Establishing and operating a business in Cyprus requires careful planning, particularly when it comes to matters concerning employment. The employer-employee relationship must be managed with accuracy, compliance, and attention to legal detail. This briefing outlines the key considerations for hiring your first employees in Cyprus, with a focus on employment contracts, contributions to the General Healthcare System (GESY), and social insurance compliance.
1. Employment Contracts
Under Cypriot labour law, employers are required to provide newly hired employees with a written statement of employment (employment contract) within the first month from the commencement of employment. The contract must include essential terms and conditions, such as:
- Job title and description
- Commencement date and (where applicable) duration of employment
- Working hours and place of work
- Salary and other relevant compensations (benefit in kind, annual bonus etc)
- Leave entitlements & Sick leave allowance
- Notice periods for termination
Employers are advised to provide an employment contract that clearly define the rights and obligations of both parties, thus mitigating the risk of future disputes and ensuring alignment with employment legislation.
2. GESY (General Healthcare System) Contributions
GESY is Cyprus’s national healthcare system, which provides access to healthcare services for all residents. Employers are legally obligated to contribute to GESY on behalf of their employees. Contributions are calculated as a percentage of the gross salary and must be remitted on a monthly basis via the Social Insurance Services.
GESY Contribution Rates:
- Employer: 2.90%
- Employee: 2.65%
3. Social Insurance Contributions
All employers are required to register with the Social Insurance Services prior to engaging any employees. Subsequently, each new employee must also be registered through the ERGANI online platform. This registration must be completed at least one day prior to the commencement of employment, in accordance with statutory requirements.
The applicable monthly contributions, to which both employers and employees are subject, are summarised below;
Social Insurance Contribution Rates:
- Employer: 8.8% of gross salary
- Employee: 8.8% of gross salary
In addition to the above, employers are also required to contribute to several auxiliary funds, including:
- Redundancy Fund: 1.2% *
- Industrial Training Fund: 0.5% *
- Social Cohesion Fund: 2.0% * *
- Holiday fund (if not exempt) : 8.0 % *
* Restricted to the maximum level of emoluments as with the social insurance contributions
**Social cohesion fund is calculated on total emoluments and has no maximum level
These contributions are calculated based on gross emoluments and must be submitted and paid via the SISNET online platform at the end of each month, together with the corresponding GESY contributions mention above. Failure to comply with the payment deadline will result in a penalty of 3% for each month of delay, up to a maximum cumulative penalty of 27%.
Key Takeaways
Compliance with Cyprus’s employment, healthcare, and social insurance regulations is essential when hiring your first employees. Properly managing contracts and timely contributions ensures legal adherence and mitigates financial risks.
For further guidance on employment structuring, payroll compliance, or representation before the Cyprus Social Insurance Services, please send your queries at info@cfa-auditors.com