and the insured pays 10% of the cost for some types of examinations.
  • There is no limit to duration.

Dependents' Medical Benefits

  • All general medical services are free.
  • Cost sharing: The insured is reimbursed from 35% to 100% of the cost of various essential medicines.
  • The Health Insurance Institute pays 90% and the insured pays 10% of the cost for some types of examinations.
  • Free benefits are provided for children up to age 12 months, disabled persons, WWII invalids and veterans, and persons diagnosed with certain serious illnesses.
  • There is no limit to duration.

Administrative Organisation

Ministry of Labor, Social Affairs, and Equal Opportunities and Ministry of Health Protection provide general supervision.
Social Insurance Institute (http://www.issh.gov.al) administers sickness and maternity benefits.
Health Insurance Institute administers medical benefits.


Work Injury

Regulatory Framework

  • First law: 1947. Current law: 1993 (social insurance).
  • Type of program: Social insurance system.

Coverage

  • Employed persons, apprentices, and students in vocational training.
  • There is no voluntary coverage.
  • Exclusions: Self-employed persons.

Source of Funds

  • Insured person: None.
  • Self-employed person: Not applicable.
  • Employer: 0.5% of payroll.
  • Government: None.

Qualifying Conditions

Work injury benefits: There is no minimum qualifying period. Occupational diseases are defined by the Ministry of Health's Medical Commission for Determining Incapacity for Work.

Temporary Disability Benefits

The benefit is equal to 100% of the average daily wage in the last 3 years and is payable for up to 12 months.

Permanent Disability Benefits

  • For an assessed loss of working capacity of at least 67%, the benefit is equal to 80% of the insured's average monthly earnings in the last 3 years but not less than the minimum standard of living.
  • Partial permanent disability: For an assessed loss of at least 33% of working capacity, the benefit is equal to between 50% and 80% of the insured's average monthly earnings in the last 3 years, depending on the degree of loss of working capacity.
  • Minor permanent disability: For an assessed loss of between 10% and 33% of working capacity, the benefit is a lump sum set by regulations. Material damages incurred by the insured person are compensated in full.

Workers' Medical Benefits

Compensation is available for additional medical care and the cost of rehabilitation.

Survivor Benefits

  • Survivor pension: A surviving spouse receives 50% of the deceased's pension.
  • Orphan's pension: Each orphan receives 25% of the deceased's pension.
  • The maximum orphan's pension is 50% of the deceased's pension.
  • Other eligible survivors: 25% of the deceased's pension is paid for each parent, grandchild, and grandparent.
    The maximum total pension is 100% of the deceased's pension.
  • Death benefit: A lump sum equal to 1 month's basic old-age pension is paid.

Administrative Organisation

Ministry of Labor, Social Affairs, and Equal Opportunities provides general supervision.

Social Insurance Institute (http://www.issh.gov.al) administers the program.



Unemployment in Albania

Regulatory Framework


  • First and current law: 1993 (social insurance).
  • Type of program: Social insurance system.

Coverage

  • Employed persons.
  • Exclusions: Self-employed persons.

Source of Funds

  • Insured person: None.
  • Self-employed person: Not applicable.
  • Employer: 6% of payroll.
  • Government: Covers any deficit.

Qualifying Conditions

Unemployment benefit: Must have at least 1 year's contributions, not be receiving any other benefits (except for partial disability), be registered at an unemployment office, and be willing to undergo training.

Unemployment Benefits

  • A flat-rate benefit is paid for up to 12 months or for a total of 365 calendar days if the insured has temporary periods of employment. The benefit must be at least equal to the minimum standard of living, as decided by the Council of Ministers (3,960 ALL a month in 2003).
  • Child's supplement: 5% of the unemployment benefit is paid for each dependent child younger than age 15, up to a maximum of 20% (the supplement is reduced by 50% if one parent is employed or receiving a pension).
  • For persons attending training courses but not receiving a grant or wages, benefits are payable for up to 18 months.
  • Benefit adjustment: Benefits are indexed annually according to price changes of selected commodities.

Administrative Organisation

Ministry of Labor, Social Affairs, and Equal Opportunities provides general supervision.
National Employment Service administers benefits.
Social Insurance Institute (http://www.issh.gov.al) collects contributions.


Family Allowances

Regulatory Framework

  • First and current law: 1993 (financial aid and social services).
  • Type of program: Social assistance system.

Coverage

Families residing in Albania.

Source of Funds

  • Insured person: None.
  • Self-employed person: None.
  • Employer: None.
  • Government: The total cost.

Qualifying Conditions

Family allowances (social assistance): Families residing in Albania with low or inadequate income or with a member who is disabled or blind.

Family Allowance Benefits

Family allowances (social assistance): Financial aid is provided to eligible families.

Administrative Organisation

Ministry of Labor, Social Affairs, and Equal Opportunities provides general supervision.
General Administration of Social Assistance and Services administers the program at district level.



Strategy of Social Insurance in Albania

SII was charged by the Ministry of Labour and Social Affairs to conduct the study: “Social insurance strategy up to 2020”.
This study was conducted in the framework of the three party social dialog. Thus a complex study group was set up with the participation of experts representing three of the social partners: state, employees and employers. The study was conducted taking into account a series of circumstances of which the most important are:

Firstly, the new social insurance legislation approved in 1993, in line with the radical changes in the political, economical and social sectors, and all the years of experience obtained by the implementation of this law, require indispensably a critical analysis on progress to date of the social insurance system and on his long-term prospects. The study should have answered several questions at the same time: How is going to be the scale of financial sustainability of the social insurance system in the long-term perspective of 20 years? Is it the current social insurance system suitable in its actual form? Which should be some of the main parametric reforms to be implemented in order to further strengthen the present social insurance scheme? And finally which are some of the main approaches to improve and strengthen social insurance financial system in the future?

Secondly, transition from the planned economy system to the market economy was followed by some negative consequences in the pension system. High rate of unemployment, as a result of a collapse in the public economy sector, huge growth of informal economy and early massive retirement because of close down and reconstruction of the public enterprises. These factors were accompanied by a dramatic worsening of the ratio contributor: beneficent, known in a large scale as the dependency ratio. This one descended from 3-4 contributors for 1 beneficiary before 1990 to today’s critical limit 0.8 beneficiaries for 1 contributor. This phenomenon, so anomalous for a pension system belonging to a country with a young population, raises questions especially concerning two cardinal issues related to the social insurance scheme:
  • On financial sustainability of the scheme, in perspective.
  • On sharp reduction of population percentage that is going to be covered by the social insurance scheme, in the future.
Thirdly, low participation of the contributors in the scheme, in categories such as self-employed people in rural areas, but even the employers in other private economy sectors. The continuation of the privatisation process in strategic economic sectors, in the future, will inevitably lead to the growth of the private sector role in economy. Consequently, the potential for evasion in the social insurance scheme will increase as well. The reduction of evasion in social insurance and the request for an harmonization between the rural and urban schemes, as a first step, with the final goal of bringing both of them together in one, requires a particular examination of the social insurance scheme regarding the self employed people in rural areas.

Forth, demographic prognosis shows that in Albania the trend of the population to get older will continue. In the future, the number of the old people will increase. In 2020 these category of people is predicted to constitute 15% of the entire population compared to 9.4% in 2000. According to the studies the tendency of the population to get old has a huge impact on the expenditures side of the social insurance balance. Compared to other countries, the retirement age in Albania is somewhat lower. Another problem this study sets about to solve is determining the right moment to increase the retirement age taking into account the period of time when the unemployment norm is equal to the natural unemployment levels. This brings no undesirable social consequences. Part of this problem is also the definition of the impact this change has in strengthening of social insurance scheme.

Fifth, establishing minimal and maximal limits to the pension amount, changing them time and again and combining this with the unequal index certified during the pension increase, influenced in weakening the relation that should normally exist between the level of contributions and the level of benefits gained through the pensions. This created the minimization of differences between pensions that is often called as pressing of pensions and the definition of the different pensions for those who contributed equally in the insurance scheme. To soften the above-mentioned anomaly and to suggest new approaches to avoid it is one of the reasons to undertake this study.

Sixth, given the situation of a critical ratio beneficiary:contributor while the new social insurance law was being drafted in 1993, establishing a relatively high taxation on employers and employees to the advantage of social insurance seemed to be an efficient measure. Current taxation in comparison with that in other countries is considered to be higher. According to the assessments made by experts, high taxation is one of the principal causes of the high evasion rate regarding the contributions collection.

Another question dealt with by this material is the one of taking into consideration the possibilities of determining the proper moment and amount to be reduced from the taxation to the advantage of social insurance. The above mentioned issues and other less important ones led to the conduction of a comprehensive study including a time period of about 20 years (2000-2020) focusing on the social insurance system and the approaches to its further improvement.

The study was conceived if four chapters, besides the preface:
Chapter one, in general terms shows the current situation of the compulsory pensions system that is better known as a 'Pay As You Go’ (PAYGO) system. Object of this chapter is to clarify the legal basis of the current social insurance system, its ways of financing, conditions and method of contributions calculation regarding the three main types of pensions: retirement, disability and survivors, the rules of pension index, up to date progress and the most important problems concerning the current social insurance system, etc.
Chapter two is about the population prognosis. Changes in demographic structure, especially those concerning the age pyramid, take a primary importance due to their influence in the progress of social insurance scheme and for the short and long term prognosis as well. In such a situation the social insurance scheme prognosis up to 2020 requires indispensably the prognosis of the whole population. The prognosis of two population groups, such as second and third age, is important to establish the correct ratio between the potential number of contributors and the number of social insurance scheme beneficiaries in relation to the retirement pensions.
Demographic prognosis has been examined in three versions: minimal, average and maximal.
In doing such a prognosis a series of difficulties was encountered:
First, deficiencies in identification of movements, especially those concerning the population flow. It's known that the transition period was accompanied by tremendous imbalances regarding demographic developments. First due to chaotic changes occurred in natural movement and mostly in space movement, in emigration and internal mechanical movement and on the other hand a decisive factor is the long period of time lapsed since the last census, dated 1989.

Emigration flow, even not on a large scale, is considered to be present even in the future for so long as marked differences between the quality of life and the level of economic development in Albania and that of other Central European countries continue to be present. The influences of mechanical movements upon the labor market and demography will increase given that emigration is not totally permanent. A part of it appears to be temporary.
The most powerful component of mechanical changes of population is the internal migration of rural populations towards urban areas especially to Tirana and Tirana-Durres region.
Second, low scale of reliability of demographic data issued by INSTAT.
Third, necessity of population prognosis not only in total but also in divided areas: rural and urban.
This year's census will avoid a great deal of the above-mentioned difficulties. It will define some of the prognosis of the age structure of the population concerning the period of time included in this study. In case when between the demographic data put on the basis of this study and analogous data issued by the census will exist differences, the study could be updated with the data issued by the census.
Chapter three constitutes the essential part of the study. Object of this chapter is the prognosis of the employed persons in national economy, of the contributors and beneficent of social insurance scheme. 
The prognosis of the incomes and expenditures progress and the outcome of financial balance of the SII has also been made.
The above prognosis was conducted not only in total for the whole country, but also for rural and urban areas separately. In this study there are arguments supporting the necessity to go through a gradual minimization and as a second step to completely avoid the gaps existing between the two schemes. The final goal is to unify both of them according to the model of the urban population social insurance scheme.
The study on contributors and beneficiaries in the scheme was not limited only to the current version of retirement age, but it was extended to two other presumptions which make a forecast for the retirement age increase. These versions bring about an increase in the number of contributors and on the other hand reduce the number of beneficiaries in the social insurance scheme, increasing at the same time the number of unemployed persons. In such a context it's been suggested the appropriate period of time with minimal social effects to implement the best version in order to increase the retirement age. Analyzing and especially making the prognosis of the contributor’s number it’s not only the most essential part of the whole study, but also it is considered the part with the highest rate of difficulty.
The main difficulties are:
First, The changes occurred in the political and economic system and the old methods of prognosis based on the extrapolation of statistical series which could not be used anymore as regards the calculations in perspective. 
The only approach is the evaluation of different variables, which define the dynamic of the economic employment growth according to experts and analogous methods mixture with the statistical methods recognized by the economic logic.
An exception from the rule was made only for the prognosis of the beneficent number from the social insurance scheme. In this case, the methods of extrapolation of the statistical series of the past period for the prognosis of the future were used at large.

Second, Full absence of perspective development strategies of economy and of its main branches as well. Even a strategy such as the green strategy of agriculture development, gives only a description perspective without any calculations of the most important indicators of their economic development. Conducting studies to compile a three-year strategy (2001-2003) for the economic growth and poverty reduction could be followed by other studies of the same nature based on development priorities for long-term periods of time.
It must be stressed that the role played by the strategies as a precondition for the harmonization of economic development and employment binomial in line with the demographic processes. The conclusion of the census is going to fill up all the deficiencies of statistical data on demography. A task of a primary importance for the future is the compilation of economic development strategies, which are going to facilitate the prognosis of employment rate and its progress. This issue has a direct impact on the contributors and beneficiaries in the social insurance scheme.
Chapter four is dedicated to some conclusions and recommendations about the further improvement of the current social insurance scheme.
In this chapter, the objects to be analysed are three sets of problems:
First, analysis and judgment on the basis of synthetic indicators about the progress and the financial sustainability rate of the current social insurance scheme for a long-term period up to 2020.
Second, bringing out the most important parametric reforms for the social insurance scheme. The most important reforms the current social insurance scheme needs to undertake are to be considered:

  1. exploring the possibility of a growth regarding the retirement age.
  2. exploring the possibility of a reduction of taxation paid by employees and employers to the Social Insurance.
  3. a gradual approach between the rural and urban pension scheme with the final goal to unify them both.
  4. to complete the current pension scheme with the second and third pillars.
  5. the possibility of increasing the maximal limit of wages and pensions in order to calculate the contributions and benefits;

Third, judgments from a critical point of view and suggestions as well as with regards to the abnormalities of the current pensions scheme and the improvement of the present social insurance legislation.
 In this group are included issues such as:

  • the continuity and the conclusion of the project to approach and equalize the pensions for the periods before and after 1993;
  • absolute necessity of a constant Consumer Price Index with CPI of the main commodities and services;
  • improvement of the inflation index calculation method used for the pension and wage indexation;
  • the possibilities to increase the pensions levels;
  • reduction of evasion in contribution collection for the compulsory social insurance; minimize the velocity of the pension replacement rate reduction, accessible for the persons who benefit retirement pension;
  • the growth of the contributions paid by the state to finance the social insurance budget through cashing provided, by the privatizing of the strategic sectors of economy which should be considered not like a state subsidy, but as a obligation society has toward the old people;
  • suspension of the retirement practices before the specific age, coming as a pressure or due to ultimate requests made by trade unions etc.

To conduct this study was taken into comprehensive literature was taken into consideration and a considerable number of studies with comparative data were consulted about the social insurance system of the several countries, especially the studies and analysis conducted by SII. As this is to be considered the first study with a perspective character there might be parts of it to be reviewed or improved. The methodological foundations were laid in this study, which make possible his update in every moment, in line with the new conditions.
In all the cases when there are no any references on statistical data in the material, they are provided by SII statistics or by the study group prognosis. In all the other cases you will find attached the references. As for the statistical data, in Albania there is a lack of an official national accounting system. Up to now the official data about macro economic indicators, especially those concerning GDP are provided through various evaluations. Not all the tables with the data prognosis are shown in this material. Only the most important part of the data is available. As for the rest of the tables, the less important part, you can find it in the annex of the study.



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