Cyprus Payroll and Social Insurance: Employer Obligations and Costs

Hiring employees in Cyprus requires the company to register as an employer and manage monthly payroll, social insurance contributions, and GESY (health system) contributions. This guide covers everything a Cyprus company needs to know about payroll obligations.

Registering as an Employer

Before hiring, the Cyprus company must:

1. Register with the Social Insurance Services (SIS): Online via the SIS portal or in person at the district Social Insurance office. You will receive an employer registration number.

2. Register with the Tax Department for PAYE: If any employee’s annual salary will exceed €19,500 (the income tax zero-rate threshold), PAYE withholding applies. Register via TAXISNET.

3. Notify the Social Insurance Services within 1 working day of each new employee commencing employment.

Contribution Rates (2025)

Payroll costs in Cyprus are composed of the gross salary plus employer contributions. The key rates:

Note: Social insurance contributions are capped at the insurable earnings ceiling. The ceiling for 2025 is approximately €60,060/year (€5,005/month). Earnings above this ceiling are not subject to social insurance contributions — only GESY and the other levies continue above the ceiling.

GESY has no contribution ceiling — the 2.9% employer and 2.65% employee rates apply to all earnings.

True Employer Cost: Example

A Cyprus employee with a gross salary of €3,000/month:

The employer pays 15.4% above gross salary — or approximately €3,462 for every €3,000 of gross pay. Annual cost: €41,544 for a €36,000 gross salary.

The employee receives:

• Gross salary: €3,000
• Less employee SI (8.8%): -€264
• Less employee GESY (2.65%): -€80
• Less PAYE (calculated on annual income): variable
• Net salary: approximately €2,600/month (before income tax, which depends on annual income and personal circumstances)

PAYE (Pay As You Earn)

If an employee’s annual income exceeds €19,500, income tax applies on the excess. The employer withholds PAYE from each monthly salary payment and remits it to the Tax Department.

Monthly PAYE calculation:

1. Annualise the monthly salary (multiply by 12)
2. Deduct personal allowances (social insurance contributions, certain expenses)
3. Apply the Cyprus income tax rates to the taxable annual income
4. Divide by 12 to get the monthly PAYE amount
5. Withhold this amount from the employee’s salary and remit to Tax Department

Cyprus income tax rates (2025):

• €0–€19,500: 0%
• €19,501–€28,000: 20%
• €28,001–€36,300: 25%
• €36,301–€60,000: 30%
• Above €60,000: 35%

Employees earning below €19,500 annually owe no income tax and no PAYE withholding is required.

Monthly Payroll Process

Each month, the company (or its payroll provider) must:

1. Calculate gross salaries (fixed and variable components)
2. Calculate employer contributions (SI, GESY, etc.)
3. Calculate employee deductions (SI, GESY, PAYE)
4. Prepare payslips for each employee
5. Remit employer + employee SI to Social Insurance Services (by the 30th of the following month)
6. Remit PAYE to the Tax Department (by the 31st of the following month)
7. Remit GESY contributions to the Health Insurance Organisation

Failure to remit on time results in penalties and interest.

Annual Year-End Obligations

At year end, the employer must:

• Prepare the IR63 (Certificate of Emoluments) for each employee — a summary of earnings and deductions for the year. Issued to employees by 31 March following the year end.
• File an IR7 (Employer’s Return of Employees Emoluments) with the Tax Department — a summary of all employees’ earnings and PAYE deducted. Due by 31 July.
• File annual social insurance declaration with the Social Insurance Services.

Director Salaries

A director of a Cyprus company can be paid a salary (as an employee) or a director’s fee. Both are subject to the same PAYE and social insurance rules if the director is treated as an employee.

Owner-directors who are non-dom tax residents typically choose to take a minimal salary (€19,500/year to utilise the zero-rate band) and take the rest as dividends. On the salary portion:

• €19,500 × 8.8% employer SI = €1,716/year employer SI
• €19,500 × 8.8% employee SI = €1,716/year employee SI (deducted from salary)
• PAYE: €0 (below the threshold)
• GESY employer (2.9%): €566/year
• GESY employee (2.65%): €517/year

Total employer cost of €19,500 salary: approximately €21,782/year.

Hiring Non-EU Employees

If the Cyprus company wishes to employ non-EU nationals, a Cyprus work permit is required (unless they have EU right of residence). Work permit applications take 1–4 months typically. The Fast Track Business Activation route accelerates this for companies meeting specific investment thresholds.

Work permits and employee relocation →

Payroll Software and Outsourcing

Most small Cyprus companies outsource payroll to their accounting firm. This typically costs:

• 1–5 employees: €100–€250/month
• 6–15 employees: €200–€500/month
• 16+ employees: negotiated, often per-employee rate

For companies with very few employees (1–2), the accounting firm handles payroll as part of their services. For larger payrolls, dedicated payroll software (e.g., BambooHR, PayFit, or local Cyprus systems) is used.

Related: Accounting services overview → · Business relocation — work permits → · Non-dom and salary optimisation →