Hire employees in Cyprus using an Employer of Record

You've been interviewing for weeks. Finally found the right person in Cyprus. Now you need to actually hire them legally. This is where most companies hit a wall.

Cyprus might be small, but its employment laws aren't simple. You'll need proper contracts, 13th-month salary payments, and registration with multiple government agencies. Miss the mandatory social insurance contributions and you're looking at penalties plus back payments. Get the termination process wrong and severance costs can hit 18+ weeks of salary.

Here's the reality: you've got three ways to hire in Cyprus, each with different costs and complexity.

Option 1: Set up your own entity

• Cost: €15,000-35,000 upfront, €8,000-12,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: Full tax registration, payroll system, legal compliance, HR infrastructure
• Makes sense when: Hiring 20+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control
• Timeline: Immediate
• Risks: Misclassification fines (€5,000+), back taxes, legal disputes
• Makes sense when: Short projects (< 6 months), specialized skills
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee
• Timeline: 2-3 days to hire
• Complexity: None - we handle everything
• Makes sense when: 1-50 employees, testing markets, multi-country teams

If you're hiring 1-5 people, entity setup costs more than 4+ years of EOR fees ($179/month = $2,148/year per employee vs €15,000+ upfront). An EOR like Hire with Columbus handles employment contracts, payroll, taxes, benefits, and compliance updates so you can focus on your business instead of Cypriot labor law.

Ready to hire in Cyprus without the legal headaches? Get started with Hire with Columbus.

What employment types can you use?

You've got three ways to bring someone onboard in Cyprus. Here's how the costs and risks compare.

Most companies jump straight to thinking about permanent vs. fixed-term contracts. But the bigger decision is how you'll legally employ someone in Cyprus in the first place.

How can you hire in Cyprus?

Set up your own entity

This route makes sense if you're planning to hire 20+ people and stay in Cyprus for years. You'll need €15,000-25,000 upfront just for incorporation, legal fees, and initial compliance setup.

The timeline kills most companies. You're looking at 4-6 months minimum to get everything running. That's company registration, tax registration, payroll system, local bank accounts, and HR infrastructure.

Ongoing costs hit hard too. Annual compliance runs €8,000-15,000, plus accounting fees, legal updates, and a local HR person to handle everything properly.

Hire contractors/freelancers

Tempting because you can start immediately, but Cyprus takes contractor misclassification seriously. If your "contractor" works set hours, uses your equipment, or follows your processes like an employee, you're looking at fines up to €85,000 plus back taxes and social contributions.

The real limitation? You can't integrate contractors into your team properly. No company equipment, limited control over how they work, and they can walk away anytime.

Hire with Columbus handles compliant contractor agreements too, so you get proper classification and smooth payments without the legal risk.

Use an employer of record (recommended)

This is where most smart companies land. Hire with Columbus becomes the legal employer in Cyprus while you handle all the day-to-day management and performance.

Cost breakdown for 5 employees: $895/month vs. €25,000+ entity setup. You break even after about 28 months, but you're hiring people in days instead of months.

We handle everything that would normally require a local entity: employment contracts, payroll processing, tax compliance, social contributions, benefits administration, and legal requirements.

Employment contract types in Cyprus

Once you've decided on your hiring approach, here are the actual contract types you can use:

Permanent contracts (indefinite duration)

This is your go-to for core team members. No end date, full employee protections, and the most flexibility for both sides after the probation period.

Probation period can be up to 6 months (extended from 4 months in 2025). During probation, either side can terminate with just one week's notice.

After probation, notice periods range from 1-8 weeks depending on tenure. These employees get full access to all benefits and protections under Cyprus law.

Fixed-term contracts

Perfect for project work, maternity cover, or seasonal needs. Maximum duration is 4 years total, including renewals.

There's a catch: if you renew a fixed-term contract more than twice, or if the total duration exceeds 4 years, it automatically converts to permanent. Cyprus updated this rule in 2025 to prevent abuse.

Fixed-term employees get the same rights as permanent employees. Same pay, same benefits, same protections. The only difference is the end date.

Part-time contracts

Part-time employees (working less than 38 hours per week) get pro-rated benefits based on their hours. They're entitled to the same hourly pay and conditions as full-time employees.

Popular for senior roles where you need expertise but not full-time commitment. Many companies use this for consultants who want employee status instead of contractor classification.

Probationary contracts

Not a separate contract type, but a clause you can add to any employment contract. Extended to 6 months maximum in 2025 (up from 4 months).

During probation, termination notice is just one week from either side. After probation, normal notice periods apply based on tenure.

Which contract type should you use?

For most international hires, permanent contracts work best. You get the flexibility to build long-term relationships while the employee gets security and full benefits.

Use fixed-term only when you genuinely have a project with a clear end date. Don't try to use it as a "trial period." That's what probation clauses are for.

Hire with Columbus handles all contract types and automatically includes the right clauses for Cyprus compliance. We'll draft everything in Greek and English, handle the local filing requirements, and make sure you're covered if employment laws change.

The bottom line? Most companies hiring 1-10 people in Cyprus should use an EOR with permanent contracts. You get compliant hiring in days instead of months, and you can always set up your own entity later if your team grows.

How does payroll and taxation work?

Your €60,000 employee actually costs €81,600 per year in Cyprus. That's a 36% markup once you factor in employer social contributions, holiday allowances, and the mandatory 13th salary payment.

Cyprus payroll isn't just about monthly salaries. You're looking at 13 salary payments per year (including holiday allowance), plus employer social contributions that add another 20.55% to your costs. Miss a deadline and penalties start at €200, escalating quickly for repeat offenses.

Tax brackets and income tax

Cyprus uses a progressive tax system that's relatively employee-friendly, but you'll need to calculate and withhold these amounts monthly:

The good news? Most of your mid-level hires won't hit the higher brackets. A €45,000 salary means about €4,590 in annual income tax, which works out to €383 per month in withholdings.

Social security contributions breakdown

This is where costs add up fast. Both employer and employee contribute to Cyprus's social insurance system, but you're on the hook for the larger share:

Plus, you'll pay an additional 2% for the Redundancy Fund and 1.2% for Industrial Training Authority contributions. Total employer contributions hit 13.3% of gross salary, capped at the €58,080 ceiling.

Payment schedule and mandatory bonuses

Cyprus employees expect their salary by the last working day of each month. But what catches most companies off guard is this: you're paying 13 salaries per year, not 12.

The 13th salary comes in two parts:

• Holiday allowance: Half a month's salary paid in June
• Christmas bonus: Half a month's salary paid in December

Both are mandatory and subject to the same tax and social contribution calculations as regular salary. You'll want to factor this into your budget from day one.

Total employment cost example

Let's break down what that €60,000 employee actually costs you annually:

Base salary: €60,000 13th salary payments: €5,000 (holiday + Christmas allowance) Employer social contributions: €8,580 (13.3% of €64,500) Other employer costs: €2,020 (redundancy fund, training levy, etc.)

Total annual cost: €75,600

That's a 26% markup on the base salary, and we haven't even factored in equipment, office space, or management time.

Payroll cycle and deadlines

Cyprus runs on a strict monthly payroll cycle with zero flexibility on deadlines:

• Salary payment: Last working day of each month
• Tax withholding remittance: 10th of following month
• Social contributions: 10th of following month
• Annual tax returns: March 31st of following year

Miss the 10th-of-the-month deadline and you're looking at immediate penalties. The Cyprus Social Insurance Services doesn't send friendly reminders.

Common payroll mistakes

Most companies trip up on these Cyprus-specific requirements:

Miscalculating the salary cap: Social contributions stop at €58,080 annually, but many payroll systems don't automatically apply this ceiling. You'll overpay if you're not careful.

Forgetting the 13th salary: Those June and December payments aren't bonuses, they're mandatory salary components. Factor them into your annual budget from day one.

Missing contribution deadlines: The 10th-of-the-month deadline is firm. Late payments trigger automatic penalties starting at €200, plus interest charges.

Wrong holiday allowance timing: The holiday allowance must be paid by June 30th. Pay it in July and you're technically in violation, even if the employee doesn't complain.

When you're managing payroll through Hire with Columbus, we handle all these calculations and deadlines automatically. Your €60,000 employee costs you $179/month through our platform with no penalties, no missed deadlines, no miscalculated contributions. We've built the Cyprus salary cap and 13th payment requirements directly into our payroll engine, so you'll never overpay or miss a mandatory bonus payment.

What benefits and leave are required?

Cyprus employees get 20 working days minimum vacation, and it must be paid out if not taken by year-end. But vacation is just the start—you'll also handle 14 public holidays, generous parental leave, and mandatory social insurance contributions that add about 8.3% to your payroll costs.

Here's what you're legally required to provide and what happens if you don't.

Annual vacation leave

Every employee gets 20 working days of paid vacation after completing one year of service. During the first year, vacation accrues at 1.67 days per month worked.

Employees can't carry over unused vacation to the next year—you must pay them for any unused days at their regular daily rate. This isn't optional, and the payment is due by December 31st.

If someone leaves mid-year, you calculate their vacation entitlement based on months worked and pay out any unused portion with their final salary.

Sick leave entitlements

Employees can take up to 9 days of sick leave per year without a medical certificate. For longer absences, they need a doctor's note from day 10 onwards.

You pay the first 3 days of sick leave at full salary. From day 4 onwards, the Social Insurance Fund covers 60% of the employee's insurable earnings, and you can choose whether to top up the remaining 40%.

For serious illnesses requiring extended time off, employees can receive sickness benefits for up to 52 weeks, all covered by social insurance after the initial 3-day employer period.

Parental leave breakdown

Maternity leave runs for 18 weeks total—2 weeks before birth and 16 weeks after. The Social Insurance Fund pays 75% of the employee's average weekly earnings for the entire period.

Fathers get 2 weeks of paternity leave at 75% pay, also covered by social insurance. They can take this leave within 16 weeks of the child's birth.

Both parents can also take unpaid parental leave until the child turns 8 years old, but this is optional and doesn't come with pay.

Public holidays in 2025

Cyprus has 14 public holidays where employees either get the day off or receive double pay for working.

If a public holiday falls on a weekend, it typically doesn't roll over to Monday—employees just lose that holiday unless your company policy says otherwise.

Mandatory social insurance contributions

You'll contribute 8.3% of each employee's gross salary to social insurance, while employees contribute 8.3% from their pay. This covers unemployment, sickness, maternity, and pension benefits.

There's also a 1.7% contribution (0.85% from employer, 0.85% from employee) to the Redundancy Fund, plus 2% each for the Holiday Fund that pays for vacation time.

The maximum monthly insurable earnings for 2025 is €5,543, so your maximum monthly contribution per employee caps at around €680.

Health insurance requirements

Private health insurance isn't mandatory, but the public healthcare system requires a €2.65% contribution on gross earnings—1.85% from the employer and 0.8% from the employee.

Most companies offer private health insurance as a competitive benefit since public healthcare can have long wait times for non-emergency procedures.

13th and 14th salary payments

You'll pay salary 14 times per year, not 12. The 13th salary is due by December 31st, and the 14th salary (vacation allowance) is paid before the employee takes their annual vacation.

Each extra payment equals one month's regular salary. If an employee works less than a full year, you prorate these payments based on months worked.

Common benefit administration mistakes

Many companies underestimate the Holiday Fund contributions or forget to register employees within the first 8 days of employment. Late registration carries fines starting at €85 per employee.

Missing the 13th salary payment deadline results in penalties equal to 5% of the amount owed, plus interest. The same applies to unpaid vacation day buyouts.

Incorrect social insurance calculations can trigger audits and retroactive payments with penalties. The Department of Social Insurance doesn't mess around with contribution errors.

Optional competitive benefits

Beyond legal requirements, most companies offer private health insurance (€50-150 per employee monthly), life insurance, and mobile phone allowances.

Some provide meal vouchers, gym memberships, or additional vacation days beyond the 20-day minimum. Company cars are less common but appreciated for senior roles.

Professional development budgets and flexible working arrangements have become standard competitive benefits, especially for tech and finance roles.

Administering these benefits correctly requires local HR expertise (€45,000+ annual salary), benefits administration software (€200+ monthly), and legal compliance reviews (€5,000+ annually). One miscalculation on social insurance contributions can cost €2,000+ in penalties per employee.

Hire with Columbus handles all benefit administration, statutory payments, and compliance reporting for $179/month per employee, including the 13th and 14th salary calculations that trip up most companies.

What are the compliance requirements?

Written contracts are mandatory in Cyprus within the first two months of employment. Skip this deadline and you're looking at potential fines plus the employee can claim their verbal agreement terms override yours.

The good news? Cyprus employment law is relatively straightforward compared to other EU countries. The bad news? Get the termination process wrong and you'll pay severance plus legal fees plus potentially have to reinstate the employee.

Employment contract requirements

Every employment contract in Cyprus must be in writing and include specific mandatory clauses. You can't just adapt your US or UK template and hope for the best.

Required contract elements:

• Employee and employer details (full legal names and addresses)
• Job title and detailed job description
• Start date and contract duration (if fixed-term)
• Workplace location and any mobility clauses
• Salary amount and payment frequency
• Working hours and overtime arrangements
• Annual leave entitlement (minimum 20 days)
• Notice periods for both parties
• Applicable collective bargaining agreement (if any)

Contracts must be in Greek or include an official Greek translation. English-only contracts aren't legally valid, even if your employee speaks perfect English.

You've got 60 days from the start date to get the written contract signed. Miss this deadline and the employee can claim whatever terms they want - and they'll probably win.

Probation periods

Standard probation in Cyprus is 6 months for most positions. You can extend this to 12 months for senior roles, but anything longer gets rejected by labor courts.

During probation, either party can terminate with just one week's notice. No severance required, no lengthy consultation process. It's the easiest time to part ways if things aren't working out.

After probation ends, full employment protections kick in immediately. That means proper notice periods, potential severance, and just cause requirements for dismissal.

Working time regulations

The standard work week in Cyprus is 40 hours across 5 days. Anything beyond 40 hours counts as overtime and must be paid at premium rates.

Overtime rates:

• First 10 hours per week: 150% of regular pay
• Beyond 10 hours per week: 200% of regular pay
• Sunday work: 175% of regular pay
• Public holiday work: 200% of regular pay

Employees must get at least 11 consecutive hours of rest between shifts and a minimum 24-hour rest period each week. You need to track and document all working hours - labor inspectors will ask for these records.

Maximum working time including overtime can't exceed 48 hours per week averaged over 4 months. Break this rule and you're looking at €1,000-€5,000 in fines per violation.

Notice periods

Notice periods in Cyprus depend on length of service and who's initiating the termination. Here's what you need to give:

You can pay in lieu of notice, but the employee has to agree. If they refuse, they work the full notice period whether you want them there or not.

Termination process

You can't just fire someone in Cyprus because you feel like it. You need documented just cause or you'll pay hefty compensation.

Valid reasons for dismissal:

• Serious misconduct (theft, violence, breach of confidentiality)
• Poor performance after written warnings and improvement plans
• Redundancy due to business needs
• Employee incapacity to perform duties

For performance issues, you must provide at least two written warnings with specific improvement plans and reasonable timeframes. Skip this process and the dismissal becomes unfair automatically.

Redundancies require 30 days advance notice to the Department of Labour Relations. You'll need to prove the position is genuinely redundant and follow proper selection criteria if choosing between employees.

Severance pay

Severance in Cyprus applies to dismissals for redundancy or employer-initiated terminations without cause. Here's what you'll pay:

Severance is based on gross weekly salary including regular bonuses and allowances. If you terminate for just cause (and can prove it), no severance is due.

Employees who resign or are dismissed for misconduct don't get severance. But make sure your misconduct case is rock solid - labor courts side with employees when evidence is weak.

Data protection

Cyprus follows EU GDPR rules exactly. Employee data handling isn't optional - it's a €20 million fine waiting to happen if you mess up.

You need explicit consent to process employee personal data beyond what's required for employment. This includes photos, personal phone numbers, emergency contacts, and health information.

Key requirements:

• Data processing policy in Greek and English
• Employee consent forms for non-essential data
• Secure storage and access controls
• Right to deletion procedures
• Breach notification within 72 hours

Don't store employee data outside the EU without proper safeguards. US-based HR systems need Standard Contractual Clauses or adequacy decisions to be compliant.

Common compliance mistakes

Most companies stumble on these basic requirements and end up in expensive legal battles:

Invalid employment contracts: Missing mandatory clauses or English-only contracts void the entire agreement. You'll owe back payments based on whatever terms the employee claims.

Wrong termination process: Skip the warning process for performance issues and pay 3-6 months compensation plus legal fees. Labor courts don't accept "we needed to cut costs" as just cause.

Overtime violations: Fail to pay proper overtime rates and employees can claim up to 6 years of back payments. With 200% rates for excess overtime, this gets expensive fast.

Missing probation documentation: Can't prove the probation period was clearly communicated? You'll pay full notice and severance as if they were permanent from day one.

Penalties for violations

Cyprus employment violations come with specific fines that add up quickly:

Common compliance failures:

• Invalid employment contract: €1,000-€3,000 fine plus contract deemed void
• Improper dismissal process: 3-12 months salary compensation plus reinstatement order
• Overtime violations: €500-€2,000 per employee plus back payments
• Working time breaches: €1,000-€5,000 per violation
• Missing mandatory clauses: Contract invalidated, employee claims prevail
• GDPR violations: €10,000-€20,000,000 depending on severity

Labor inspectors in Cyprus actually show up and check records. They're not just sending warning letters - they issue fines on the spot for violations.

Hire with Columbus ensures every contract includes all mandatory clauses in proper Greek translation. We handle the entire termination process according to Cyprus law, including proper documentation and notice periods. Our compliance team tracks all working hours and overtime automatically, so you'll never face a surprise inspection penalty.

What has changed recently?

Cyprus rolled out some pretty significant updates to its employment rules in 2025, and honestly, some of them caught a lot of international employers off guard.

The biggest shake-up? New digital nomad visa requirements that went into effect in March 2025. If you're hiring remote workers who want to live in Cyprus, they now need to prove €3,500 monthly income (up from €3,000) and show health insurance coverage that specifically includes mental health services. The application process also moved entirely online, which sounds great until you realize the system crashes during peak hours.

Minimum wage jumped to €885 per month as of January 2025, affecting about 15% of the workforce. This isn't just pocket change – it's a €45 increase that caught some companies scrambling to adjust their compensation packages, especially for entry-level positions.

Something that'll make your compliance team nervous: Cyprus introduced mandatory pay transparency reporting for companies with 50+ employees. You now have to publish salary ranges for all job postings and submit annual pay gap reports by March 31st each year. The penalties aren't joke money either – fines start at €5,000 for non-compliance.

Parental leave got a major upgrade in 2025. Fathers can now take up to 4 months of paid leave (up from 2 weeks), and there's a new "parental sharing" option where couples can split up to 8 months between them however they want. It's progressive, but it's also creating some interesting budget conversations for HR departments.

Social security contribution rates also shifted slightly. Employee contributions dropped to 8.3% (from 8.5%), while employer contributions increased to 8.5% (from 8.3%). It's basically a wash for total costs, but your payroll calculations need updating.

New anti-harassment legislation requires all companies to have formal complaint procedures and designated harassment officers by December 2025. Companies with 25+ employees need annual training programs, and the documentation requirements are pretty extensive.

One more thing that's causing headaches: Cyprus now requires all employment contracts to include specific clauses about AI and automation. If your role could potentially be affected by AI tools, you have to disclose this upfront and provide retraining commitments. It's well-intentioned but adds another layer of complexity to your contract templates.

When you're working with an EOR like Hire with Columbus, these changes get handled automatically. Contract updates, payroll adjustments, and compliance reporting all get managed without you having to track every regulatory shift.