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Employment in Cyprus

Cypriot employment law is relatively straightforward and flexible. There are minimal statutory requirements with regards to contracts, termination procedures as well as employee pensions and holidays. On the whole, the Cypriot labour market is much more flexible than most of its European counterparts. As the following only aim to act as a guide in the broadest sense, it is still recommended that professional legal advice be sought when employing in Cyprus. For further reading, please refer to the Cypriot Ministry of Labour’s website here.

Key points on employment in Cyprus

While not as highly unionised as European neighbours such as Spain and Italy, it is still common for workers in certain industries to be represented by trade unions and have collective agreements that regulate their working status. The main industries that are organised in trade unions are the building industry, the transportations industry, dockworkers, maritime workers and farmers. The remainder of employment relationships are dictated through employment contracts between the employer and employee.

 

  1. Contracts

    Employment contracts can either be oral or in writing.

    However, under the Employer’s Obligation to inform Employees of the Conditions Applicable to the Contract or Employment Relationship Law, the employee must be provided with a written statement of the substantive terms governing the employment contract within one month of commencing employment. The written statement must include:

    • Place of work
    • Job title and scope
    • Commencement date of employment (and expected duration for fixed term contracts)
    • Annual leave entitlement
    • Notice periods for termination of the contract by the employer or the employee
    • Remuneration and payment schedule
    • Daily or weekly working hours, and
    • Any applicable collective agreements.

    The written statement must be signed by the employer.

    Contracts of employment may be written in any language that is understandable to both parties. However, if the contract is written in a language that the employee does not understand, the provisions of the contract must be orally explained to the employee. It is advisable for the employer to obtain the confirmation from an independent professional (e.g. a lawyer) that the terms of the contract have been appropriately explained to the employee. An employer is also prohibited from unilaterally modifying an employment contract. If the employer unilaterally modifies essential terms of employment in a less favourable way, such as substantial change in place of employment, working hours or the salary without the employee’s consent, then the employee after he/she has resigned can appeal to the Industrial Dispute Court to determine if the employee was put under compulsion to resign (forced resignation) and claim compensation.

    Terms and conditions of employment may also be agreed by collective bargaining between the employer and trade unions.

    Cypriot law also distinguishes between full-time and part-time workers, fixed-term and unlimited duration workers.

    1.Part-time worker

    ‘Part-time worker’ means an employee, whose normal hours of work, calculated on a weekly basis, or on average over a period of employment of one year, are less than the normal hours of work of a comparable full-time worker in the same establishment.

    Every part-time worker is entitled to equivalent terms and conditions of employment and treatment as afforded to comparable full-time workers, namely in terms of :-

    • Wages and benefits
    • Protection under the social security system
    • Maternity protection
    • Paid annual leave and paid public holidays
    • Parental leave
    • Sick leave
    • Termination of employment.
    • The right to organise, to collective bargaining and to represent workers.
    • Safety and health at work
    • Protection against unfavourable discrimination in employment and occupation

    2.Comparable full time worker

    Comparable full-time worker’ means an employee who

    • is employed in the same establishment as the part-time worker,
    • has the same type of employment contract or relationship as the part-time worker, and
    • performs the same or similar duties as the part-time worker, due regard being given to other considerations such as seniority, qualifications and skills.

    Where there is no comparable full-time worker in the establishment, the comparison is made by reference to the collective agreement applicable in each case or, where there is no applicable collective agreement, in accordance with law, other collective agreements or practice.

    3. Fixed-term worker

    ‘Fixed-term worker’ means a person having a fixed-term employment contract or relationship, concluded directly between the employer and the worker, where the end of the employment contract or relationship is determined by objective conditions, such as reaching a specific date, completing a specific task or occurrence of a specific event. There are no restrictions on the maximum length of time a fixed-term contract may be.

    Note that under certain circumstances, the courts may consider a fixed-term contract is actually for an indefinite period in case of a dispute. Case law of the Industrial Disputes Court advises that care must be taken when drawing up a fixed-term contract so as to avoid being seen as entering into such contracts as a way of depriving employees of their statutory rights (ie by appointment from year to year on a series of such contracts).

  2. Probation Periods

    The minimum probation period of prescribed under Cypriot law is six months, however this may be extended up to a maximum of two years provided that there is a written agreement to that effect between the employer and employee at the commencement of employment.

    During this period, the employer can dismiss an employee without cause, or the employee may freely resign without any repercussions.

    All temporary and agency workers as well as permanent employees are subject to the same probationary period rules.

  3. Termination Procedures

    Termination procedures are governed by the Termination of Employment Law, 1967. Employers are not required to serve written notice of dismissal, however this is still recommended by the Cyprus Industrial Court.

    Employees may only be dismissed under legally justified grounds. Dismissals that cannot be justified under any one or more of the grounds below are considered unlawful and give rise to a right to compensation:-

    • Unsatisfactory performance (excluding temporary incapacitation due to illness, injury and childbirth)
    • Redundancy
    • Force majeure, act of war, civil commotion or act of God
    • Termination at the end of a fixed period
    • Conduct rendering the employee subject to summary dismissal
    • Conduct making it clear that the relationship between the employer and employee cannot reasonably be expected to continue, commission of a serious disciplinary or criminal offence, indecent behaviour or repeated violation, or ignorance of employment rules.

    Employers are not permitted to dismiss employees who are on maternity leave. However, employees who have been on medical leave may only be dismissed after more than 6 months.

    Notice periods

    Statutory notice periods depend on the employee’s continuous length of service, and must be given in writing.

    Period of continuous employment Minimum Period of Notice
    From 0 to 26 weeks (up to 6 months) No notice
    From 26 to 51 weeks (6 months – 1 year) 1 week
    From 52 to 103 weeks (1 year – 2 years) 2 weeks
    From 104 to 155 weeks (2 years – 3 years) 4 weeks
    From 156 to 207 weeks (3 years – 4 years) 5 weeks
    From 208 to 259 weeks (4 years – 5 years) 6 weeks
    From 259 to 311 weeks (5 years – 6 years) 7 weeks
    From 312 weeks + (6 years +) 8 weeks

    During the notice of termination period, the employee is still required to work. If the employee wishes to leave during that period, he/she can do so without giving any further notice to the employer. In such case the employee loses his/her rights for the rest of the notice.

    Severance payments 

    The severance payment must be paid as soon as possible after dismissal. Severance payments are calculated according to years of employment as follows:

    • Two weeks’ wages for each year of service up to four years.
    • Two-and-a-half weeks’ wages for each year of service from five to ten years.
    • Three weeks’ wages for each year of service from 11 to 15 years.
    • Three-and-a-half weeks’ wages for each year of service from 16 to 20 years.
    • Four weeks’ wages for each year of service beyond 20 years. The above are multiplied by the last weekly wage of the employee, including commissions and bonuses, if these have been incorporated as part of the employee’s remuneration package (and do not merely constitute one-off payments) or are payable under employee’s contract of employment.

    Employees who are above 65 years (pension age) prior to termination are not entitled to any compensation.

    Unfair dismissal

    Any employee feeling that he/she has been unfairly dismissed can make an appeal to the Industrial Dispute Court in order to claim compensation.

    Redundancy 

    Redundancy is a valid reason for dismissal under the Termination of Employment Law 1967, as amended. Article 18 states that an employee is redundant when his/her employment has been terminated:

    • Because the employer has ceased trading.
    • Because the employer ceased trading in the geographic location where the employee is working.
    • For operational reasons causing a reduction in the number of employees either: due to a reduction of turnover/production materials; due to the adoption of modern more efficient production methods.

    An employer is obliged to inform the Ministry of Labour about any proposed redundancies at least one month before the intended date of termination.

    The employer has to disclose the following:

    • The reasons for any proposed collective dismissal.
    • The number and the description of the employees it proposes to make redundant.
    • The total number of employees and the description of employees normally employed at the establishment.
    • The time period during which the proposed redundancies are to take place.
    • The criteria for selecting the employees to be dismissed.
    • The method of calculating any redundancy payment, other than the redundancy payments provided by the Termination of Employment Law, as amended. If the number of dismissals is less than the number stipulated in the Collective Redundancies Law 2001, the Termination of Employment Law 1967 applies. As regards notice periods, the provisions of the Termination of Employment Law 1967, as amended, apply.

    Furthermore, the employer is obliged to re-hire redundant employees if a position becomes available up to eight months following the redundancy.

    Severance payment 

    Payments that are calculated in accordance with Table 4 of the Termination of Employment Law 1967, are made by the state Redundancy Fund, to which employers pay contributions. Redundancy payments are calculated according to years of employment as follows:

    • Two weeks’ wages for each year of service up to four years.
    • Two and a half weeks’ wages for each year of service from five to ten years.
    • Three weeks’ wages for each year of service from 11 to 15 years.
    • Three and a half weeks’ wages for each year of service from 16 to 20 years.
    • Four weeks’ wages for each year of service beyond 20 years.

    The maximum amount of redundancy compensation that can be paid out is 75 and a half weekly wages. Statutory compensation for unlawful dismissal is payable by the employer pro rata for the period of continuous employment, calculated in the same way as for redundancy up to two years of which one year of wages is paid by the employers and the remaining amount by the state Redundancy Fund. Depending on the circumstances, the employee may also claim general damages for breach of contract or loss of career prospects.

    Collective redundancy

    Collective dismissals under the Collective Redundancies Law 2001 (Law No. 28(I)/2001) are dismissals for one or more reasons not related to the employees, and where the number of employees dismissed within a 30-day period is either:

    • At least ten employees, if the establishment employs more than 20 but fewer than 100 employees.
    • At least 10% of the workforce, in cases where the establishment employs at least 100, but fewer than 300, employees.
    • At least 30 employees, in cases where the establishment usually employs at least 300 employees.

    An employer intending to implement a collective redundancy has a statutory obligation to notify and engage in consultations with the employees’ representatives as soon as possible to reach a settlement agreement.

  4. Statutory Leave

    Working Hours

    Generally, the number of working hours for a five-day week should not exceed 48 hours per week, including overtime. However, different rules may apply in certain sectors (such as the hotel industry).

    Employees are also generally entitled to a minimum of 11 continuous hours of rest per 24 hours and 24 continuous hours of rest per week. Either two rest periods of 24 continuous hours each, or a minimum rest period of 48 continuous hours within every 14-day period, must also be given.

    Annual leave

    All workers are entitled to paid leave of at least four weeks per year. Employees who work five days a week are entitled to at least 20 days’ leave while those who work six days a week are entitled to 24 days’ leave.

    Annual leave may only be substituted with cash in the event of the termination of employment.

    Medical leave

    In practice, the majority of employers do not demand a sick note for any medical absence of less than three days, after which one is required. An employer can lawfully terminate the employment of an employee who has been absent for more than 26 consecutive weeks.

    Under the law, no mandatory payment is required for the first three days of sick leave. After three days, employees are paid a percentage of their salary by the Social Insurance Fund (not by the employer). It is at the employer’s discretion to pay either for the first three days of absence or make any payments on top of the stipulated percentage. The maximum number of days for which sick pay is payable is 156 days during a single period of interrupted employment. This can be extended for a further period of 156 days during the same period of interrupted employment, provided that the insured is eligible to receive an incapacity (disability) pension but is not expected to remain permanently incapacitated (disabled) from working.

    Maternity leave

    An employed pregnant woman is entitled to maternity leave of 18 consecutive weeks. Of this, 11 weeks is compulsory for both the employer and the employed woman (two weeks before the week of the expected delivery date, the week of delivery and eight weeks after the week of delivery).

    In order to be entitled to maternity leave, the pregnant woman must produce, in time, to her employer a medical certificate stating the expected week of her delivery.

    Under the Social Insurance Law, the insured woman is entitled to maternity allowance payable out of the Social Insurance Fund, subject to certain contributions and other conditions. Maternity allowance is composed of the basic and the supplementary benefit. Under the Social Insurance Law, a woman who has given birth is also entitled to a maternity grant in the form of a lump sum payment, provided that either she or her husband satisfies the relevant contribution conditions. A separate claim must be made for the grant, no later than 12 months after the date of delivery.

    Other leave

    Employees are also entitled to other statutory leave such as paternity leave, adoption leave, parental leave etc.

     

  5. Pensions and Benefits

    Employers and employees are required to make contributions to the Social Insurance Department. These contributions provide benefits, including sickness benefits, unemployment benefits, employment injury benefits and state pensions.

    Employer’s total contributions include:

    • Social Insurances’ contributions amounting to 7.8% of the employee’s monthly salary.
    • Contributions to the Social Cohesion Fund equal to 2% of the employee’s monthly salary.
    • Contributions to the Redundancy Fund equal to 1.2% of the employee’s monthly salary.
    • Contributions to the Industrial Training Fund equal to 0.5% of the employee’s monthly salary.
    • Contributions to the Leave Fund (in lieu of holiday pay) equal to 8% of monthly salary [however, exemption may be obtained from having to contribute to this fund]

    The employee’s total contributions amount to 7.8% of their monthly salary.

    The maximum monthly contributions for the employer and employee respectively is currently up to € 4,533.

    In addition to the above, both employers and employees are also subject to a special contribution for any individual with monthly gross employment income above €1,500. The rates range from 0-3%, and are shared equally between the employer and the employee.

    Foreign nationals employed by local employers must contribute to the Cyprus social security system unless either of the following applies.

    • They can claim exemption on the basis of bilateral agreements entered into by Cyprus (applicable for employees working in Cyprus for periods of up to three years).
    • They are European Union (EU) nationals who are in Cyprus on secondment.Cyprus has entered into social security totalization agreements with Australia, Austria, Canada, the Czech Republic, Egypt, Greece, the Netherlands, Quebec, Serbia, Slovak Republic, Switzerland and the United Kingdom. Coverage for one to three years is usually permitted under these agreements.

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Cyprus. For companies which intend to employ their staff directly through their incorporated Cypriot entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Cyprus.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Cyprus.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Cyprus

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Cyprus

– the company needs help with tax, employment, immigration and payroll compliance in Cyprus

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