Getting a grip on payroll workflows and expectations in your own country is a big enough headache. Figuring out the process in a whole new nation can be a serious challenge.
If you’ve already hired a team member or two in Cyprus, you’ll know that there’s a lot of time and effort involved in running an international payroll process.
But did you know you don’t actually have to go through the pain of managing your own payroll in Cyprus?
A payroll company in Cyprus (like Skuad) can take care of it for you. Check out this payroll guide for Cyprus to find out how.
What does the payroll process in Cyprus involve?
Payroll is the process by which you pay your employees and contractors — both at home and internationally. It involves working out how much you need to pay your workers and how much you need to pay in taxes and other deductions.
A payroll workflow looks something like this:
- Collect relevant data from your employee or contractor – including personal and tax information
- Calculate net pay – your employee’s gross earnings minus tax, benefit, and social security deductions
- Pay your workers – use your worker’s chosen payment method and also issue a payslip detailing salary and deductions
- Transfer deductions to the relevant authorities – pay tax, benefit, and social security contributions on behalf of their employees
This process may look very familiar if you’re already running payroll for your employees in the U.S. But while the workflow may be the same, there’s a lot to learn when you’re starting to run payroll in Cyprus.
For example, all businesses operating payroll in Cyprus have to pay into the European Union (EU)’s Social Cohesion Fund. And employers don’t have to pay an employee during any annual leave — but they do have to contribute to the Central Holiday Fund.
Ready to dive into the facts and figures? Let’s go!
What you need to know about payroll in Cyprus
A few Cyprus payroll basics
The currency in Cyprus is the Euro (€). The payroll cycle in Cyprus takes place on a monthly basis, with payments made no later than the last working day of each calendar month.
Working hours in Cyprus
Workers in Cyprus shouldn’t work more than 48 hours per week (including any overtime). Most employees work a five-day week, with office hours between 8 a.m. and 6 p.m.
Overtime rules in Cyprus
If an employee works more than 40 hours in a week, additional hours are classed as overtime. Overtime rates are agreed upon as part of the employment contract.
Minimum wage requirements in Cyprus
Minimum wage requirements in Cyprus don’t apply to all workers. Instead, they are specified for a few select workers and industries.
People in manual, semi-skilled roles, such as shop assistants, nursing assistants, and security guards, earn a minimum of €870 per month. This rises to €924 per month after six months of service.
There are also minimum wage requirements for workers in the agriculture industry. Unskilled asylum seekers earn a minimum of €425 per month, with food and board provided. Skilled agricultural workers earn a minimum of €767 per month.
Employers and employees in other industries are free to negotiate wages as they see fit.
Many companies in Cyprus award their employees a 13th-month bonus. This additional month’s pay is usually given in mid-December. While this isn’t a legal wage requirement, it’s a customary practice across the country.
Cyprus payroll tax and deductions
As part of Cyprus payroll statutory requirements, employers and employees must make the following contributions.
- 8.3% - Social insurance (capped at €57,408 per year)
- 2.0% - Social Cohesion Fund
- 1.2% - Redundancy fund
- 0.5% - Training and development
- 2.9% - National health system
- 8.0% - Central Holiday Fund (some companies can apply become exempt from this contribution)
Most of these are self-explanatory but let’s go into a little more detail on three of them:
It’s worth bearing in mind that there are planned increases to social insurance contributions, for both employers and employees in Cyprus, over the coming years.
Contributions will rise to:
- 22.8% from 2024 - 8.8% from employers, 8.8% from employees, 5.2% from the state
- 24.1% from 2029 - 9.3% from employers, 9.3% from employees, 5.5% from the state
- 25.4% from 2034 - 9.8% from employers, 9.8% from employees, 5.8% from the state
- 26.7% from 2039 - 10.3% from employers, 10.3% from employees, 6.1% from the state
Social Cohesion Fund
The Social Cohesion Fund was created to support the economic, social and territorial cohesion of the EU.
It is used to improve transport infrastructure and environmental protection in EU member states where gross national income per capita is less than 90% of the European average. Cyprus is one of these member states.
Central Holiday Fund
Employees in Cyprus don’t get paid leave from their employer. Instead, according to the Annual Holiday with Pay Law, employees receive payment from the Central Holiday Fund.
If they provide a more favorable annual leave package for their employees than the one stipulated by the Annual Holiday with Pay Law, employers can exempt themselves from this contribution. They then pay their employees their normal salary during agreed leave periods.
- 8.3% - Social insurance
- 2.65% - National health system
In Cyprus, income tax is charged at a progressive rate. There are four tax bands, with annual earnings up to €19,500 exempt.
- €19,501 to €28,000: 20%
- €28,001 to €36,300: 25%
- €36,301 to €60,000: 30%
- €60,001+: 35%
Employee leave entitlement in Cyprus
There are 14 public holidays celebrated in Cyprus. Employees are not expected to work on these days.
Whether they receive their holiday pay from their employer or the Central Holiday Fund, full-time employees are entitled to 20 days’ paid leave per year.
They become eligible for paid leave after working 48 weeks with a single employer.
Employees who work a six-day week are entitled to 24 paid days of leave per year.
Employees who are too sick to work can draw benefits from the Social Insurance Fund. They can start their claim on day four of their illness and will continue to receive the benefit for up to 156 days.
Maternity / Paternity leave
Statutory maternity leave is paid by the government at a rate of 72% of the employee’s regular salary.
Mothers can take up to 18 consecutive weeks of paid leave for a single birth, 22 weeks for twins, and 26 weeks if they give birth to three or more babies.
Fathers can take up to two weeks of paid leave at any point during their partner’s maternity leave.
Severance pay in Cyprus
Employers have to calculate severance pay based upon how long an employee has been working for their business or organization.
Payments are as follows:
- 0-4 years in employment: 2 weeks’ severance pay for each year of employment
- 5-10 years in employment: 2.5 weeks’ severance pay for each year of employment
- 10-15 years in employment: 3 weeks’ severance pay for each year of employment
- 15-20 years in employment: 3.5 weeks’ severance pay for each year of employment
- 21+ years in employment: 4 weeks’ severance pay for each year of employment
Compliance in Cyprus
Businesses that fail to abide by these regulations for payroll in Cyprus face fines and penalties. Timely payment of all taxes and contributions is also important as interest and penalty charges apply.
In other words, you need to run a strong payroll system in Cyprus if you’re to avoid making costly mistakes.
Want to get started with payroll management in Cyprus? Speak to a member of the Skuad team to understand exactly what’s expected of your business.
Outsourcing payroll in Cyprus: what are your options?
Many international businesses outsource their HR and payroll operations in Cyprus. But there are two distinct options to choose from.
#1 Work with a dedicated HR and payroll company in Cyprus
Pick this option and you’ll still run your own payroll management back home. However, HR and payroll for employees in Cyprus will be outsourced to another company.
While a Cyprus payroll system solves one problem, it can create others. Running HR and payroll in Cyprus separately from the rest of your business can be time-consuming and confusing.
What’s more, with a number of payroll teams working simultaneously, there’s a greater chance of mistakes and non-compliance.
#2 Work with a payroll partner like Skuad who can manage HR and payroll in Cyprus and for all employees
Here at Skuad, we become the HR and payroll department for all of your employees, whether they live in the U.S., Cyprus, or even further afield. You no longer need to work with multiple payroll partners.
We provide a single, easy-to-use dashboard for a company-wide payroll process. We ensure that you meet all statutory requirements for your employees and that you comply with payroll laws 100% every step of the way.
With great onboarding and benefits packages, along with optimal exchange rates and flexible withdrawals, we cover all of the bases for companies that want to employ and pay remote talent.
Start hiring and paying employees in Cyprus and across the world today! Book a free Skuad demo to see our global payroll and HR platform in action.