I Introduction
Cypriot employment law is a mixture of statute and case law. To determine whether a person is an employee or an independent contractor, the entire arrangement between the parties should be considered, particularly the parties’ rights and obligations. Unlike agreements for services that are exclusively governed by contract law, particular laws and regulations govern certain aspects of an employment relationship.
The Industrial Disputes Tribunal (IDT) is a special type of court with exclusive jurisdiction to determine employment matters, including termination of employment, annual leave, maternity protection and equal treatment. The IDT’s jurisdiction to order compensation for unlawful dismissal is limited to a maximum of two years’ salary. Compensation claims that exceed this limit may be raised with the relevant district court.
The IDT is composed of a president or a judge and two lay members appointed on the recommendation of the employers’ and employees’ trade unions. The role of the lay members is purely consultative. There are currently four IDTs in Cyprus; these are based in Nicosia, Larnaca, Limassol and Paphos.
The Ministry of Labour and Social Insurance is the authority responsible for the application and enforcement of most employment laws and regulations. The Ombudsman’s Office is responsible for the application and enforcement of equal treatment legislation.
II Year in review
2023 has been a year of important changes in Cyprus Employment Law, the most important of which include the introduction of a minimum salary, the implementation of the EU directives on work-life balance for parents and caretakers and on transparent and predictable working conditions, the legal right to take annual leave from day one, a new law to regulate remote working (telework) and new legislation against violence and harassment at work.
The national monthly minimum salary has been increased from €940 to €1,000 (€900 for the first six months of employment), effective from 1 January 2024. The national minimum salary is subject to review every two years, to take into account the conditions and the cost of living. It applies to all employees, subject to certain limited exceptions (i.e., domestic workers, agricultural workers, shipping workers and certain workers in the hotel industry).
For the purposes of implementing Directive (EU) 2019/1158 on work-life balance for parents and carers, in December 2022 the Law on “Leave (Paternity, Parental, Caring, Force Majeure) and Flexible Work Arrangements for Work-Life Balance” (Law 216(I)/2022) was passed. This new Law abolished the previous law and introduced important new employee rights and benefits, including paid parental leave the right to care leave for employees who provide personal care/support either to a relative or to a person living in the same household as them and also the right to absence from work for urgent family reasons involving illness or accident. Furthermore, an employee, who is a parent of a child up to eight (8) years of age or a caregiver, has the right to request flexible work arrangements for care reasons, provided that he has completed six (6) months of continuous employment with the same employer, subject to the employer’s approval.
For the purpose of implementing Directive (EU) 2019/1152, in April 2023 a new law was passed, the “Law on Transparent Predictable Working Conditions” (Law 25(I)/2023). This law, which abolished the previous law on information given by the employer to the employee regarding terms of employment, shortened the period within which information must be provided by the employer from 1 month to 7 days and requires Temporary Work Agencies to provide information regarding the identity of the business to which the employee will be assigned and reduced the maximum allowed probationary period from 104 weeks to 6 months.
Another important development concerned an amendment to the Annual Paid Leave Law (Law 24(I)/ 2023) in April 2023, for the purpose of better harmonization of the law with Article 7 of Directive 93/104/EC, by abolishing the condition that employees are entitled to receive annual leave after the completion of 13 weeks of continuous employment. Pro rata annual leave is now available to all employees from the first day of their employment.
In December 2023, a new law on Telework was introduced, which makes remote working optional and requires an agreement in writing between the employer and an employee either upon recruitment or by amending the employment contract or by collective agreement. Important obligations imposed on the employer by this law include the obligation to cover the minimum monthly cost of the telework to the employee, to carry out a health and safety risk assessment and a data protection impact assessment. It also introduces the employee’s right to disconnect from all electronic means of telework outside of normal working hours and prohibits discrimination against an employee for refusing to consent to working remotely.
Finally, a new law which creates separate offenses for violence and harassment at work, is currently prepared. The new legislation will separate workplace harassment based on gender and victims will now have easy access to legal proceedings, or out-of-court settlements, whilst protected from dismissal.
It should also be noted that as of 1 January 2024, social insurance contributions in Cyprus by both the employer and the employee on insurable earnings have increased from 8.3% to 8.8%.
III Significant cases
The following cases demonstrate the approach of Cypriot courts when considering the true facts and circumstances of a particular claim. The cases also describe the Cypriot courts’ willingness to find in favour of employees where their statutory rights are violated.
In December 2016, the IDT afforded full protection to a pregnant woman who had given formal notice of pregnancy to her employer and who was subsequently dismissed following the transfer of the business, holding that the dismissal was unlawful.[1]
In March 2018, the IDT accepted that a combination of agreements for the provision of services and a series of fixed-term employment contracts over several years constituted an employer–employee relationship regardless of what was provided in the various contracts. During her engagement as an independent contractor, the claimant carried out the same duties as those under fixed-term employment contracts, alongside certain additional duties, and she also worked the same hours as all other employees.[2]
In March 2022, the Supreme Court of Cyprus recognised that although sexual harassment conduct was attributed to another employee, the employer was jointly liable in respect of the conduct under the law if it failed to take reasonable and effective measures to stop the conduct and prevent it from happening again.[3]
IV Basics of entering into an employment relationship
i Employment relationship
An employment contract is not required under Cypriot law, although it is considered advisable.
Employment contracts can be for a fixed term. However, termination of employment at the end of a fixed term will be considered unlawful if the IDT has reason to consider that the employment relationship was for an indefinite term.
Furthermore, employment that exceeds 30 months will be automatically considered of indefinite term unless the employer can show that the fixed term is justified by objective reasons, such as the temporary nature of the requirements of the position, the temporary replacement of another employee, special characteristics of the position and probation periods.
Employers are required to provide employees with specific information, including:
- the identity of the parties;
- the place of work and registered address of the business;
- the position or specialisation of the employee and the nature of work duties;
- the date of commencement and duration of employment;
- annual leave entitlement;
- termination notice periods;
- salary and benefits;
- working hours;
and details of any collective agreements that may apply to the employee.
This information must be provided within one month of the commencement of employment either by a contract or letter of appointment or by any other written document signed by the employer.
Amendments to employment terms should be agreed upon in advance and in writing. Terms and conditions followed as a matter of practice over time may become acquired rights and should not be varied or amended unilaterally without the consent of the employee.
ii Probationary periods
The law protects employees against unlawful termination of employment after the first 26 weeks of employment. The employer and the employee may, by means of a written contract concluded at the time of employment, extend this period up to a maximum of 104 weeks. This period is commonly referred to as a probation period.
Employment during a probation period is governed by contract law, and unless otherwise agreed, either party can terminate employment for any reason and without notice.
iii Establishing a presence
Overseas companies that establish a place of business in Cyprus have an obligation under the Companies Law[4] to register with the Registrar of Companies within one month of establishment. Employers can hire employees through an agency or another party.
Employers have an obligation to make social insurance contributions for every person they employ in Cyprus. Employment may be found based on a contract of employment or based on circumstances from which the existence of an employer–employee relationship can be inferred.
According to EU law, a person pursuing an activity as an employed or self-employed person in a Member State shall be subject to the legislation of that Member State.[5]
An employer with its registered office or place of business outside the competent Member State shall fulfil all the obligations enumerated by the legislation applicable to its employees in that Member State, notably the obligation to pay the contributions provided for by the Member State’s legislation as if the employer had its registered office or place of business in that competent Member State.
An employer without a registered office or place of business in the Member State can agree that the employee in the Member State may fulfil the employer’s contribution obligations. The employer must send notice of this arrangement to the competent institution of that Member State.[6]
A foreign company not officially registered in Cyprus can engage an independent contractor. The mere presence of an independent contractor in Cyprus is not in itself sufficient to create non-resident tax status. A company is a tax resident of Cyprus if it is managed and controlled in Cyprus. Although there is no legal definition of ‘management and control’, the basic requirements considered are the residence of the majority of the directors, the place where board meetings are held and the location where policy decisions are implemented.
Employers have a legal obligation to make statutory contributions for social insurance and to the General Healthcare System, as well as income tax deductions for their employees in Cyprus. Deductions are made at source, and the employer is responsible for reporting and withholding these amounts.
V Restrictive covenants
Under Cypriot law, any agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void’, subject to three specific exceptions concerning restrictions imposed on the sale of the goodwill of a business and between partners in a partnership.
The Supreme Court of Cyprus has acknowledged that only agreements in restraint of trade that fall within one of the specific statutory exceptions can be valid and that Cypriot law is thus a substantial departure from English common law, under which an agreement in restraint of trade is valid if it is reasonable and not injurious to the public.[8]
However, courts in Cyprus have held that during employment, employees owe a duty of loyalty to their employers, which includes the duty not to compete with their employer.
Non-compete clauses in employment contracts may therefore be considered void and unenforceable against departing employees. However, where the evidence suggests that an employee had made preparations to set up a competing business while still employed, Cypriot courts may be willing to acknowledge that the employee violated their duty of fidelity towards their employer and order compensation or any other appropriate interim relief.
VI Wages
i Working time
Generally, under Cypriot law the number of working hours plus overtime should not exceed 48 hours per week, except in certain sectors where different considerations may apply.
Employees are generally entitled to a minimum of 11 continuous hours of rest per day, 24 continuous hours of rest per week and either two rest periods of 24 continuous hours each or a minimum of 48 continuous hours within every 14-day period. Managerial members of staff are exempt from the statutory restrictions on working hours.
Night workers should not, on average, exceed eight hours of work in a 24-hour period.
ii vertime
Cypriot law does not require overtime compensation unless agreed in a contract of employment or collective agreement.
Where overtime compensation is established, it may be considered part of the employee’s salary and will be protected by the Protection of Salaries Law of 2007.
Generally, an employee’s number of working hours should not exceed 48 per week, including overtime.
VII Foreign workers
There is no requirement for a separate register of foreign workers and no limit on the number of foreign workers a company may have.
Cypriot law prohibits an employer from employing foreign nationals without a permit issued by the Civil Registry and Migration Department of the Ministry of the Interior. A temporary residence permit entitles the foreign national to work in a specific occupation and for a period of time that is specified in the permit. If the holder of the permit begins another job, the employment permit ceases to be valid and is considered cancelled.
The Ministry of Labour and Social Insurance is responsible for establishing policies for the employment of third-country nationals and for granting approvals to employers.
The most basic criterion for granting approval to employers for the employment of foreigners is the impossibility of satisfying the employer’s specific needs with labour either from the local labour market or from Member States of the European Union.
Every employer or business that wishes to employ a foreign national must obtain approval from the Labour Department. The maximum engagement period of a foreign national with a temporary residence permit is four years.
A business that employs foreign nationals must pay the same taxes and benefits for these employees as it would for Cypriot employees. A foreign employee is protected under employment laws in the same way as a native employee.
VIII Global policies
Internal discipline rules are not required by law. Employers may adopt disciplinary rules as a matter of policy, provided that the rules are fair and reasonable and comply with all applicable employment laws and regulations and the rules of natural justice.
There is no requirement to file disciplinary rules with any government authority.
Discrimination and sexual harassment are prohibited, and employers have a legal obligation to protect employees from this conduct.
In 2019, employers’ and employees’ representatives agreed on the Code of Conduct on Preventing and Combating Harassment and Sexual Harassment in Public Services. The Code provides practical guidance for employers and employees to ascertain the necessary procedures for dealing effectively with the prevention and repression of sexual harassment at work. The Code advises employers to implement a policy, establishes specific obligations that employers and employees should observe and suggests certain measures to be taken.
Policy rules should be written in a language that employees can understand, and employees should be notified of the rules.
It is generally advisable for employers to implement disciplinary rules as policies rather than incorporate them into employment contracts, to retain the flexibility to revise them periodically.
IX Parental leave
Maternity leave entitlement is up to 18 continuous weeks, nine of which must be taken within the period beginning on the second week before the week of expected childbirth. Leave is extended to 22 weeks for the birth of a second child and to 26 weeks for subsequent births. Maternity leave is paid by the government in accordance with social insurance laws.
In the nine months following childbirth, a female employee is entitled to interrupt her employment for up to one hour per day to breastfeed or raise her child. The employee may use this break time at the beginning, middle or end of the working day. The time must be considered normal working time, for which employees are compensated.
A working husband whose wife gave birth, or who had a child through a surrogate mother, or a working husband who adopted a child under the age of 12, may apply for two consecutive weeks’ paid paternity leave within the period from the week of childbirth or adoption until two weeks prior to the end of the maternity leave period. Paternity leave is paid by the government in accordance with social insurance laws.
Employees who have completed six months or more of continuous employment with the same employer are entitled to unpaid parental leave of up to 13 weeks on the grounds of childbirth or adoption, with a minimum of one week and a maximum of four weeks per year. Employees are also entitled to unpaid leave of seven days per year for reasons connected to illness or accident of family members or dependants.
Employees are protected from receiving notice of dismissal, dismissal or permanent replacement for a period extending from the beginning of pregnancy until five months after the end of maternity leave.
Employees on paternity leave are protected from receiving notice of dismissal and dismissal during the period that starts on the date of the employee’s written notice of his intention to exercise his right to paternity leave and expires at the end of the paternity leave.
X Translation
There is no requirement under Cypriot law to have employment documents translated into the local language (Greek). However, employees should be informed about terms and conditions of their employment, so any related documents should be in a language that employees can understand.
XI Employee representation
Employees in Cyprus have a constitutional right to join trade unions, although employers are not required by law to enter into collective agreements with trade unions. Employers are not required to deal with trade unions unless they have entered into collective agreements.
Community-scale undertakings and community-scale groups of undertakings are required to establish a European works council (EWC) or a procedure for informing and consulting employees upon request. The central management of the business starts negotiations with employees on its own initiative or following a written request by at least 100 workers or their representatives. The workers making the request must belong to at least two enterprises or establishments located in at least two different Member States.
Next, a special negotiating group is established, and the representatives are elected together with their deputies from existing trade unions, or, where trade unions do not exist, representatives are elected directly by the employees. Where there are no employee representatives for reasons outside the employees’ control, the employees have the right to elect or appoint themselves.
The members of the special negotiating body are elected or appointed in proportion to the number of workers employed in each Member State by the undertaking, allocating to each Member State one seat per share of workers employed in that State equal to 10 per cent of the number of workers employed in all Member States or a fraction thereof.
The special negotiating body and the employer’s central management are responsible for determining by written agreement, the scope, composition, tasks and term of office of the EWC or the employee information and consultation procedure.
The central management, together with the special negotiating team, must determine in writing the details of the information and consultation procedure, including the place, frequency and duration of EWC meetings.
To ensure the coordination of its activities, the EWC elects a maximum five-member committee. The committee ensures the appropriate conditions are met for the EWC to exercise its activities at regular intervals and drafts its internal regulations.
The central management of the business and the EWC work in a spirit of cooperation, mutually respecting their rights and obligations.
EWC members shall have the necessary means to exercise their legal rights and to collectively represent the interests of workers, and, during the exercise of their duties, they enjoy the same protections and guarantees as the employee representatives.
XII Data protection
i Requirements for registration
A company is not obligated to register with the Commissioner for Personal Data Protection or any other government body in Cyprus for data protection purposes.
Consent is not required for processing personal employee data because this type of processing is generally acknowledged as a legitimate interest of employers under the provisions of the General Data Protection Regulation (GDPR).
Under the GDPR, employers are required to provide employees with certain information when collecting personal data, depending on whether the data is collected from the employees or from other sources. Disclosures include the identity and contact details of the employer, the purposes for the processing and its legal basis, the recipients of the personal data, the employer’s intention to transfer personal data abroad (if applicable), the period of data storage, data subject rights, consequences of failure to provide the data and the data sources.
According to the GDPR, an employer must limit access to personal data to authorised persons who need access to the data for the purpose it was collected. Where third-party processors are used, an employer must be able to demonstrate that these processors comply with their respective obligations under the GDPR.
Employers must ensure that employee data is processed in a manner that ensures its security. This includes protection against unauthorised or unlawful processing and accidental loss, protection against destruction of personal data and the requirement for the employer to use appropriate technical or organisational measures to ensure the data is protected.
ii Cross-border data transfers
Employers are not obligated to register with the Commissioner for Personal Data Protection to transfer employee data outside the EU.
Where an employer intends to transfer personal data to a third country or international organisation, the employer must inform the employee about the intended transfer and the existence or absence of an adequacy decision by the European Commission. Alternatively, the employer may reference the appropriate or suitable safeguards it takes and the means by which to obtain a copy of these safeguards or where they have been made available.
In the absence of an adequacy decision from the Commission stating that a particular third country ensures an adequate level of protection under the GDPR, standard data protection clauses adopted by the Commission should be used for data transfers from the EU to third countries. This applies to onward transfers as well.
iii Sensitive data
Under the GDPR, ‘special category data’, generally referred to as sensitive data, is personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, or trade union membership. Special category data also includes genetic data, biometric data for the purpose of uniquely identifying a natural person, personal health data or data concerning a natural person’s sex life or sexual orientation.
The processing of special category data without an employee’s explicit consent can be allowed under the GDPR where it is necessary for the performance of obligations and the exercise of rights in the context of an employment relationship. This processing must be authorised by EU or national law providing for appropriate safeguards for the fundamental rights and the interests of the employees.
Under Cypriot law implementing certain derogations allowed by the GDPR,[12] employers that intend to transfer special categories of personal employee data to a recipient in a third country or to an international organisation should inform the Commissioner before the transfer, who may, for important reasons of public interest, impose explicit limits.
If the transfer is based on derogations for specific situations provided for in Article 49 of the GDPR, an impact assessment and prior consultation with the Commissioner is required. The impact assessment must contain the information provided for in Article 35(7) of the Regulation and a description of the technical and organisational security measures provided for in Articles 24, 25, 28 and 32 of the Regulation.
iv Background checks
The GDPR requires personal data to be collected for specific, explicit and legitimate purposes and not to be further processed in a manner that is incompatible with those purposes.
Subject to this principle, background checks are allowed in Cyprus if they are necessary for the purposes required (i.e., the needs of a particular position) and are not considered excessive. The employee should be notified of the employer’s intention to carry out these checks as required by the GDPR.
Similar considerations apply to credit checks.
Under the GDPR, the processing of data relating to criminal convictions should be carried out only under the control of official authority or when it is authorised by EU or Member State law providing for appropriate safeguards for the rights and freedoms of data subjects.
A comprehensive register of criminal convictions shall be kept only under the control of the official authority.
Under Cypriot law, criminal records in Cyprus are kept by the police, and information regarding criminal convictions can only be accessed by the data subject or any person authorised by the data subject.
v Electronic signatures
Electronic signatures are permissible in Cyprus under EU law and national legislation.
An electronic signature will not be inadmissible in legal proceedings solely on the grounds that it is in electronic form, or that it does not meet the requirements for qualified electronic signatures, which have the equivalent legal effect of a handwritten signature. A qualified electronic signature based on a qualified certificate issued in one Member State will be recognised as a qualified electronic signature in all other Member States.
XIII Discontinuing employment
i Dismissal
A dismissal will be considered unlawful if it cannot be justified based on any of the following grounds:
- unsatisfactory performance;
- redundancy;
- force majeure, acts of war, etc.;
- expiry of fixed term;
- display of gross misconduct that warrants summary dismissal; or
where it is clear that the employment relationship cannot be reasonably expected to continue (disciplinary or criminal offence, indecent behaviour, repeated disregard of work regulations, etc.).
An employer is not obligated to notify a government authority, works council or trade union unless the parties agree otherwise in a collective agreement.
Minimum termination notice depends on the length of continuous employment, as follows:
notice by the employer, for the following employment periods:
- 26 to 51 weeks: one week’s notice;
- 52 to 103 weeks: two weeks’ notice;
- 104 to 155 weeks: four weeks’ notice;
- 156 to 207 weeks: five weeks’ notice;
- 208 to 259 weeks: six weeks’ notice;
- 260 to 311 weeks: seven weeks’ notice; and
- 312 or more weeks: eight weeks’ notice; and
- notice by the employee, for the following employment periods:
- 26 to 52 weeks: one week’s notice;
- 53 to 260 weeks: two weeks’ notice; and
- 261 or more weeks: three weeks’ notice.
The employer has the right to require the employee to accept payment in lieu of notice.
Dismissed employees are not entitled to severance or other compensation if their dismissal is considered lawful. Employers and employees are free to enter into a settlement agreement.
ii Redundancies
An employee is considered redundant when the employer ceased or intends to cease the operations that require the services of the employee. The employer may cease operations for any of the following reasons:
modernisation, mechanisation or any other change in production methods or organisation that reduces the number of employees required;
changes in products, production methods or the skills required of employees;
elimination of processes;
difficulties in placing products on the market or credit difficulties;
shortage of orders or raw materials;
shortage of means of production; or
reduction in the volume of work or business.
Employers should notify the Ministry of Labour and Social Insurance of redundancies at least one month before the scheduled dismissal date.
Employers should notify trade unions of redundancies if required by collective agreement or if the dismissal is part of a ‘collective redundancies’ exercise.
Collective redundancies are redundancies made by employers for reasons unrelated to employees, as long as the number of redundancies within a period of 30 days is, at least:
- 10, where between 20 and 100 employees are employed;
- 10 per cent of employees, where between 101 and 300 employees are employed; and
- 30, in enterprises that normally employ at least 300 employees.
A social plan is not required for redundancies. However, negotiations should cover methods for avoiding collective redundancies, reducing the number of affected employees and mitigating the consequences of the redundancies through social measures that aim to re-employ dismissed employees.
An employer who makes employees redundant must give priority to the dismissed employees if it wishes to re-increase its workforce with the same type of employees within eight months of the redundancies.
An employer must provide a minimum notice of termination in accordance with the law and has the right to require the employee to accept payment in lieu of notice (see Section XIII.i).
Employees are not entitled to severance or other compensation if a redundancy is considered lawful. Redundant employees may be entitled to receive payments from the government.
Employers and employees are free to enter into a settlement agreement.
XIV Transfer of business
In the event of a business transfer, there is an automatic assignment from the transferor to the transferee of all the transferor’s rights and obligations under employment contracts or employment relationships that exist on the date of transfer. After the transfer, the transferee maintains the working conditions agreed upon in any relevant collective agreement for a minimum period of one year.
The business transfer cannot itself be a reason for dismissal. However, a business transfer does not bar dismissals due to economic, technical or organisational reasons.
The transferor and the transferee have an obligation to inform employees who will be affected by the transfer, in good time, about the following:
- date or proposed date of the transfer;
- reasons for the transfer;
- legal, financial and social consequences of the transfer for employees; and
- suggested measures to be taken in relation to the employees.
XV Outlook
Employers in Cyprus should be prepared to meet the increased costs that will result from the new national minimum salary requirements and social insurance contributions. They should also familiarise themselves with the requirements of the new legislation on flexible working arrangements and work/ life balance, transparent working conditions and Telework and to take practical measures to comply with their relevant statutory obligations and to deal with any requests from eligible employees.
To ensure compliance with their new obligations, employers are advised to review their contracts to ensure that the necessary information which must be given to the employees is included and to also have in place comprehensive internal policies and procedures to ensure that employees will be aware of their rights and be able to exercise them in a fair manner, especially as regards requests for flexible working arrangements and Telework.
As regards Telework in particular, it is essential that employees also ensure that they have the necessary knowledge and resources to carry out health and safety risk assessments and data protection impact assessments and to have the appropriate technical and organisational infrastructure in place to support such working arrangements.