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Cyprus – Employer of Record

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Country Introduction – Cyprus

Capital – Nicosia
Currency – Euro
GDP – 28.41 billion USD (2021)
People/Nationality – Cypriot
Language – Greek and Turkish
Major Religion – Christianity
Population – 1,263,118 (as of November 9, 2023)

Introduction to Cyprus:

Cyprus has a mixed-market economy, with a prosperous services sector, significant industrial and agricultural activity, and a strong tourism industry. Tourism plays a vital role in Cyprus’ economy. The island is known for its beautiful beaches, historical sites, and pleasant Mediterranean climate, attracting millions of tourists each year.

Cyprus has a well-developed shipping industry and is considered one of the largest ship management centers in the world. The maritime sector contributes significantly to the country’s economy. Wine production is a notable industry, with Cypriot wines gaining recognition internationally.

Cyprus has offshore natural gas reserves in the Eastern Mediterranean. The exploration and potential exploitation of these reserves could have a significant impact on the country’s economy in the future. Cyprus became a member of the European Union in 2004, which has provided various economic benefits, including access to EU markets and funding for infrastructure and development projects.

 The cost of living in Cyprus can vary depending on the location and lifestyle, it is generally lower than in many Western European countries. Cyprus has a well-developed healthcare system with both public and private hospitals. The quality of healthcare services is generally good, and it is considered a safe country with a relatively low crime rate compared to many other European countries.

Contract of Employment

Employment contracts in Cyprus can be either fixed-term or indefinite-term. Fixed-term contracts specify a specific duration for the employment relationship, while indefinite-term contracts have no fixed end date.

Verbal contracts are legally binding in Cyprus, it is advisable to have the employment terms in writing. A written contract provides clear documentation of the agreed-upon terms and helps prevent misunderstandings or disputes in the future.

Probation Period

The duration of the probation period can vary and is typically specified in the employment contract. Common probation periods in Cyprus range from one to six months, with three months being a standard duration for many employers.

Termination

In Cyprus, the notice period required for termination of employment is regulated by the Termination of Employment Law, Chapter 281 of the Laws of Cyprus. The notice period varies based on the length of service of the employee.

– Less than 26 weeks of continuous employment: No notice period is required for termination.
– Between 26 weeks and 52 weeks of continuous employment: One week’s notice
– Between 52 weeks and 104 weeks of continuous employment: Two weeks’ notice
– More than 104 weeks of continuous employment: Four weeks’ notice employer, Two weeks’ employee

It’s important to note that these notice periods apply unless a different notice period is specified in the employment contract. Additionally, the law provides for certain situations where termination can occur without notice, such as cases of serious misconduct.

Working Hours

The normal pattern of working hours in Cyprus is 40 hours per week.

Overtime

According to Cypriot labor laws, overtime rates vary depending on when the overtime hours are worked.

– For hours worked on a weekday (Monday to Friday) beyond the normal working hours, the overtime rate is usually 1.5 times the regular hourly rate.
– For hours worked on a Saturday beyond the normal working hours, the overtime rate is typically 1.5 times the regular hourly rate.
– For hours worked on a Sunday or a public holiday, the overtime rate is generally 2 times the regular hourly rate.

13^th Month Pay

Cyprus does not have a mandatory 13th-month pay requirement under national labor laws.

Annual Leave

Less than 5 years of continuous service: Employees are typically entitled to 20 days of paid annual leave per year. After completing 5 years of continuous service with the same employer, employees are entitled to an additional 1 day of annual leave for each additional year of service, up to a maximum of 25 days.

Sick leave

Employees can take sick leave of up to 156 days. The entitlement to benefits commences on the fourth day of an employee’s absence from work due to illness, and for self-employed individuals, it begins on the tenth day of such absence. The benefit amount is determined by the average weekly earnings for which contributions were made in the preceding contribution year within the social insurance scheme.

Maternity and Paternity Leave

Pregnant employees in Cyprus are entitled to a period of maternity leave. The duration of maternity leave is 18 consecutive weeks. Maternity leave typically starts no earlier than two weeks before the expected date of childbirth, unless agreed otherwise between the employer and the employee.

Following childbirth, the remaining period of maternity leave can be taken as postnatal leave. The postnatal leave can be extended if the employee is unable to work due to illness resulting from pregnancy or childbirth.

A recent legal update in Cyprus, published on December 16, 2022, brings substantial amendments to the nation’s labor laws. A noteworthy change involves paternity leave, granting fathers the entitlement to 10 working days of leave with full pay and regular working hours.

VAT / GST

Standard VAT Rate: The standard VAT rate in Cyprus is 19%. This rate applies to most goods and services unless they fall under reduced or zero rates.

Reduced VAT Rates: Cyprus applies reduced VAT rates of 9% and 5% to certain goods and services. For example, the reduced rate may apply to certain types of food, books, pharmaceutical products, hotel accommodations, and more.

Zero-Rated Supplies: Some goods and services are subject to a 0% VAT rate. This includes, for instance, the export of goods to non-EU countries, certain international services, and the supply of certain foodstuffs.

Income Tax

The taxation of individuals in Cyprus is based on their residence status. Individuals who are tax residents in Cyprus are generally taxed on their worldwide income, while non-tax residents are taxed only on income earned in Cyprus. The income tax rates for tax residents are typically as follows:

Employer / Employee Contributions

Employer Contributions:

– Employers are responsible for contributing to the social insurance fund on behalf of their employees.
– The employer’s contributions are based on the employee’s earnings and are calculated as a percentage of the employee’s insurable earnings.

Employee Contributions:

– Employees are also required to make social insurance contributions, which are deducted from their salaries.
– The employee’s contributions are calculated as a percentage of their insurable earnings.

Self-Employed Individuals:

Self-employed individuals in Cyprus are responsible for both the employer and employee contributions, as they are considered both employer and employee.

Contribution Rates:

The contribution rates can vary based on the type of benefit and the earnings of the individual. For example, the rates for basic social insurance contributions may differ from those for contributions related to specific benefits like sickness, maternity, or pensions.

Public Holidays

It’s important to note that the dates of movable religious holidays may vary each year.

1 January 1 – New Year’s Day
6 January 6 – Epiphany
Green Monday (movable date)
March 25 – National Day
April 1 – 1955-1959 EOKA National Day
Good Friday (movable date)
Easter Monday (movable date)
May 1 – Labour Day
Whit Monday (movable date)
August 15 – Assumption Day
October 1 – Independence Day
October 28 – WWII National Day
December 24 – Christmas Eve
December 25 – Christmas
December 26 – Boxing Day

Severance Pay

Employees are entitled to severance pay based on their length of service:

– Two weeks’ severance for each year of employment up to four years.
– Two and a half weeks’ wages for each year of employment between five and ten years.
– Three weeks’ wages for each year of employment between eleven and fifteen years.
– Three and a half weeks’ wages for each year of employment between sixteen and twenty years.
– Four weeks’ wages for each year of employment exceeding twenty years.

Work and Residence Permits (Expatriates)

Non-EU/EEA nationals who wish to work and reside in Cyprus typically need to obtain both a work permit and a residence permit.

1. Work Permit:

Non-EU/EEA citizens must obtain a work permit before they can legally work in Cyprus. The work permit is usually applied for by the employer on behalf of the employee. The employer in Cyprus needs to demonstrate that there are no suitable local candidates for the position and employing a non-EU/EEA national is necessary.

2. Residence Permit:

Once the work permit is approved, the employee can apply for a residence permit. The residence permit allows the expatriate to legally reside in Cyprus. The residence permit application is typically submitted to the Civil Registry and Migration Department.

3. Types of Work Permits:

Work permits in Cyprus can be issued for various categories, such as employment, self-employment, or seasonal employment. The specific type of work permit depends on the nature of the job and the circumstances of the expatriate.

4. Documents Required:

The documents required for a work and residence permit application may include a valid passport, employment contract, proof of qualifications, and a health insurance policy. The employer may need to provide additional documents, such as a statement explaining why a non-EU/EEA national is being hired.

5. Duration of Permits:

Work permits and residence permits are typically granted for a specific duration, often linked to the employment contract. Renewal procedures may be necessary to extend the permits.

6. EU Blue Card:

Cyprus also participates in the EU Blue Card scheme, which allows highly skilled non-EU nationals to work and reside in Cyprus under specific conditions.