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Old-Age Insurance (Industry, etc.) Convention, 1933 (No. 35) - Chile (RATIFICATION: 1935)

1. The Committee has noted the conclusions and recommendations made by the committee set up to examine the representation alleging non-observance by Chile of, inter alia, Convention No. 35, made under article 24 of the ILO Constitution by the College of Teachers of Chile, AG (document GB.273/16/4, 274th Session, March 1999).

The allegations presented in the representation by the complainant organization relate to the failure to pay the social security contributions of teachers and the consequent responsibility on the public authorities. The Government did not refute the content of its international obligations and supplied detailed information on the institutional framework and the verification and supervisory measures exercised by the authority of the State. The Government also supplied information on some corrective measures designed to settle the arrears in payment of contributions. In its conclusions, the committee set up to examine the representation considered that, although the steps taken by the Government have improved the situation to some extent, further measures are necessary in order to ensure that the relevant Conventions are fully applied in practice. In particular, it recommended that the competent services carry out their tasks and strengthen their supervisory activities and that appropriate penalties be strictly applied so as to prevent the situation of arrears in contributions from recurring in future, and urged the Government to continue to ensure that the outstanding social security arrears, the scale of which should not be underestimated, are settled in full. The said committee also urged the Government to take all the necessary measures to ensure that the social security rights of teachers are restored; to continue and strengthen the supervision of the effective payment of social security contributions by the municipalities; and to ensure the effective application of deterrent penalties in the event of non-payment of social security contributions. The Committee also requested the Government to supply, inter alia, detailed information on the number of checks carried out, in particular by the Ministry of Education, to verify payment of social security contributions by the municipalities; the number and nature of violations registered and the number and nature of the penalties imposed; the number of municipalities remaining in arrears with regard to their payment of social security contributions, and the amount of such arrears; the number of workers affected and the amount of arrears settled.

The Committee of Experts notes the information supplied by the Government in September 1999 in response to the said conclusions and recommendations as well as the information which the College of Teachers communicated in October 1999 in connection with the representation.

In its report on the measures adopted to ensure effective payment of social security contributions for teachers, the Government refers to measures such as verification and supervision of payment of social security contributions along with government action and legislative measures to settle the amount owed by certain municipalities.

In regard to the verification and supervision of payment of social security contributions in respect of teachers, the Government indicates that it has adopted special inspection measures to be carried out by the supervisory bodies with competence in the matter which are: (a) the Ministry of Education, which has been authorized to retain from subsidies the amount of the social security contributions in respect of teachers which have not been paid into the social security institutions; (b) the Directorate of Labour, whose inspectors are empowered to impose the fines which sanction failure to comply with the obligation entailed in declaring and paying the remuneration and income of workers. The social security contributions duly declared in the AFPs and not paid, as is the case for most of the social security arrears incurred by the municipal corporations, can be covered by judicial methods, which lie within the exclusive competence of each AFP. With respect specifically to the municipal corporations, the Directorate of Labour carries out the following types of action: (i) it publishes in the bulletin of breaches of labour and social security legislation the list, supplied by the social security institution itself, of the municipal corporations which are in arrears of payment of social security contributions; in July 1999, these arrears amounted to 2,098,712,464 pesos; (ii) it carries out inspection measures at the request of concerned individuals or institutions. Among the administrative fines imposed are fines on municipalities in respect of social security matters which amount to a total of 966,918 pesos, imposed on 23 municipalities in the country; (iii) in two consecutive years, it has conducted special verification programmes in municipal schools. The information on the programme for 1998 allowed to review the social security situation in 75 schools with a total of 2,924 workers to be revised. No violations were recorded. (c) Administradoras de Fondos de Pensiones (companies administering pension funds) which, according to section 19 of Legislative Decree No. 3500 of 1980, are obliged to pursue legal action designed to recover the social security contributions in arrears in respect of their members. The superintendency of companies administering pension funds has specially instructed the AFPs in regard to recovery of unpaid social security contributions by means of three circulars (Nos. 336, 347 and 551) which relate to judicial recovery, the information procedure for employers who have not paid contributions to the AFPs and the records to supervise and maintain the information up to date respectively.

In regard to the total amount of social security arrears owed by the municipalities, the Government indicates that there has been a considerable decrease. At 20 April 1998, the total debt amounted to 7,534,544,602 pesos and involved 38 municipalities. In July 1999, 29 municipalities still had social security arrears in an amount of 5,791.8 million pesos, distributed among the following institutions: companies administering pension funds (AFPs), 3,261.6 million pesos; health provident institutions (Isapres), 394.3 million pesos; Welfare Administration Institute (INP), 1,951 million pesos; mutual societies or workers' welfare institutions, 148.9 million pesos. Under Act No. 19609 which allows money from the common municipal fund to be advanced to municipalities which have accrued social security arrears at 31 July 1998, an agreement to pay was to be signed with the municipalities of Quilpue, Villa Alemana, Lampa, Quinta Normal, Lota, San Clemente, Curacautín and Chimbarongo. The sum to be paid amounts to 4,300 million pesos updated at September 1999: 2,500 million pesos to the AFPs with resources provided under said Act and 1,800 million pesos in judicial transactions with the INP, set out in an agreement concluded with that institution. With this, the global figure at July 1999 of 5,791.9 million pesos would be reduced to 3,252 million pesos. Nevertheless, the search for alternatives permitting this situation to be settled definitively will continue.

With respect to the legislative measures adopted to solve the matter of social security contributions in arrears, the Government approved Act No. 19609 of 2 June 1999 which allowed the amount of 3,500 million pesos to be advanced to the municipalities which had social security arrears in respect of teachers. To this end, a period of 120 days was granted for the municipalities to conclude an agreement for advance of the amount required with the Ministry of Education or the Ministry of Health as appropriate. With reference to the case of subsidized educational establishments, the Act empowers the Ministry of Education to retain from the resources or subsidies due to the establishments an amount equivalent to the social security contributions of teaching staff that they should have paid and which are in arrears. Another legislative measure designed to safeguard the workers' social security rights is the approval and promulgation of a Bill under which the labour relations of a worker are maintained in force from the time of his dismissal for as long as the social security contributions in arrears have not been paid to the appropriate institutions. The Labour Code is thus amended to specify that if the social security contributions have not been paid at the time of dismissal, the dismissal will not result in putting an end to the labour contract and the contractual obligations of the parties shall remain in place.

The College of Teachers of Chile, AG indicates for its part that the teachers' trade union, contrary to the statement in paragraph 21 of the report on the representation, had never requested the Ministry of Education to lift the sanction involving suspension of payment of the educational subsidy to those bodies which did not pay the remuneration and contributions of its staff on time. With reference to paragraph 23 of the report, it indicates that according to information submitted in November and December 1998 by the sub-secretary of Regional Development and Administration to the Chamber of Deputies of Chile, more than 104 municipalities out of a total of 350 (namely 29.7 per cent) had social security arrears in the order of $23,442,000 and that this had increased by 7.39 per cent as compared with the previous report of the Government. The College of Teachers of Chile, AG declares its concern at the inadequacy of resources which must be provided under Act No. 19609 of 2 June 1999 to settling the problem of social security arrears; resources which amount to 3,500 million pesos. This mechanism is the only one envisaged to settle total accumulated social security arrears as at June 1999. Furthermore, section 7 of the Act provides special criminal sanctions or retention of the educational subsidy (in accordance with the Act on subsidies) for future arrears which might occur from July 1999 in this respect. The College of Teachers is of the view that the Act suppresses the possibility of penalizing the social security arrears accumulated during the 1980s and to June 1999 through the reduction of subsidies, or qualifying it as an offence of misappropriation of public funds in accordance with section 233 of the Chilean Penal Code. The teachers who depend on the municipal sector are subjected to the will of the municipalities to conclude agreements to settle this long-standing debt or the exercise of the inspection facilities of the social security superintendency and the AFPs to press the social security institutions to initiate and follow up judgements to pay prescribed by the Act, which has not occurred up to the present.

The Committee notes the special supervisory measures being carried out by the supervisory bodies such as the Ministry of Education and the Directorate of Labour. It notes in particular with interest the actions such as publication in the bulletin of offenders against labour and social security legislation of the list of corporations in arrears, the administrative fines imposed on municipalities in regard to social security and the special supervisory programmes for municipally run schools. The Committee requests the Government to provide information on the penalties which could be applied to municipalities which have not paid the social security contributions and on the results of any cases brought against such municipalities. It also takes note of the information relating to the amount of the social security arrears of the municipalities as well as on the number of municipalities that have social security arrears. It observes discrepancies between this information and the information provided by the College of Teachers of Chile, AG. It requests the Government to supply its comments on the discrepancy observed and to provide precise statistical information on the number of workers affected by the unpaid remuneration and contributions. The Committee notes the legislative measures adopted to settle the arrears in social security contributions. It notes with interest the amount of 3,500 million pesos which the Government has approved pursuant to Act No. 19609 of 2 June 1999 and the Bill under which the labour relationship of a worker is maintained at the time of his dismissal for as long as the social security contributions in arrears have not been paid to the relevant institutions. It requests the Government to provide information on the application of Act No. 19609, including on the number of municipalities which wish to take advantage of funds advanced in order to settle teachers' individual accounts.

2. The Committee notes the comments received on 20 October 1998 from the Unitary Occupational Front of Pensioners and Survivors of Chile (Region V) alleging that the adjustment of the pensions provided under the former system of redistribution of pensions is not sufficient in regard to the international standards ratified by Chile. The Committee also notes the Government's reply to these comments.

In its communication, the Occupational Front states that in the past 25 years the pensions dependent on the redistribution scheme have undergone serious deterioration and the Front refers to the facts that have produced this. According to the Front, pensions have deteriorated during two periods: the first stretched from 29 September 1973 to 10 May 1990 and the second from 11 May 1990 to 31 August 1998. In the first of them, it refers to a series of suspensions of the adjustment of pensions applied under legislative decrees. In the second, it refers to adjustments carried out at various periods, and to sectors excluded from such adjustments. Reference is also made to increments made to minimum and basic pensions.

The Government, for its part, supplies information to the effect that it is not possible to affirm that the system of updating or adjusting pensions provided under the former system of pensions is not sufficient in relation to the international standards ratified by Chile. On this matter, it indicates that the standards on the reassessment of pensions under Act No. 15386 of 1963 ceased to be applicable when they were replaced by an automatic adjustment system established in section 14 of Legislative Decree No. 2448 and section 2 of Legislative Decree No. 2547, both of 1979. In addition, pursuant to Legislative Decree No. 2444 of the same year, all the pensions that began before 1 September 1975 were specially readjusted so that from September 1978, they thus recovered their initial purchasing power. Since then, adjustments made to pensions have been equivalent to 100 per cent of the variation shown on the Consumer Price Index (CPI) during the corresponding period, with the sole exception of May 1985 when the adjustment granted was lower by 10.6 per cent than the CPI variation for the period from November 1984 to April 1985, and also in March 1987 and April 1988, when the adjustments applied to pensions at the highest rate were also less than the CPI variation. Pursuant to Act No. 18987, in July 1990, in conjunction with the automatic adjustment applied in accordance with section 14 of Legislative Decree No. 2448 of 1979, minimum pensions were adjusted by 10.6 additional points. Then, as provided in Act No. 19073, an adjustment of 10.6 per cent was applied to all pensions mentioned in section 3, as from 1 July 1999, stipulating different dates according to the amount of the pensions. In this way, since December 1992, pensions of the former system have recovered their initial purchasing power by maintaining in the present adjustment system compensation for the effects on them produced by inflation; it should also be noted that special adjustments have been granted to the lowest pensions designed to increase their amounts in real terms.

The Committee notes this information. In order to appreciate whether, in conformity with Article 19 of the Convention, adjustments to pensions are at least sufficient to cover the essential needs of the pensioner, the Committee requests the Government to supply statistical information in respect of the same period of time on the evolution of the cost of living and the evolution of benefits, including the amount of minimum pensions.

3. In regard to matters of principle, as indicated in its previous observation, in conformity with usual practice, the Committee decided to postpone its examination of the application of Conventions Nos. 35, 36, 37 and 38 pending the decisions to be adopted by the Governing Body in respect of the representation made in November 1998, under article 24 of the ILO Constitution, by various national unions of workers of pension fund administration companies. The Committee will therefore examine the information supplied by the Government in its report relating to the period 1998-99 in the light of the decisions adopted in due course by the Governing Body in the framework of said representation.