Hiring Employees in Cyprus at a Glance: Payroll, Taxes, and Employment Laws Explained

Hiring Employees in Cyprus at a Glance

Cyprus has become an attractive destination for international employers due to its strategic location, skilled workforce, and business-friendly environment. However, hiring employees in Cyprus requires a good understanding of local employment laws, payroll regulations, social security contributions, and statutory benefits. This guide provides a clear overview of what employers need to know about hiring in Cyprus, including taxes, employee rights, and Employer of Record (EOR) solutions.

Key Facts About Employment in Cyprus

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Taxes in Cyprus

Employer Contributions

Employment Tax in Cyprus: 12.5% – 20.5%
Social Security Contributions: Flat rates applied to gross salary

Employee Contributions

Total Employee Social Security Contribution: 11.45% of salary

Income Tax Brackets

Employers and employees must contribute to both social security and health insurance, making compliance an essential part of payroll in Cyprus.

Employer of Record (EOR) in Cyprus

An Employer of Record in Cyprus is the legal employer of workers on behalf of international companies. The EOR manages compliance obligations such as payroll, taxes, benefits, and contracts while the client company manages day-to-day operations.

EOR Responsibilities:

• Compliance with Cypriot employment law
• Local payroll processing
• Filing taxes and social contributions
• Issuing payslips
• Salary distribution

How EOR Works in Cyprus

• Company: Manages daily tasks and employee performance
• Employer of Record Provider: Handles payroll, taxes, and benefits compliance
• Employee: Fulfils obligations as a worker under a compliant contract

Statutory Benefits in Cyprus

Mandatory Benefits:

• Health insurance via the National Health Insurance System (NHIS)
• Pension contributions through the social insurance system
• Unemployment and occupational accident insurance

Common Non-Mandatory Benefits:

• Private health insurance
• Meal vouchers or allowances
• Mobile phone and internet allowance
• Supplementary pensions
• Company car or transportation allowance
• Childcare assistance

Employee Rights and Protections

Employees in Cyprus are entitled to several protections, including:

• Right to equal pay
• Protection from discrimination and harassment
• Limits on working hours and protection against overwork
• Right to safe working conditions
• Protection from unfair dismissal
• Redundancy pay and union membership

Leave Entitlements in Cyprus

Employment Conditions in Cyprus

Employers must comply with standard working hours (38–48 per week), pay at least the minimum wage, and contribute to the Social Insurance Fund for pensions, healthcare, and sick leave benefits.

Payment Frequency: Salaries are typically paid monthly, though weekly or bi-weekly schedules may apply in some sectors.

Termination of Employment: Governed by the Termination of Employment Law (Law 24 of 1967). Employers must provide valid reasons for dismissal (capacity, performance, misconduct, redundancy). Notice periods and severance pay depend on the length of service. Employees with over 6 months of service gain additional protections against unfair dismissal.

Frequently Asked Questions About Hiring in Cyprus

1. What is the minimum wage in Cyprus?
The statutory minimum wage in Cyprus is €940 per month, though certain sectors may have specific wage agreements.

2. How many working hours are allowed per week in Cyprus?
The standard working week is 40 hours, with daily working time not exceeding 8 hours.

3. How many public holidays do employees in Cyprus receive?
Employees are entitled to 14 official public holidays each year.

4. What is the income tax rate in Cyprus?
Income tax is progressive, ranging from 0% to 35%, depending on income brackets.

5. Do employers and employees contribute to social security in Cyprus?
Yes. Employers contribute to social insurance (8.8%), redundancy, training, and cohesion funds, while employees contribute 11.45% of their gross salary.

6. Is remote work allowed in Cyprus?
Yes. Remote work is permitted, but subject to specific regulations regarding contracts, insurance, and tax compliance.

7. What is the tax year in Cyprus?
The tax year runs from 1st January to 31st December.

8. How is payroll typically processed in Cyprus?
Wages are usually paid monthly, but some sectors allow weekly or bi-weekly payments.

9. What are the penalties for employee misclassification in Cyprus?
Employers risk retroactive payments of unpaid taxes and benefits, penalties, and potential court proceedings for misclassifying employees.

10. What benefits are mandatory for employees in Cyprus?
Statutory benefits include health insurance, pension contributions, unemployment insurance, and occupational accident insurance.

11. What types of non-mandatory benefits do employers often provide?
Employers may offer private healthcare, meal allowances, transportation support, childcare assistance, and career development allowances.

12. What is the maternity leave entitlement in Cyprus?
Maternity leave is 18 weeks, starting up to 9 weeks before the expected due date.

13. Do employees have parental leave rights in Cyprus?
Yes. Employees are entitled to unpaid parental leave for each child under the age of eight.

14. How is employment termination regulated in Cyprus?
Termination is governed by the Termination of Employment Law (Law 24 of 1967), which sets rules for notice periods, severance, and unfair dismissal protections.

15. What is an Employer of Record (EOR) in Cyprus?
An EOR acts as the legal employer on behalf of foreign companies, managing payroll, taxes, compliance, and contracts while the company oversees daily operations.

Final Thoughts

Hiring in Cyprus offers access to a highly skilled workforce within the European Union. Employers, however, must ensure compliance with local employment laws, payroll taxes, and statutory benefits. Setting up a company locally can be time-consuming and costly, while engaging an Employer of Record in Cyprus provides a faster, compliant solution for international businesses.

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