Payroll legislation and regulations in Cyprus

Generally, staff matters are quite complicated direction. Moreover, when it comes to jurisdictions where clients are not familiar with local requirements, it becomes more confusing. Any entity entering a foreign market meet a number of employment related challenges. Furthermore, payroll can take a considerable part of time and resources – two components that are crucially important for start-ups, small and medium sized companies.

In order to have general comprehension of the payroll laws and regulations, the following can be considerated.

In respect of the legislation concerning payroll sphere, the following legal documents can be highlighted:

  • Employment Contract or Relationship Laws of 2000 and 2007
  • Organization of Working Time Laws of 2002 and 2007
  • Protection of Wages Law of 2007
  • The Fixed-Term Work Laws of 2003 and 2007
  • The Part-time Work Laws of 2002 to 2007
  • Maternity Protection Law
  • Redundancy Law
  • Termination of Employment Law

In addition to the above, employers need to consider the provisions of the below EU Directives in relation to employees:

  • Working Time Directive 
  • Data Protection Directive
  • Acquired Rights Directive

Main payroll regulations that are obligatory to compliance:

  • Social Insurance is obligatory and comprise all persons gainfully employed in Cyprus Republic. Social insurance contributions must be paid by the employer, the employee, and the state.
  • Annual leave for every employee is 20 days.
  • The Social Pension is a state pension and is available to individuals above the age of 63 for women and 65 for men. The paid-out pension depends on the performed contributions.
  • The Pay as you Earn system (PAYE) applies to all salaries, wages, directors’ emolument, pensions, and fringe benefits. PAYE is applicable to all resident and non-resident employees in Cyprus. Tax residents in Cyprus get taxed on their worldwide income while non-resident employees are taxed on the income they get in Cyprus. Employee must pay it, and the employer deducts it at the income every month.
  • Proper Maintenance of payroll records: Employers in Cyprus should keep certain personal documents regarding employees such as their employment contract, copy of their ID/Passport, residential address and telephone number, tax number, Social Insurance number and Yellow/Pink slip for foreigners. Employers are also required to keep signed weekly/monthly payslips, IR.59 forms and IR.63 forms and record any absence from work.
  • Health and safety: It is obligatory must be taken into account the rights and obligations regarding the health and safety in the workplace. A safe and healthy working environment can improve your business, will attract quality employees and increase their efficiency and retention.

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