Expand your workforce to Cyprus by learning which benefits are mandatory and which perks can help attract top talent.

For companies interested in global expansion, Cyprus is a popular strategic business hub. Its Mediterranean location eases trade between the major European, Asian, and African markets, and many businesses have set up headquarters in Cyprus to take advantage of its low corporate taxes. 

With a GDP of $33.89 billion in 2023, the World Bank has classified Cyprus as possessing a high-level economy. Its economic strengths are attributed to its tourism, services, and agricultural sectors. In fact, tourism accounted for 20% of its GDP in 2023. Furthermore, Cyprus is an EU member, permitting the free movement of capital and goods across European states. 

Undoubtedly, Cyprus is an appealing business destination for expansion, but successfully hiring a workforce relies on compliance with the Cyprus Labor Law. The labor laws govern the employment contract, onboarding, tax withholding, and mandatory benefits. 

Not only will understanding these regulations help you establish a skilled labor force, but it will also protect you from non-compliance penalties. In Cyprus, violation of employment laws leads to a fine of €15,000, employer termination, and imprisonment of up to six months. 

To make expansion in the Mediterranean country easier while attracting the best possible workforce, this guide explores pressing labor laws, employee benefits in Cyprus, and how an Employer of Record (EOR) can support compliance. 

Cyprus Employment Laws

In Cyprus, the Department of Labor Relations is responsible for implementing employment-related laws and regulations. Their purpose is to ensure that local and foreign employers protect employee rights by following a legislative framework for employment termination, minimum wages, and social security. 

The following takes a closer look at common Cyprus labor laws for local and international companies: 

Termination of Employment Law

As per Cyprus’s Termination of Employment Law, both employers and employees must issue written notice to end the employment relationship based on years of service. If the employer terminates the contract, one week’s notice must be given to employees who’ve worked for more than six months but less than one year. 

Workers can be paid directly by the employer or from the Central Holiday Fund during this period. 

Minimum Wage Law

Full-time employees who have worked for their employer for six months must receive a minimum wage of €1,088 per month. The minimum wage law applies to both EU and Cypriot nationals. 

Social Security Regulations

The Social Insurance Scheme in Cyprus covers unemployment, sickness, maternity, paternity, and survivor benefits. It includes a funeral grant, and employees who are injured at work receive free medical care under this scheme. 

Leave Schemes

Based on the labor law in Cyprus, employees are entitled to maternity leave, paternity leave, paid leave, unpaid leave, and sick leave. 

Why seek legal counsel?

To ensure that you comply with Cyprus labor laws, it is a good idea to seek legal counsel. One of the simplest ways of remaining compliant is to partner with a professional Employer of Record (EOR) in Cyprus. An EOR can guide you through employment regulations to help you adhere to strict regulatory processes, from onboarding new hires and drafting employment contracts to administering payroll and employee benefits. 

Mandatory Employee Benefits in Cyprus

The mandatory employee benefits in Cyprus range from annual paid leave and sick leave to holiday pay, working hours, and social insurance regulations. 

Social Security Contributions

The Social Insurance Law provides employees with a cash benefit for unemployment, sickness, marriage, and maternity leave. Employees fund the scheme with 8.8% of their gross salary, while employers contribute 8.8% and the state 5.2%. 

Annual Paid Leave

Full-time workers receive 20 days of fully paid leave per year if they have worked five days a week. Employees who work six days a week receive 24 days of annual leave. Based on paid leave law, employees who work for the same employer for 48 weeks are entitled to four weeks of paid leave. 

Working Hours

Working hours in Cyprus must not exceed 48 hours per week, including overtime. The daily or weekly working hours are determined between the employee and employer through the process of collective bargaining. 

Not all professions are subject to standard working hour regulations. For example, working hours for office employees cannot exceed 44 hours per week, including overtime.

Overtime Pay

Overtime pay in Cyprus is calculated at 150% of the employee’s standard wage for weekdays and 200% for work on Sundays and public holidays. 

Paid Public Holidays

Cyprus has numerous public holidays for employees; however, it is not mandatory to issue leave for these government-listed holidays. It is important to note that public holidays do not form part of employee annual leave. 

Paid Sick Leave

Cypriot employees receive up to 156 days of sick leave covered by the Social Insurance Scheme. Only if agreed upon in the employment contract, the employer must pay for sick leave. 

Maternity Leave

Pregnant employees must receive 18 weeks of maternity leave. To receive maternity leave, proof of the pregnancy must be presented with a medical certificate. 

Paternity Leave

The Protection of Paternity Law grants two weeks of leave to fathers, and notice must be issued to employers at least two weeks before requiring time off. 

Severance Pay

Severance pay is calculated according to an employee’s years of service with the same employer. Severance is paid from the state’s Redundancy Fund.  

Employees who have worked for the same employer for 5-10 years receive two and a half weeks of severance pay for every year worked. 

Supplementary Employee Benefits in Cyprus

Employers must provide their workforce with statutory benefits, or they’ll violate the local labor laws; however, fringe or supplementary benefits do make recruitment in Cyprus easier because they are used to attract highly desired employees and increase worker retention. The most common supplementary employee benefits in Cyprus are discussed below: 

  • Private insurance: While employees in Cyprus have access to the National Health Insurance System (NHIS), many employers offer additional private health insurance that provides more treatment options, eliminates treatment delays, and includes add-ons such as dental care.
  • Additional leave: Providing employees with extra time off can boost their morale and support work-life balance. It affords workers the time and resources to tend to family matters or advance their careers.
  • Flexible scheduling: Flexible scheduling in Cyprus involves shorter working hours or working from home. It is a simple solution to improve productivity by reducing stress and frustration in the workplace.
  • Study allowances: When the Cypriot employer agrees to pay for an employee’s studies, they give individuals the opportunity to advance their education or develop their skills and abilities to move forward in their careers.

Optimize Employee Benefits with Remote People

Hiring in Cyprus allows you to establish your business in one of the most investment-friendly destinations in the world. But to ensure successful expansion, you must be aware of the local labor laws. In addition to protecting yourself from penalties, the labor laws regulate employment contracts and employee benefits in Cyprus. 

When you’re aware of mandatory and supplementary employee benefits, you’re equipped to attract top talent in the country. From private healthcare to flexible working hours, these benefits provide leverage to negotiate competitive employment contracts that employees find valuable. 

But to satisfy employees and remain compliant, you need a professional Cyprus EOR on your side, and that’s where Remote People can help. Remote People’s EOR services will assist with compliance, payroll, and benefits solutions in Cyprus. 

As a business looking to expand in the Mediterranean, reach out to Remote People to optimize employee benefits, helping you attract and retain Cyprus’s highly skilled and qualified job candidates.