Starting a Business in Cyprus

Employment Law In Cyprus

Cyprus is a diverse country in the Anatolian peninsula, with an average population of 1.23 million. By far, the government has clocked an excellent literacy rate of 99.86%, with a diverse culture comprising Turkish and Greek lineages, allowing companies to explore a vast talent pool. 

Cyprus is a premier location for international employers for various reasons, such as its advantageous geographic positioning, high English proficiency, and stable economy. The Cypriot government has further leveraged the opportunity by introducing several business-friendly laws, allowing Cyprus to acquire the 54th rank out of 190 global competitors.  

As Cyprus brings several advantages to the table for an international company, there’s no doubt that Cypriots are in high demand. However, employers looking to run a payroll must understand compliance with the labor code while avoiding fines for non-compliance. This employment law in Cyprus guide aims to list and explain all the crucial regulations to allow employers to traverse the Cypriot territory easily. 

Who is Covered by the Employment Act?

The labor code in Cyprus covers every working citizen within the country. The provisions under the Cypriot labor law aim to promote equality for its citizens in a professional environment with an excellent work-life balance. 

Non-residents who have acquired approval from the Cyprus department of labor and the Cyprus work visa are also covered by the Cypriot labor law. A non-resident can be an international student studying in Cyprus, a non-EU resident, or a foreign national.  

Employment Contract

The Cypriot labor law primarily enforces in-definite and fixed-term contracts for employment. These contracts are often called the ‘general contract of employment’ and vary per industry. 

  • Indefinite contracts: This is Cyprus’s most commonly used employment contract. Under such agreements, employment is provided for an indefinite period. However, based on specific circumstances, an employer or an employee can terminate the job through a justifiable reason. 
  • Fixed-term contract: These contracts are rarely used in Cyprus. Under such agreements, there is a predetermined date of termination. Recently, fixed-term contracts have gained more popularity due to foreign employers’ incorporation of new businesses and subsidiaries. 

Key Provisions of the Act

The labor code in Cyprus moderates every facet of employment with several laws that enforce systematic and non-discriminatory practices. Employers looking to employ staff in Cyprus must be aware of the necessary provisions these laws enforce. 

Working hours

  • The Cypriot labor law generally enforces a 48-hour work week, which includes overtime.  
  • Certain exceptions are made for specific industries. For example, the healthcare and hospitality industries have different limitations. 
  • Every Cryption employee must be allowed to have 11 hours of undisturbed rest for every 24 hours of work. 
  • Furthermore, the labor code of Cyprus also entitles employees to a 48-hour rest period after finishing 14 days of work. 
  • Night shift workers are prohibited from working more than 8 hours every night under any circumstances. 

Holiday entitlements

The holiday entitlements for every employee covered by the labor code in Cyprus are listed below. 

  • Every working citizen of Cyprus can have a four-week leave yearly.
  • Employees working on a five-day shift are entitled to a 20-day leave. While on the other hand, employees who work six-day shifts must be given a 24-day vacation. 
  • Employee holiday entitlements are not replaceable by cash, even when the two parties agree to the same. 
  • Companies in the private sector can allot the mentioned leaves on public holidays. However, providing leave on a public holiday is not mandatory. 
  • The government-approved holiday list has been provided below.
    1. January 1st, New year 
    2. January 6th, Epiphany
    3. Any movable day in March, Green Monday
    4. A specific day either in March or April, Good Friday
    5. Easter Saturday, Sunday, and Monday. Anyday in March or April, usually announced by the government each year
    6. April 1st is National Day
    7. May 1st is Labor Day
    8. An announced date in June for the Holy Spirit Day festival 
    9. August 15th, Assumption Day
    10. October 1st, Independence Day 
    11. October 28th, Greek National Day 
    12. December 25th, Christmas Day
    13. December 26th, Boxing Day

Leave schemes

Every employee is entitled to several leave schemes per Cyprus’s labor regulations. A list of primary leave schemes with related laws has been explained below.

Maternity leave

  • A pregnant employee is entitled to a maternity leave of 18 weeks. 
  • An employer must issue at least 11 weeks of maternity leave. The leave shall be given two weeks before the delivery week. Furthermore, pregnant employees are also entitled to eight weeks post-delivery.  
  • An employee must certify her pregnancy by providing a medical certificate to her employer. The expected delivery date must be mentioned in the given document.
  • During multiple births, the maternity leave can be extended by four weeks. 

 

Paternity leave

  • As per Protection of Paternity Law 117(1)2017, an employee is entitled to a two-week leave in the event of their wife’s pregnancy. The rest is granted during the birth week. 
  • The rules also apply for birth through surrogacy. 
  • Employees must issue a notice to their respective employers. Furthermore, it should be done two weeks before the commencement date of the requested paternity leave. 
  • Employees should receive 72% of their hourly salary during paternity leave. 

 

Adoption leave

  • In adoption, maternity leave is only applicable for a child below 12 years of age. 
  • The maternity leave for adoption is 16 weeks. The employee must notify the event to the Department of Social Welfare services. 
  • It is also mandatory for an employee to notify their employer about the event six weeks before the planned maternity leave. 

 

Surrogacy leave

  • The maternity leave from Cyprus also covers surrogacy, but it should be accompanied by relevant information. 
  • Female employees are granted 18 weeks of maternity leave for delivery through a surrogate mother. 
  • According to Law 69(I) of the Medically Assisted Human Reproduction Law 2015, a female employee must provide a court order to their employer. It is applicable if they are expecting a baby from a surrogate. 
  • During multiple births, the mentioned leave can be extended by four weeks. 

 

Unpaid leave

  • Employees can have a maximum of seven unpaid leave annually. 
  • The event is usually termed “force majeure.” It denotes an urgent family situation that might result in an employee’s absence. 
  • It is commonly called the carer’s rights in legislative terms. 

 

Paid leave

  • The labor regulation in Cyprus makes it mandatory for employers to grant at least four weeks of paid leave. 
  • These leaves are non-continuous and can be taken throughout the year. 
  • Replacing the mentioned leave with monetary remuneration is not allowed. 

 

Sick leave

  • Employees can take sick leave of up to 156 days. 
  • An employer is not obliged to pay for the initial three days of sick leave. 
  • Employers are not required to pay for any sick leave. The Social Insurance Fund covers remuneration for sick leave. However, if the payment for sick leave is outlined in the contract, it is payable by the employer. 
  • Employers are prohibited from requesting paid sick leave from the state. 
  • Employees are requested to file for a remuneration Social Insurance Fund for sick leave that surpasses the initial three days. 
  • The payable remuneration is a percent of the negotiated salary. 

Minimum wage

The labor code in Cyprus enforces minimum wage rules for specific professions. The minimum wage, as of 2023, in Cyprus is EUR 885 per month. The labor code also underlines an increment to a minimum of EUR 940 after six months of service. The job roles covered by the minimum wage laws are listed below. 

  • Private hospital employees or any other staff associated with healthcare 
  • Nursing assistants
  • Baby and childcare employees
  • Clerical staff
  • A shop assistant
  • Security guards
  • A school assistant

Pension fund

There are three types of pension schemes in Cyprus, which encompass mandatory and non-mandatory plans. 

State-run pension scheme

  • The Social Insurance Law passed in 2014 under the labor regulations in Cyprus amends a state-run pension scheme for its citizens. 
  • The overall employee for the mentioned scheme is 20.2%. 
  • Employers must pay 7.8% per month, and the employees pay another 7.8%. The state pays the remaining 4.6%. 
  • In the case of self-employment, individuals should pay 14.6%, while the state should pay 4.6%. The total payable amount for self-employed individuals is 19.2%. 
  • The minimum salary must be higher than EUR400 per month.
  • No taxes are levied.

 

Supplementary pensions

  • Employers can provide additional pension schemes for their employees. 
  • It is a common practice in Cyprus. However, it is not a mandatory practice. 

 

Private pensions

  • Employees or working citizens in Cyprus can sign up for personal pension schemes. 
  • Registered private organizations usually provide these schemes. 
  • Employers and the state take no part in these pension schemes. 

Payroll tax and employer registration

The employer contribution for payroll taxes amounts to 22.9%, briefly divided into several components listed below. 

Tax CapSchema Name
8.3%Social insurance tax
2%Social cohesion tax
1.2%Redundancy
0.5%Training and development
8%Holiday fund
2.9%National health system (NHS)

Payslip

It is advisable to provide a payslip or a relevant payment invoice before issuing the salary. Every payslip should contain the mentioned components at the least. 

  • Employee name and designation
  • Salary date
  • Work hours, overtime included
  • Gross salary
  • Overtime pay, if applicable
  • Deductions per social insurance and other applicable taxes
  • Benefits, if any

Employers must always keep a soft copy of every issued payslip and ensure that the data is accurate, per the contract. 

Probation period

An employer or an employee is free to terminate an employment contract during the probation period. The Termination of Employment Law (Law no. 24/1967) 1967, enforced under the labor regulations in Cyprus, enforces a minimum notice period. However, termination during the probationary period can be initiated and carried out by the employee or the employer without prior notice. 

A probation period in Cyprus can last up to 104 weeks, but this should be specified in the contract.  

Dismissal Rules

Termination of employment is moderated by The Termination of Employment Law, 1964, which enforces rules like minimum notice period and fair termination notices. 

Notice period

  • An employer must issue a written notice and offer a notice period to their employees. 
  • Employees who terminate their contract must also provide information to their employers and serve a minimum tenure.
  • The length of continuous employment determines the minimum notice period. A breakdown has been provided below. 
Length of employment Applicable notice period (minimum)
26 to 51 weeksOne week
52 to 103 weeksTwo weeks
104 to 155 weeksFour weeks
156 to 207 weeksFive weeks
208 to 259 weeksSix weeks
260 to 311 weeksSeven weeks
More than 312 weeksEight weeks

Dismissal

  • The employer or the employee must provide notice for terminating the contract. 
  • An acknowledgment and a notice period follow contract termination. 
  • The cause for termination should be non-discriminatory and justifiable. 
  • Employers must provide severance pay to their employees after termination. 
  • Per the labor regulations in Cyprus, the severance pay is calculated at 1.2% of an employee’s gross salary. 
  • Severance pay is calculated according to the length of continuous employment. For every 52 weeks of work, additional two-week severance pay is added. 

Severance pay

Some of the most common laws related to severance pay per the labor regulations in Cyprus are as follows: 

  • Redundancy pay is compensated through the redundancy fund. An employer must finance the entire redundancy fund. 
  • The severance or redundancy pay is calculated at 1.2% of an employee’s gross earnings. 
  • Employees are granted a redundancy pay of two weeks for every continuous employment of 52 weeks.  

An exact length of severance pay calculation per the employment length has been provided in the table below. 

Employment TenureSeverance pay length
Up to 4 years of continuous employment 2 weeks
5 to 10 years of continuous employment2.5 weeks
11 to 15 years of continuous employment3 weeks
16 to 20 years of continuous employment3.5 weeks
21 to 25 years of continuous employmentOne-month

Data protection and employee privacy

The General Data Protection Law Regulation (Regulation(EU 679/2016) and the Personal Data Protection Law (Law 125(I)/2018) safeguard the privacy of an employee. Under these laws, employers are prohibited from divulging the personal information of their employees to an outside source. 

When an employer partners with a third-party firm, specific expectations are set. In such cases, however, the transfer of sensitive data to a partner firm must be justified with an acceptable reason. 

EU directive on transparent and predictable working conditions

Cyprus falls under the European Union (EU) territory as a de-facto island with around five representatives in the mentioned body. As a member EU country, employers are obliged to follow all the legislations enforced by the union, besides the labor regulations in Cyprus. Inadvertently, the Cypriot government must ensure that employees follow the EU directive on transparent and predictable working conditions. Some of the primary requirements of the mentioned EU regulations have been listed below. 

  • Employers must enforce preventive measures to reduce workplace bullying and abuse. 
  • Every employer must provide free training to their recruits. 
  • Provide reasonable deadlines for every task. 
  • Employees have the right to work with another employer. 
  • The utmost transparency of job deliverables should be provided in a written format. 

Penalties 

Non-compliance with the labor regulations in Cyprus might lead to several penalties, including fines, employer termination, or imprisonment. Even though fines are rarely issued, employers must be aware of specific violations and their corresponding repercussions. 

  • Non-compliance to dismissal rules: Employers who fail to comply with the dismissal rules under the labor code in Cyprus can be fined up to EUR1,708. During an instance of collective dismissal, the amount can go as high as EUR 3,417.  
  • Missing the deadline for filing a tax return is punishable with a fine of up to EUR 120,000. 
  • Undeclared employment of a Cypriot citizen is punishable with a fine of EUR 500 for a single employee. 

Compliance Strategies for Employers

The Cypriot labor law has introduced multiple regulations to protect its citizens while ensuring maximum ease of business in the country. An employer can use a few compliance strategies to abide by the rules and regulations. Some practical ways of complying with the local laws are listed and explained below. 

Hiring an in-house team

  • The employing company can hire an HR team to abide by the labor regulations in Cyprus. 
  • The said team reduces discriminatory practices within a workplace and introduces specific rules for the employees in a company. The HR team moderates work hours, overtime, benefits, and holidays. It allows the employing company to abide by labor regulations in Cyprus. 

Outsourcing from a dedicated team

  • Employers can hire a dedicated HR team in Cyprus to work alongside the company. 
  • These HR teams are well-versed in the local Cypriot laws. Therefore, they can be used to align a company’s policies to the labor act rules in Cyprus.

Using an Employer of Record (EOR) solution

  • Employers of record (EOR) solutions have gained massive traction in recent years for their ability to help employers stay compliant for a fraction of the cost and effort. 
  • Every employing company is provided with compliant contracts and documents for hiring and managing Cypriot employees. 
  • These solutions provide pre-placed provisions, allowing employers to abide by rules like minimum work hours, minimum pay, holidays, Cypriot-paid maternity leave, and more. 

How Multiplier Can Help Businesses Stay Compliant

Complying with the labor code in Cyprus is a continuous process. Employers can overlook the process or transfer the responsibilities to an in-house HR manager. It increases the budget for small and mid-sized enterprises looking to hire a handful of Cypriot employers. You can collaborate with third-party providers like Multiplier to comply with Cyprus’ regulations. 

Multiplier is a SaaS-based Employer of Record (EOR) that allows an employer to comply with all labor act rules in Cyprus every month. Compliant employment contract generation, payroll management, multi-currency payroll, and a centralized system to keep track are some features that have made international hiring feasible for businesses of every size. While the cost-to-output ratio is crucial in business growth, Multiplier promises the best in every field.

Frequently Asked Questions

Cyprus joined the European Union (EU) on May 1st, 2004, as a de-facto territory. As of 2023, Cyprus is considered a part of the EU territory. However, EU laws are not exercised in Cyprus. Instead, the Cypriot labor law is primarily used in the Mediterranean island.

According to the labor regulations in Cyprus, there are no such provisions where employees can request a flexible work regime. Acceptance and provision are made purely by the employer.

There are no provisions that protect a whistleblower. Employers are provided with full authority to fine per the company policies.

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