Hire employees in Cyprus
What a foreign company needs to know before employing people in Cyprus: whether you need a local entity, what an employee costs with 15.4% employer contributions and the Central Holiday Fund, how the 2026 tax reform and relocation exemptions shape net pay, what a dismissal requires after 26 weeks, and why the temporary agency work rules shape how you structure a hire. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first.
Do I need a local entity in Cyprus to hire?
No. There are three routes:
- Employer of Record. Dryft Global employs the person in Cyprus through a compliant local employer, notifies the hire through ERGANI before day one, pays social insurance, GESY and PAYE each month and runs payroll in euro. You direct the work.
- Direct local entity. You form a private limited company, register as an employer and for tax and set up payroll: plan for 2 to 4 weeks before the first payroll.
- Independent contractor. Lawful only for genuinely independent work. An arrangement that is employment in substance brings back contributions and penalties.
When should I use an EOR instead of registering locally?
Use an EOR for your first engineers, finance staff or sales people in Cyprus, when you want to start in days and do not want to build employer registration, ERGANI notification and monthly PAYE and contribution payments yourself. Your own entity earns its keep for a sustained team, a company seeking Business Facilitation Unit status or a sales office signing Cypriot contracts.
What does an employee actually cost beyond salary?
The employer pays 15.4% in contributions below the social insurance ceiling of EUR 5,742 a month. Employers not exempted from the Central Holiday Fund pay at least 8% more, and a contractual 13th salary and private medical cover add to the total. Budget about 15% to 24% on top of gross salary.
How difficult is termination in Cyprus?
Once an employee has 26 weeks of service, every dismissal is presumed unfair unless the employer proves a valid reason such as redundancy, unsatisfactory performance or serious misconduct. Notice runs from 1 to 8 weeks by service, or pay in lieu, and unfair dismissal compensation can reach 2 years' wages. Redundancy payments after 104 weeks come from the Redundancy Fund. Mutual agreement is the common clean exit.
Can Dryft Global legally employ my team in Cyprus?
Yes. Dryft Global employs your team in Cyprus through a compliant local employer set up for the Cyprus rules on temporary agency work. We issue written terms under Law 25(I)/2023, notify each hire through ERGANI, pay social insurance, GESY and PAYE each month, administer leave and benefits, and manage notice and dismissal.
Hiring routes compared
Speed, set-up burden and liability differ by route.
| Factor | Direct local entity | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Time to first payroll | 2 to 4 weeks | Days to 2 weeks | Days |
| Local entity required | Yes, private limited company or branch | No | No |
| Registration, ERGANI and PAYE | Your registrations | Handled by Dryft Global | Contractor's own |
| Temporary agency work rules | Not applicable | Structured compliantly by Dryft | Not applicable |
| Statutory liability | Direct corporate exposure | Assumed by Dryft Global | High if the work is dependent |
| Best fit | Sustained team, local sales | First hires, engineering teams | Short independent projects |
What an employee costs in Cyprus
Employer contributions total 15.4% below the social insurance ceiling. The model below is a Limassol software engineer on EUR 4,000 gross a month with a contractual 13th salary, EUR 52,000 a year.
| Component | Employer share | Notes |
|---|---|---|
| Social Insurance Fund | 8.8% | Up to EUR 5,742 a month |
| General Healthcare System (GESY) | 2.9% | Up to EUR 180,000 a year |
| Social Cohesion Fund | 2.0% | On all pay, no cap |
| Redundancy Fund | 1.2% | Up to the social insurance ceiling |
| Training fund (HRDA) | 0.5% | Up to the social insurance ceiling |
| Statutory subtotal | 15.4% | EUR 616 per payment on EUR 4,000 |
| Central Holiday Fund | 8%+ if not exempt | Most private employers are exempt and pay leave directly |
| Total employer on-cost | ~15% to 24% | Depending on benefits and Holiday Fund status |
For an employee on EUR 4,000 a month with 13 payments, budget roughly EUR 60,000 a year in statutory cost before benefits and the EOR fee. The employee pays 11.45% in contributions and income tax of about EUR 5,700 a year, leaving net pay of about EUR 3,102 per payment. A 13th salary is customary but not required by law. Ask us for a cost model with current rates applied.
Payroll and tax
Salary is paid monthly in euro, with 13 payments where the contract provides a 13th salary. The employer withholds PAYE and pays it, together with social insurance, GESY and the funds, by the end of the following month, and files the annual TD7 return through the Tax Department's Tax For All portal. Each new hire is notified through ERGANI at least one day before the start, and the basic written terms are due within 7 days.
Income tax withholding
From 1 January 2026 income up to EUR 22,000 a year is tax-free, followed by bands of 20%, 25% and 30%, with 35% above EUR 72,000. Employee contributions are deductible, and new deductions apply for children, rent or mortgage interest and green investments. People moving to Cyprus may qualify for a 50% exemption (pay above EUR 55,000, for 17 years), a 20% exemption capped at EUR 8,550 a year (7 years) or a 25% exemption for returning former residents.
Minimum wage 2026
The national minimum wage is EUR 979 gross a month on hiring, rising to EUR 1,088 after 6 months' continuous service with the same employer, under a decree in force from 1 January 2026 to 31 December 2027. Hotel employees covered by a collective agreement, domestic workers, agricultural workers and maritime workers are excluded.
Leave and mandatory benefits
- Annual leave. At least 20 working days on a 5-day week (24 on a 6-day week), paid directly or through the Central Holiday Fund.
- Public holidays. About 15 commonly observed holidays, including Orthodox Easter; private sector entitlement often follows collective agreements and custom.
- Sick pay. No statutory employer sick pay; the Social Insurance Fund pays sickness benefit from the 4th day unless the employer's policy provides company pay.
- Maternity. 22 weeks for the first and second child and 26 weeks from the third, paid by the Social Insurance Fund.
- Paternity. 2 consecutive weeks, paid by the Social Insurance Fund.
- Working time. An average of 48 hours a week at most including overtime; overtime premiums are set by contract or collective agreement.
- Common extras. Contractual 13th salary, provident fund contributions and private medical cover.
Termination and notice periods
Probation can last up to 6 months. Notice and unfair dismissal protection apply after 26 weeks of continuous service.
| Item | Rule |
|---|---|
| Notice by service | 1 week (26 to 51 weeks) rising to 8 weeks (312 weeks and over); pay in lieu allowed |
| Valid reasons | Redundancy, unsatisfactory performance, serious misconduct, end of fixed term, force majeure, retirement |
| Unfair dismissal compensation | At least the redundancy amount and up to 2 years' wages; claims within 12 months |
| Redundancy payments | After 104 weeks, paid by the Redundancy Fund, 2 to 4 weeks' pay per year of service |
- Burden of proof. Every dismissal is presumed unfair unless the employer proves a valid reason.
- Protected employees. No dismissal during pregnancy or the maternity protection period.
- Collective dismissals. Thresholds by workforce size within 30 days trigger consultation and notice to the Minister.
- Mutual agreement. The common clean exit.
Can I use independent contractors?
Only for genuinely independent work. A self-employed person registers with Social Insurance and pays 16.6% social insurance plus 4% GESY, but a contractor who works set hours under your direction, only for you, on a fixed monthly fee and with your equipment is employed in substance, which brings back contributions and penalties. Assigning a worker to work under another company's direction falls under the Temporary Agency Work Law, which requires a licensed agency and equal treatment. Cyprus has no separate employer of record legislation, so this is a point to settle for each hire. For anyone who works like an employee, an EOR set up through a compliant local employer is the safe route.
The legal framework in brief
Cyprus has a mixed legal system in which statutes set most employment rules and courts follow common law principles. The instruments you will hear most:
- Termination of Employment Law 24/1967. Notice, unfair dismissal protection after 26 weeks, compensation and redundancy payments.
- Transparent and Predictable Working Conditions Law 25(I)/2023. Basic written terms within 7 days, the rest within 1 month, and probation of up to 6 months.
- Social Insurance Law and GESY. Contributions and benefits for sickness, maternity, paternity and parental leave.
- Income Tax Law. The 2026 bands, new deductions and relocation exemptions.
- Data protection. GDPR and Law 125(I)/2018, enforced by the Commissioner for Personal Data Protection.
- Immigration and right to work. EU nationals work freely. Others need a work permit after a labour market test, the Business Facilitation Unit fast track (key personnel from EUR 2,500 a month) or an EU Blue Card from EUR 43,632 a year. A digital nomad visa does not allow work for a Cyprus employer.
- Authorities. The Ministry of Labour and Social Insurance, the Tax Department, GESY, the Civil Registry and Migration Department and the Commissioner for Personal Data Protection.
Where the talent is
About 983,000 people live in the government-controlled areas, with unemployment of 3.6% in the second quarter of 2026. Average gross earnings were EUR 2,548 a month in the second quarter of 2026. English is widely used in business. Time is UTC+2 (UTC+3 in summer), and Cyprus is in the EU and the eurozone, with full Schengen membership targeted for 2027.
| City | Talent and industry concentration |
|---|---|
| Limassol | Technology, shipping, fintech and trading |
| Nicosia | Capital, government, banking and professional services |
| Larnaca | Airport, logistics and services |
| Paphos | Tourism, services and remote teams |
Cyprus Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step.
- Step-by-step checklist, from route selection to first payroll
- ERGANI notification, written terms and probation set-up
- Gross to net, relocation exemptions and employer cost
- Monthly PAYE, social insurance and GESY payments
- Contractor reclassification and agency work risk checklist
- Notice, valid reasons and Redundancy Fund pack
- Every official Cyprus authority with direct links
This guide is general information, not legal, tax or immigration advice. Cyprus revises the social insurance ceiling, contribution rates and tax deductions regularly, and scheduled social insurance increases apply in later years. Confirm current figures and the employment structure with a qualified adviser or with Dryft. Last reviewed November 2026.
Ready to hire in Cyprus?
Tell us who you want to hire and where they sit. You will get a cost model and a compliant route within a day, from a person who has done this before.