Table of contents
- Registering as an employer
- The employment contract
- Social insurance: the 8.8% + 8.8% bill
- GESY (national health) contributions
- Other employer funds: redundancy, training, holiday
- The full employer cost buildup
- Anatomy of a Cyprus payslip
- PAYE and the income-tax bands
- Annual leave, sick leave, maternity, paternity
- The 12-month compliance calendar
- Remote employees: A1 forms and cross-border posts
A Cyprus company that incorporates without any intention of hiring is a simple machine. The day the company has its first employee, it acquires a parallel set of employer obligations — registration, social insurance, GESY, payroll filings, statutory leave, notice periods. This guide sets out exactly what changes when you cross that line, with the full cost buildup for 2026 and the compliance calendar you’ll live by.
Registering as an employer
Before hiring, the company registers with three authorities:
- Social Insurance Services (Ministry of Labour) — obtain an Employer Registration Number (ERN).
- Tax Department — register for PAYE withholding (TD63 employer code).
- Health Insurance Organisation (HIO) for GESY contributions.
Registration is online, with company certificates and director IDs. Typical turnaround 1–2 weeks.
The employment contract
Required content:
- Parties’ full identification.
- Job title and description of duties.
- Salary, payment frequency and method.
- Place of work (including remote if applicable).
- Working hours and overtime rules.
- Probationary period and its duration.
- Notice period (longer of statutory or contractual).
- Annual leave entitlement.
- Confidentiality, IP assignment (critical for IP Box companies), non-compete (limited enforceability in Cyprus).
- Reference to the Cyprus Labour Law and relevant collective agreement, where applicable.
Social insurance: the 8.8% + 8.8% bill
Under the Social Insurance Law, both employer and employee contribute 8.8% each on gross salary up to an insurable-earnings ceiling of €68,904 per year for 2026(€5,742/month, €1,325/week; up from €62,868 in 2025). Above the ceiling no further SI is owed.
Self-employed individuals (Class A or Class B) have different rates (15.6% combined) but that is out of scope here.
GESY (national health) contributions
The General Healthcare System (GESY) is funded by contributions from multiple groups at the 2026 steady-state rates:
- Employer contribution on salaries: 2.90%
- Employee contribution on salaries: 2.65%
- Self-employed contribution: 4.00%
- Pensioners, dividends, rent, interest: 2.65%
GESY contributions apply to all Cyprus tax-resident earners up to an annual cap of €180,000 of total contribution base. Contributions above that ceiling are not required.
Other employer funds: redundancy, training, holiday
| Fund | Employer rate | Purpose |
|---|---|---|
| Social Cohesion Fund | 2.0% (effective ~1.2% after offsets) | Low-income support, administered centrally |
| Redundancy Fund | 0.5% of gross | Pays statutory redundancy compensation directly to employees |
| Industrial Training Fund (HRDA) | 0.5% of gross | Funds accredited training programmes |
| Holiday Fund (where applicable) | ~1.2% | Industries with sector agreements; IT / professional services often opt out via direct provision |
The full employer cost buildup
Worked example: an engineer on €50,000 gross salary per year, 2026 rates, company opted out of the Holiday Fund.
| Item | Rate | Amount |
|---|---|---|
| Gross salary | €50,000 | |
| Employer Social Insurance | 8.8% | €4,400 |
| Employer GESY | 2.9% | €1,450 |
| Social Cohesion Fund | 2.0% | €1,000 |
| Redundancy Fund | 0.5% | €250 |
| Industrial Training Fund | 0.5% | €250 |
| Total employer cost | €57,350 |
Employee take-home approximation: gross €50,000 − SI €4,400 − GESY €1,325 − PAYE €5,785 = about €38,490 net.
Anatomy of a Cyprus payslip
Cyprus payslips list, per pay period:
- Gross salary and any bonuses / commission / benefits in kind.
- Social Insurance employee contribution.
- GESY employee contribution.
- PAYE withheld.
- Net pay.
- Year-to-date totals.
- Employer contributions (disclosed but not deducted from net).
PAYE and the income-tax bands
| Annual taxable income (€) | Rate |
|---|---|
| 0 – 19,500 | 0% |
| 19,501 – 28,000 | 20% |
| 28,001 – 36,300 | 25% |
| 36,301 – 60,000 | 30% |
| 60,001 + | 35% |
Relocating employees earning over €55,000 can claim a 50% exemption on Cyprus employment income for up to 17 years, if the employee was not a Cyprus tax resident in the 15 prior years. This is one of the most valuable tools for hiring senior international talent.
Annual leave, sick leave, maternity, paternity
- Annual leave: minimum 20 working days (5-day week).
- Sick leave: paid by Social Insurance after the 4th day; waiting period is employer-borne.
- Maternity leave: 18 weeks statutory (extending to 22/26 for multiple births / adoptions).
- Paternity leave: 2 consecutive weeks, paid via SI.
- Parental leave: up to 18 weeks unpaid per parent per child under 8.
The 12-month compliance calendar
| Frequency | Filing | Deadline |
|---|---|---|
| Monthly | Social Insurance + GESY employer contributions | End of the following month |
| Monthly | PAYE (TD7) | End of the following month |
| Monthly | Special Contribution for Defence withholding (if applicable) | End of the following month |
| Annual | IR63 (employee income statements) | By 31 January of following year |
| Annual | IR7 (employer summary) | By 31 July |
| Annual | TD63 (employer return reconciliation) | By 30 April |
Remote employees: A1 forms and cross-border posts
For EU employees on Cyprus payroll working from another EU country, the A1 form (EU Regulation 883/2004) determines the applicable social-security system. Two main situations:
- Posted workers (up to 24 months): Cyprus employer continues to pay Cyprus SI while the employee works from another EU country temporarily.
- Pursuit of activity in multiple states: where the employee regularly splits time, a 25%-in-residence test applies. Below 25% in residence, Cyprus (employer state) applies; above 25%, residence state applies.
For non-EU remote work (UK post-Brexit, US, Australia), bilateral social-security agreements apply. In their absence, the employee may need dual coverage.
Frequently asked questions
How much does it cost me to pay an employee €50,000 gross in 2026?
Do I need a written employment contract?
What is the minimum wage in Cyprus?
How much annual leave is mandatory?
What’s the probationary period?
Can I hire remote employees outside Cyprus on my Cyprus payroll?
What are the dismissal rules?
About the authors
Philippou Law Firm (delivered under the brand Zeno)
Philippou Law Firm is a full-service Cyprus law firm established in 1984 and regulated by the Cyprus Bar Association. The firm advises international clients on Cyprus company formation, cross-border tax structuring, relocation, and statutory audit. Its accounting and audit engagements are delivered by ICPAC-licensed professionals. The firm works in English, Greek, German, Spanish, Russian, Polish, Dutch and Arabic.
Disclaimer: This article provides general information on Cyprus law and tax practice as of the update date shown above. It is not legal or tax advice and should not be relied upon for specific transactions. Cyprus tax rules change from time to time; we review and update every article at least every six months. For advice on your situation, please contact a licensed Cyprus advocate or ICPAC-registered advisor.
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