Payroll in Cyprus

Mercans is your go-to payroll provider in Cyprus for premier payroll services. Our unwavering commitment to delivering exceptional payroll solutions in Cyprus makes us the preferred choice for businesses of all sizes. With years of experience in payroll in Cyprus, Mercans ensures accurate and compliant payroll services, offering timely and accurate payroll transactions along with the convenience of multi-currency payments. As your dedicated local payroll provider in Cyprus, we boast a team of in-country payroll specialists with deep knowledge of local laws, offering comprehensive support for a seamless payroll experience tailored to your business needs.

Everything you need to know before running payroll in Cyprus

Working Hours and Overtime

In Cyprus, the five-day workweek is mandated by law for both the private and public sectors, except for retail sales, which operate on a six-day schedule due to industry demands. The standard working week duration is 38 hours over 5 days.

Working hours vary across different economic sectors. In the public sector, the typical workday runs from 07:30/08:00 to 14:30/15:00, with Thursdays extending by 2 hours. Construction and industrial sectors observe a working day from 07:30 to 15:30/16:00, while in the private sector and services, it ranges from 08:00/09:00 to 17:00/18:00.

Though there was a slight decline in working hours from 2000 to 2006 per the EU Labor Force Survey, regulations typically govern working time in Cyprus, with exceptions handled by sector-specific laws or agreements. Collective agreements often establish a 38-hour workweek, while retail sales adhere to the 2006 Law, usually set at 38 hours. Public and semi-state organizations follow a 37.7-hour workweek as agreed upon by the Pancyprian Public Employees Trade Union (PASYDY) and the government.

The 1993 Framework Agreement between employers’ and trade union organizations aimed to gradually reduce the workweek from 40 to 38 hours by 1998.

Regarding restrictions on working hours, employees should not exceed 48 hours per week, inclusive of overtime, with specific limitations applying to certain sectors like hospitality. Rest periods mandate at least 11 continuous hours daily, 24 hours weekly, and either two 24-hour periods or a minimum of 48 continuous hours within a 14-day span. Employees can opt out with consent, and managerial staff may be exempt.

Night workers are subject to limits, with hazardous or demanding roles capped at eight hours of night work. Overtime pay is typically determined by individual or collective agreement, with specific regulations for shops, hotels, and leisure centers, as well as civil servants and public law workers. If not regulated, employers must obtain employee consent and compensate accordingly, ensuring no adverse consequences for refusal.

Minimum Wages

Cyprus has adjusted its minimum wage starting from January 1, 2024. The revisions are as follows:

• The national minimum wage for starting salaries has risen from €885.00 to €900.00 per month.
• After six months of employment, the national minimum wage increases from €940.00 to €1,000.00 per month.

13th Month Salary

In Cyprus, the practice of offering a 13th-month salary is at the discretion of private companies, often seen as a means to strengthen the employer-employee relationship. While there is no specific legislation mandating this benefit in the private sector, employers are required by law to inform employees in writing, either through a Collective Agreement or Employment Contract, whether they are eligible for such additional payments.

According to guidelines provided by the Ministry of Labor and Social Insurance, the handling of 13th and 14th salary contributions involves separate declarations of earnings and contributions from regular salaries. These additional payments are typically made in April or May for the 13th salary and in December for the 14th salary. Contributions for these extra salaries are calculated separately, ensuring that the total insurable wages for each period are accounted for.

In cases where an employee’s earnings exceed the maximum limit of insurable earnings, the regular salary is declared, while the 13th and 14th salary contributions are considered as Non-Regular Pay.

Additionally, earnings declarations for 13th and 14th salary benefits also contribute to Social Cohesion and Health Plan Funds. Any difference in insurable earnings up to the maximum limit for the respective period is insured as Non-Regular Earnings, specifically for the 13th and 14th salaries.

It’s important to note that according to the Cyprus Labour Ministry, 13th salary provisions, when part of a collective agreement, personal contract, or company practice, are legally considered integral parts of an employee’s salary. Failure to pay these additional salaries constitutes a violation of the law and can result in civil claims by employees and potential criminal charges against the employer. Penalties for non-compliance may include imprisonment for up to six months, fines of up to €15,000, or both. Additionally, courts have the authority to order employers to pay the amounts equivalent to the owed 13th salary to affected employees.

Payroll Cycle

In Cyprus, the typical payroll schedule is monthly, with payments expected to be completed by the final working day of each month.

Company Formation in Cyprus

• Verify and reserve the company name through the Department of Labour, a process that typically takes 2-3 business days.
• Complete the necessary forms for incorporating a limited liability company, providing details such as the registered office address. Submit these forms to the Register of Companies.
• Include scanned copies of the first page of your ID or passport, along with the occupations and full addresses of the shareholders, director, and secretary. Also, submit corporate documents outlining the company’s purposes, activities, and subscribed share capital.
• Private limited liability companies in Cyprus must have between one and 50 members, with no minimum share capital required. For public limited companies, the minimum share capital is €25,629.
• Nominee shareholders, secretaries, and directors can be appointed through a formal agreement, clarifying their lack of financial interest in the company.
• Once the company is incorporated, proceed to open a bank account. While the Bank of Cyprus is an option, consider alternatives like Hellenic Bank, Astrobank, or Alpha Bank for potentially faster setup times.
• Local lawyers authorized by the Cyprus Bar Association can assist in obtaining a social insurance number and self-employment certificate.
• Finally, schedule an appointment with the Civil Registry and Migration Department to apply for the yellow slip, a registration certificate printed on yellow paper.

Payroll Compliance in Cyprus

In Cyprus, employers are obligated to submit the following statutory filings. Mercans assists you in completing the necessary filings as per the Cyprus local laws.

Statutory Filings and Contributions

Government Requirements

Registration Requirements

• Employers must register with the Tax Department and the Social Insurance Services upon hiring their first employee.
• Application forms and necessary documents must be submitted to obtain a Tax Identification Code and a Social Insurance Number for the employer.
• Employees are also required to register with the Tax Department and submit a personal income tax return by 31 July following the tax year.
• A decree by the Council of Ministers may exempt certain individuals from submitting income tax return forms.

Income Tax Withholding by Employers

• Employers must withhold income tax under the Pay-As-You-Earn system and remit it to the Tax Department monthly.
• Late payments incur interest and penalties.
• Employees must inform employers of additional income or deductions outside their employment to be considered in tax withholding calculations.

Tax Residency and Income Tax

• Cyprus tax residents are taxed on worldwide income, while non-residents are taxed only on Cyprus income.
• A tax resident is defined as someone staying in Cyprus for more than 183 days in a tax year.

Significant Exemptions for Income Tax Purposes

• Legislation allows for exemptions of up to 50% or 20% for certain categories of individuals, subject to conditions.
• Exemptions apply to specific periods and income thresholds.
• Pension Requirements

Social Insurance Contributions

• Contributions to the Social Insurance Scheme are made by employers, employees, and the Republic.
• Pension entitlement is based on contributions and reaching the retirement age.

Contributions to the General Health Care System

• Employers withhold and contribute to the General Health Care System based on employee income.
• Contributions have an annual cap and must be paid monthly.
• Employment Obligations

Minimum Monthly Salary

• Vulnerable categories have minimum wage requirements, while others depend on the activity.

Working Time

• The maximum workweek is 48 hours, with normal hours set at 40 per week.

Minimum Annual Leave

• Employees are entitled to 20-24 days of annual leave depending on their work schedule.

Sick Leave

• Sickness allowances are provided through social insurance authorities.
• Payroll Requirements

Payment Frequency

• Pay periods vary but are commonly weekly or monthly.

Certificate of Emoluments (Form TD63)

• Employers must provide annual certificates detailing employee emoluments and deductions.
• Banking Requirements Related to Payroll:
• No specific requirements, but income and contributions must be converted to euro for payment calculations.

Payroll Taxes in Cyprus

Social Security in Cyprus

According to the Cyprus Social Insurance Law, effective from 1 January 2024, the contribution rates to the Social Insurance Fund will increase for both employed and self-employed individuals. For employed persons, both the employer and the employee will see their contribution rates rise from 8.3 percent to 8.8 percent on insurable earnings. Self-employed persons will experience an increase in the contribution rate from 15.6 percent to 16.6 percent on insurable earnings.

The Department of Social Insurance Services in Cyprus determines the maximum insurable earnings annually for calculating contributions to various funds. For the year 2024, the maximum insurable earnings have been revised upwards to €1,209 per week, €5,239 per month, and €62,868 per annum.

Contributions are capped for certain funds, but the Social Cohesion Fund is calculated on actual earnings without any caps. The applicable contribution rates for 2024 payable by employers and employees are summarized in the table provided.

Self-employed individuals have specific minimum insurable earnings based on their occupational category, as outlined by the Department of Social Insurance Services.

The Department of Social Insurance Services has issued tables summarizing the amounts of contributions due for each quarter of 2024, based on the minimum weekly insurable earnings of self-employed persons. These tables provide crucial information for individuals and employers to ensure compliance with social insurance contribution requirements.

This table outlines the applicable contribution rates for 2024 payable by employers and employees to different funds as per the Cyprus Social Insurance Law.

Personal Income Taxes in Cyprus

Income taxation in Cyprus is renowned for its attractiveness both within the EU and globally. Cyprus tax residents are liable for taxes on all assessable income derived from sources within Cyprus and internationally. Non-residents of Cyprus are subject to taxation on specific income sourced within Cyprus. The favorable income tax framework entices international entrepreneurs, professionals, and individuals with high net worth to relocate to Cyprus.

The 183-day Rule

An individual spending more than 183 days in Cyprus during a calendar year qualifies as a tax resident of Cyprus. The calculation of days spent in and out of Cyprus follows these guidelines:

• The day of departure from Cyprus is counted as a day outside the country.
• The day of arrival in Cyprus is considered a day within the country.
• If arriving and departing from Cyprus on the same day, it counts as one day of residence.
• Similarly, departing and returning to Cyprus on the same day is counted as a day outside the country.

Foreign taxes paid can be offset against the individual’s personal income tax liability.

The 60-day Rule

Effective January 1, 2017, individuals may be deemed tax residents in Cyprus under the “60-day rule” if they meet the following criteria:

• Do not exceed 183 days of residence in any single state.
• Are not recognized as tax residents by any other state.
• Reside in Cyprus for at least 60 days.
• Have additional ties to Cyprus, such as conducting business activities, being employed, or holding an office in a Cyprus tax-resident company. Additionally, maintaining a permanent residential property in Cyprus is required.

Personal Tax Rates

Income Tax Exemptions

Various types of income are exempt from income tax in Cyprus, including interest, dividends, certain employment income for expatriates, profits from foreign permanent establishments, and more. Deductions are also available for losses, contributions, donations, rental income, and other specified expenses.

These provisions significantly enhance the appeal of Cyprus as a destination for international business and investment.

Employee Benefits in Cyprus

Employee benefits in Cyprus encompass both traditional benefits and modern perks aimed at enhancing employee satisfaction and attracting top talent.

Benefits typically include compensation supplements such as medical insurance, provident/pension funds, performance bonuses, annual bonuses, commissions, and other monetary incentives. These benefits contribute to the overall financial well-being of employees and are often funded partially or fully by the employer.

Perks, on the other hand, are additional offerings provided by employers to improve employee morale and satisfaction. While they also hold monetary value, their primary goal is to boost employee happiness rather than supplement income. Commonly referred to as lifestyle benefits, perks can range from flexible work hours and remote work options to free meals, gym memberships, corporate events, and even assistance with childcare and education expenses.

In recent years, there has been a growing emphasis on offering attractive perks to employees, driven by a competitive job market and the need to retain top talent. Employers in Cyprus are increasingly adopting innovative perks to differentiate themselves and attract skilled professionals. Some of the perks offered by companies in Cyprus include gym memberships, free meals, snacks, corporate events, educational allowances, flexible work hours, extended vacation time, and even on-site massages.

While traditional benefits mandated by law include monthly contributions to social insurance and national health insurance, many companies go above and beyond these requirements to provide additional benefits and perks. Paid leave, holiday funds, and performance bonuses are common offerings, along with private medical insurance coverage and various incentives aimed at promoting employee well-being and satisfaction.

Overall, the trend in Cyprus reflects a shift towards offering a more comprehensive package of benefits and perks to employees, with employers recognizing the importance of creating a positive work environment and competitive employment offerings.

Leave Benefits in Cyprus

Employees are granted an annual paid vacation of 20 days. If employees also work on Saturdays as per the agreed contract, they are entitled to 24 days. Normally, employees receive 22 days of standard paid vacation, but these conditions are subject to the employer’s discretion.

During holiday leave, employees are entitled to compensation equivalent to what they would have earned if they had worked during that time. This rule fully applies only to components of remuneration specified in a fixed monthly rate. Variable elements may be calculated based on the average remuneration from the three months preceding the holiday start month or over a 12-month period if they fluctuate significantly.

Maternity and Paternity Rights

Maternity Protection, Parental Leave, and Leave Due to Force Majeure

Scope

• Protects employees from dismissal
• Guarantees the right to maternity leave
• Provides special support for childcare
• Ensures workers’ rights upon returning to work
• Prohibits dismissal if an employee notifies the employer of pregnancy in writing, up to 3 months after maternity leave ends, and the dismissal must be revoked by the employer.

Employees have the right to inform the employer, with a written doctor’s certificate, within 5 days of the employer becoming aware of the pregnancy, whether orally or through colleagues.

Lawful Dismissal

• Termination of business operations
• Employee misconduct
• Expiration of the contract

Maternity Leave

• 18 weeks, including 11 mandatory weeks, with 2 weeks before the expected delivery.
• Additional maternity leave for premature labor or infant hospitalization, with 1 week added for every 21 days of hospitalization.
• Maternity allowance equal to 75% of the employee’s insurable earnings during the previous year’s contributions, with possible increases based on the number of dependents.
• Application for maternity benefit must be submitted by the end of the 25th week of pregnancy, or post-natal, based on the birth date.

Other Benefits

• Absence from work without loss of earnings for prenatal testing, provided the tests cannot be conducted outside working hours, with notification to the employer.
• One-hour absence with pay for breastfeeding or storing milk during work hours, with the employer providing appropriate facilities.

Workplace Rights

• Absence calculated as working time.
• Promotion and return to work rights unaffected.
• Equal pay and job position guaranteed.

Paternity Leave

• Effective from 01/08/2017.
• Fathers entitled to leave without discrimination.
• Duration of 2 weeks, extendable up to 20 weeks in certain circumstances.

Parental Leave Law

• Implemented in Cyprus in 2002.
• Total duration of up to 18 weeks for each child under 8 years old, without pay.
• 23 weeks for a widowed parent.
• Parental leave rights after 6 months of employment with the same employer, individual and non-transferable except under specific circumstances.

Sick Leave and Benefits

• Sickness benefit for employees after 3 days of continuous sickness insurance coverage.
• Benefit payable for up to 156 days, extendable to 312 days if incapacity to work is not permanent.
• Certification of illness required from the first day, with further examinations possible.
• Application for benefit within 21 days of illness start, with waiting periods of 3 days for employees and 9 days for the self-employed.

Benefits of Payroll Outsourcing in Cyprus

• Adherence to Complex Regulations: By outsourcing payroll services in Cyprus, businesses ensure meticulous compliance with intricate labor laws and regulations. Skilled professionals adeptly navigate these complexities, minimizing the risk of errors or penalties due to non-compliance, providing peace of mind for businesses.
• Scalability and Adaptability: Payroll outsourcing offers unmatched scalability and adaptability to meet the evolving needs of businesses. Whether expanding their workforce or adjusting to changes in employment regulations, outsourcing providers seamlessly adjust their services to meet these demands.
• Access to Advanced Technologies and Expertise: Utilizing cutting-edge software solutions, outsourcing providers streamline processes, enhance data security, and improve efficiency in payroll management. Additionally, professionals possess extensive knowledge of tax regulations, deductions, and reporting requirements, ensuring accurate and timely processing.
• Cost-Efficiency and Competitive Pricing: Outsourcing payroll leads to significant cost savings by eliminating the need to hire and train in-house staff. Furthermore, providers often offer competitive pricing models tailored to the specific needs of businesses, optimizing cost-effectiveness while maintaining quality service.
• Supporting Business Expansion: Overall, outsourcing payroll services in Cyprus enables businesses to focus on core objectives while benefiting from accurate, compliant, and cost-effective management. With specialized expertise, advanced technologies, and scalability, providers play a crucial role in supporting the growth and success of businesses.
• High Security Standards: Incorporating industry-leading security measures to safeguard sensitive data, along with ISO 27001 and ISAE3402 certifications, ensures strict adherence to information security protocols.
• Consistent and Sustainable Performance: Ensuring consistent and sustainable performance that meets the dynamic demands of payroll services.
• Flexibility and Scalability: Offering flexibility and scalability to accommodate evolving client needs and adapt to changing business environments.
• Collaborative Cloud Tools: Utilizing a Cloud-based platform that facilitates collaborative work, promoting efficiency and accessibility across teams. These certifications signify a commitment to the highest standards of information security and operational integrity.

Payroll Solutions in Cyprus

Unleash the power of seamless payroll processing in Cyprus with Mercans’ Global Payroll Solutions. Our flexible models ensure local compliance, streamline multi-currency transactions, and seamlessly integrate with global Human Capital Management (HCM) and Enterprise Resource Planning (ERP) systems. Guaranteeing precise payments has never been simpler.

Explore Our Flexible Models:

• SaaS (Software as a Service): Tailored for large enterprises managing payroll across multiple countries with complex data points, locations, currencies, and languages. Our SaaS model enhances operational efficiency to the fullest.
• Managed Services: Designed for mid-sized and large enterprises, our Managed Services model caters to the complexities of multi-country payroll management. It offers on-demand HR expertise, ensuring security, reliability, and compliance at every stage.
• HRMS (Human Resource Management System): Perfect for mid to large businesses expanding their operations, our HRMS model offers a comprehensive range of features, including payroll and benefits management. Companies can select the specific functionalities they need, ensuring a customized and efficient solution.

Streamline Payroll with Mercans’ Technology and Integrations

• Technology: Explore the forefront of innovation with Mercans’ cutting-edge technology that powers our global payroll solutions. Learn more about our technological prowess here
• Integrations: Seamlessly integrate your Human Capital Management (HCM) systems with Mercans’ solutions, enhancing efficiency and connectivity. Discover the power of integration here.
• Recognitions: Join a partner recognized for excellence. Mercans has earned accolades for its commitment to delivering exceptional payroll services. Explore our awards and recognitions here.