ACCOUNTING, AUDIT, PAYROLL, COMPLIANCE,
NON-DOMICILE, TAX ADVISORY, ASSURANCE
WORKING IN CYPRUS - KEY FACTS
REGISTRATION OF EMPLOYERS AND EMPLOYEES, MINIMUM WAGES, WORKING HOURS, ANNUAL LEAVE, PUBLIC HOLIDAYS, SICK LEAVE, MATERNITY LEAVE, PATERNITY LEAVE, PARENTAL LEAVE
REGISTRATION OF EMPLOYERS AND EMPLOYEES
Every salaried person or self employed person must have a Personal Tax Identification Code (T.I.C) and a Personal Social Insurance Number (S.I.C). The registration of personnel is made though the Social Insurance Office and the Income Tax Office. The procedure is not complicated and it usually takes 10 working days to be registered with Social Insurance Office and the Income Tax Office. In the event
that the Company / Sole Trader is not registered as an employer, it should also register as an employer first and then register the employees under his/her name.
According to Ministry of Labour and Social Insurance guidelines, for full time office employees, the minimum monthly wage at recruitment is EUR870. For employees who have completed a six month period of employment at the same employer, the minimum monthly wage is EUR924. Note that other rates apply for some professions.
NORMAL WORKING HOURS
The working week is Monday to Friday and the standard working hours are 40 hours across five days. In some sectors such as retail shops, a six-day week is possible. Employers must be granted written permission from employees in order to increase the employee’s working hours.
All work more than the standard working hours a week is to be paid as overtime and is regulated by the employment contract or collective bargaining agreements. The maximum number of hours during a workweek is 48 and is averaged over a 4-month period. All hours in excess of 40 hours a week are paid at an overtime compensation rate; this rate is stipulated in the employment contract or collective bargaining agreements.
PAID ANNUAL LEAVE
The paid annual leave entitlement is dependent on the number of years of employment. The standard leave entitlement for employees who work a five-day week is 20 days per year or 24 days per year for employees who work a six-day week. Further entitlement for leave is outlined in the employment contract or collective agreement. Employees become eligible after 48 weeks of employment with a single employer, and the employer reserves the right to accept or deny any leave requests due to the demands of the business.
There are 14 public holidays. Most are religious feast days and national days.
Employees are entitled to paid sick leave from the fourth day of sickness and is paid by Social Security. The employee must submit a medical certificate to the Social Security Administration within 48 hours of the start of the sick leave.
Female employees are entitled to 18 weeks of maternity leave. The leave increased to 22 weeks for twins and 26 weeks for triplets. 11 weeks of maternity leave are compulsory and are generally taken as two weeks before the due date and the remainder after. To be entitled to maternity leave, the pregnant employee must provide a medical certificate certifying her pregnancy and the expected due date.
Fathers are entitled to 2 consecutive weeks of paid paternity leave within the 16 weeks following the birth of a child, paid by the Social Insurance Fund at 75.20% of the employees’ regular salary.
The right to parental leave covers all employees who have children under the age of 8. According to the law, every eligible employee can take up unpaid parental leave of up to eighteen weeks for each child.
Depending on collective bargaining agreements or the employment contract, an employee may be allowed additional leave types such as following:
Bereavement: Employees are entitled to up to 5 days of paid leave due to a death of a direct family member.
Adoption: Employees who want to adopt a child under the age of twelve years are entitled to up to 16 continuous weeks’ leave starting from the date they begin to take care of the adopted child.
Military: Employees called to perform military service are covered by assimilated insurance.
WORKING IN CYPRUS - CONTRACTS OF EMPLOYMENT, PROBATION PERIOD, TERMINATION OF EMPLOYMENT, SEVERANCE PAY, EMPLOYER OBLIGATONS
CONTRACTS OF EMPLOYMENT
For all the employees, long term or short term contracts need to be signed and all the terms and conditions to be agreed between them and their employer. The contracts must include, among others, the position, salary, days of holiday and sick leave and termination conditions.
The probationary period in Cyprus is dependent on the type of role and is stipulated within the employment agreement. The most common probation period is 6 months..
TERMINATION OF EMPLOYMENT
If an employee terminates employment, then the minimum period of notice he/she must give to the employer is as follows:
Employed up to 51 weeks: 1 week notice
Employed from 1 year to 5 years: 2 weeks notice
Employed over 5 years: 3 weeks notice
The notice period for a temporary or permanent employee is dependent on the employee’s length of employment. The only time a notice is not required is when the employee has committed a serious offense. If an employer terminates employment of an employee, then the minimum period of notice the employer has to give the employee is as follows:
Employed up to 26 weeks: No notice is required
Employed 27 to 51 weeks: 1 week notice
Employed 1 year to 2 years: 2 weeks notice
Employed 2 years to 3 years: 4 weeks notice
Employed 3 years to 4 years: 5 weeks notice
Employed 4 years to 5 years: 6 weeks notice
Employed 5 years to 6 years: 7 weeks notice
Employed over 6 years: 8 weeks
The severance pay varies based on length of employment:
2.0 weeks’ severance for each year of employment up to 4 years
2.5 weeks of wages for each year of employment between 5-10 years
3.0 weeks of wages for each year of employment between 11-15 years
3.5 weeks of wages for each year of employment between 16-20 years
4.0 weeks of wages for each year of employment over 20 years
All employers must provide to their employees their monthly pay-slip which indicates the monthly gross salary and corresponding deductions and contributions arriving to the employees net salary. Also they must prepare and submit the Employer’s Tax Return (IR7) to the tax authorities by the 31 of July of the following year. For instance for 2022 the IR7 has to be submitted by 31.07.2023.
At the end of each year all employers must prepare and provide to their staff an official form (IR63) stating the annually gross salary with all deductions and contributions for the year. Usually this form is provided to the employees in March- April of the next year. All forms, Pay-slips, IR7 & IR63 are completed by the accountant of the Company / Employer.
WORKING IN CYPRUS - SOCIAL INSURANCE, NATIONAL HEALTH INSURANCE (GESY) AND OTHER COSTS, OBLIGATORY DEDUCTIONS FROM GROSS SALARY
SOCIAL INSURANCE & OTHER COSTS
Whether a self employed person or an employer, you must immediately inform the Social Insurance as soon as you hire a new employee. At present, Social insurance cost for the company is 14,9% on the gross salary of the employee, while the cost for the employee arises to 8,3% and any tax that need to be paid in case of taxable income over 19.500 euro which is the tax-free amount. The employer pays the 14,9% (8.3% plus other contributions 3,7% and GESY 2,9%) on the employee’s salary to the authorities and deducts the 8,3% from the employee’s salary.
Salaries must be paid net of the GESY contributions in the same way as social insurance contributions are deducted. The Social Insurance office has amended its forms and online portal for the GESY contributions so that both contributions are collected by the Social Insurance Office on a monthly basis. The Maximum obligatory amount for the Social Insurance Contributions is EUR54648 and it is different from the Maximum obligatory GESY contributions of EUR180000.
Employer Payroll Contributions
8.30% Social Insurance (Maximum annual contribution of EUR5808000)
2.00% Social Cohesion
0.50% Training and Development
2.90% National Health System (GESY)
8.00% Holiday Fund (if not exempt)
22.90% Total Employment Cost (vs 38% in Russia)
Employee Payroll Contributions
8.30% Social Insurance
2.65% National Health System (GESY)
10.95% Total Employee Cost (vs 31% in Germany)
WORKING IN CYPRUS - EMPLOYEE OBLIGATIONS, PAY AS YOU EARN (PAYE) INCOME TAX PAYMENT BY EMPLOYER ON BEHALF OF THE EMPLOYEE
All employees must register with the tax authorities and need to complete and submit their personal tax return (IR.1) stating their income from employment and any other income. The tax return is submitted electronically by the 31 of July the following year i.e. for 2022 it will be the 31.07.2023. In this form, a calculation of their tax is also included and any differences between the PAYE already paid and the actual tax need to be settled by 30 of June the following year i.e. for 2022 it will be the 30.06.2023. In the event that tax paid is higher than the actual tax due then the excess amount will be refunded by the authorities once the tax return is examined.
PAY AS YOU EARN (PAYE) INCOME TAX
Where the employee’s taxable income (i.e. Gross salary less Social Insurance paid) is over the threshold of EURO 19.500, then tax for the employee is as follows:
Gross Income up to EUR19500: 0%
Gross Income EUR19500 to EUR28000: 20%
Gross Income EUR28000 to EUR36300: 25%
Gross Income EUR36300 to EUR60000: 30%
Gross Income over EUR60000: 35%
The employer must be informed the employee of all taxable income and personal circumstances by completing the form IR.59 at the beginning of each year. The HR department of the employer collects these forms and calculates the appropriate PAYE deductions based on the information provided on these forms. The amount of PAYE tax is calculated on the estimated income of the employee for the
year at the start of each year and is divided by 12 months. Bonuses and 'benefits in kind' (BIK) are also included as salaried income and taxed accordingly. Note that benefits in kind and bonuses are subject to Social Insurance Contributions, GESY and PAYE.