The Legal 500

Cyprus law distinguishes a contract of service from a contract of services. This distinction is important for determining payment of taxes and social insurances, and application of statutory employment and other rights.

The relationship established under a contract of services is governed mainly by the provisions of the basic Contract Law while employment is governed by a number of specific statutory provisions, such as those relating to termination of employment.

According to well established principles of Cyprus labor law, to determine whether a person is an employee or an independent contractor all the particular circumstances of the relationship must be taken into consideration, with particular emphasis on the overall relationship between the contracting parties. For the purposes of distinguishing between the two it is therefore not enough to simply rely on the description and the contents of a signed contract.

A written contract would constitute evidence pointing towards the existence of an independent contractor relationship or an employer-employee relationship. However, the contract itself may not be conclusive evidence regarding the actual status of worker or the terms and conditions of his service/ services but account must be taken of all the particular circumstances of the relationship.

For the purposes of making this distinction the courts take into account all surrounding circumstances. The courts will be mainly concerned with the following:

a) How integrated is the worker in the business which hired him - For example, does he use the tools provided to him by the party who hired him or does he use his own tools? Does he work on the other party's premises or from anywhere else?

b) How much control can be exercised over him by the business - For example, does he take orders from the party who hired him for the performance of his obligations or not? Also, does he work fixed hours or does he work whenever needed?

c) What are the economic realities of the relationship - Does the employer pay him a fixed salary or does his income depend on his performance (eg on a commission basis)? Does the employer pay his social insurance and income tax or does he make his own contributions and on what basis?

If the answers to the first parts of the above questions are affirmative, then it is likely that (regardless of anything which may be contained in a contract) an employer-employee relationship will be established.

Who is the Actual Employer

Where more than one natural and / or legal person are involved in employment of another person, for legal reasons it is most important to be able to distinguish who the actual employer is.

To determine who the actual employer is it is necessary to take into account all the actual circumstances of each given case. What is most important to determine is who is actually paying an employee's salary and under whose instructions the employee is actually accustomed to act.

Contracts of Employment

As already mentioned above, a contract of employment will not be considered conclusive evidence of an employment relationship but merely evidence of the possible existence of such relationship.

Cyprus law makes provision for certain matters, such as notice periods, probation periods and annual leave, usually by laying down certain minimum standards/ guidelines which must be observed.

Where the law lays down minimum standards it may allow the employer to determine certain terms in a manner which he may consider more convenient to him. For example, the Law allows for a probation period of six months which may be extended by the employer in certain circumstances, during which the provisions of the law which govern unlawful dismissal such as, for example, the need to establish legitimate reasons and provide minimum statutory notice, do not apply.

Duration of Employment

Employment Contracts in Cyprus may be of a fixed term or of unlimited duration. As a general rule, employment under a fixed term contract is considered as automatically (and lawfully) terminated upon the expiration of the specified term. However, Section 5(d) of the Law on Termination of Employment, Law 24/67 as amended, provides (in free translation) that termination is lawfully effected at the end of the fixed term unless the Industrial Disputes Court has reason to consider that the contract actually was for an indefinite period.

Fixed term contracts should be genuine and not be used as a means of depriving an employee of the benefits which are provided under the legislation for open term contracts (i.e. by year to year renewal of employment by means of fixed term contracts). This depends on a correct judicial evaluation of the relevant facts.

Information Given to the Employee by the Employer About the Terms Which Govern the Employment Contract or the Employment Relationship

The Law imposes an obligation on the employer to provide an employee with specific information about his terms of employment within 1 month, at the latest, from the commencement of his employment.

The information must be given in any of the following ways:
1. In a contract of employment,
2. In a letter of appointment,
3. Any other document, signed by the employer which contains at least all the information below:

The information given by the employer must consist of at least the following:
a) Information about the identity of the parties,
b) The place of work and the registered address of the business or the home address of the employer,
c) The position or the specialization of the employee, his rank, the type of his duties as well as the object of his employment,
d) The date of commencement of the contract or the employment relationship and its anticipated duration if this is for a fixed time,
e) The duration of any annual leave to which the employee is entitled, as well as the manner and time it may be taken,
f) The time limits which must be observed by the employer and the employee in the event of a termination of the employment, either by consent or unilaterally,
g) All types of emoluments to which the employee may be entitled and the time schedule for their payment,
h) The usual duration of his daily or weekly employment,
i) Mention of any collective agreements which govern the terms and/ or the conditions of the employee's employment.

Unlawful Dismissal

Under Cyprus employment law an employee enjoys certain statutory rights, regardless of whether or not these are mentioned in the contract.

Such rights include the right not to be "unlawfully" dismissed.

Labor Law will not, however, offer any protection to any employee who is employed for a period of less than 26 weeks or while under an agreed probation period which can be for a period of 26-104 weeks. Such employment will only be governed by general contract law and any rights and obligations on either party vis-à-vis each other will only be contractual in nature.

Termination of employment will be considered as lawful only if it based on any of the following reasons:
a) Where the employee does not perform his duties in a reasonably satisfactory manner (excluding temporary incapacitation to work due to illness, injury and childbirth).
b) Where the employee has been made redundant.
c) Where the termination is due to force majeure, act of war, civil commotion, act of God, destruction etc.
d) Where the employment is terminated at the end of a fixed period of employment.
e) Where the employee displays such conduct so as to render himself subject to summary dismissal (without notice)
f) The employee may also be dismissed without notice if he has displayed conduct making it clear that the relationship between employer and employee cannot be reasonably expected to continue, committed a serious disciplinary or criminal offence during the performance of his duties, for indecent behavior during the performance of his duties or for repeated violation or ignorance of the rules of his employment.

Dismissal for any reason which cannot be justified under any one or more of the above grounds will be considered unlawful by a Cyprus court and will give rise to a right to statutory compensation.

Labor law in this area can be classified as "social legislation", seeking to protect the employee from being dismissed without cause and the courts will not readily accept any allegations by an employer that a dismissed employee's behavior falls within any of the above grounds. The burden of proof, which by law is on the employer, shows that in effect any dismissal is deemed unlawful unless otherwise proven. Any other ground alleged for dismissal is likely to be regarded by the courts as unlawful.

Notice

Statutory minimum notice to be given by the employer varies according to the employees' period of continuous employment, as follows:

Where the employee has been employed continuously for a period of 26 to 52 weeks one week's notice is required, where the employee has been employed continuously for a period of 52 to 104 weeks two weeks' notice is required, where the employee has been employed continuously for a period of 104 to 156 weeks, four weeks' notice is required and then one additional week of notice for every period of 52 weeks, up to a maximum of eight weeks' notice for a period of 312 or more weeks of continuous employment.

The notice period can be effectively extended by agreement above the prescribed statutory minimum.

The employer who serves notice of termination to an employee has the right to require the employee to accept payment instead of notice. As far as a salaried employee is concerned, such payment should cover his salary entitlement, pro-rata, for the period of the notice.

As regards notice to be given by the employee, this starts from a period of 1 week's notice for 26-52 weeks of employment, 2 weeks for 52-260 and 3 weeks for over 260.

The Legal Provisions Relating to Redundancy (General)

Redundancy in Cyprus is a complex area of law.

Redundancy, if genuine, is one of the reasons for which termination of employment will be considered as lawful, thereby preventing a claim for compensation for unlawful dismissal under the Law.

"Redundancy" is defined as termination of employment in the following cases:
(a) The employer has ceased or intends to cease carrying on the business in which the employee is engaged
(b) The employer has ceased or intends to cease carrying on the business at the place where the employee is engaged
(c) For any of the following reasons which relate to the operation of the business:
(i) Modernization, automation or any other changes in the methods of production or organization which reduces the number of necessary employees
(ii) Changes in the products or the methods of production or the necessary qualifications of the employees
(iii) Closing down of departments
(iv) Difficulties in placing products in the market or credit difficulties
(v) Lack of orders or raw materials
(vi) Rarity of means of production
(vii) Reduction of the capacity of work

As far as redundancy is concerned, the employee who has been employed for a continuous period of 104 weeks with the same employer is entitled to payment from the Redundancy Fund of the Ministry of Employment and Social Insurance (the "Fund"), in accordance with the Law.

It is the employer's statutory obligation to give notice to the Minister of Employment and Social Insurance of any proposed redundancy dismissal at least one month before the intended date of termination. The notice must include the following:
a) The number of employees which may possibly be made redundant
b) The affected branch or branches of the business
c) The occupations and, where this is possible, the names and family obligations of the affected employees
d) The reasons for redundancy

Notice of termination of employment must also be given to the employee, the minimum period of which is determined by reference to the period of his continuous employment with the employer (see above).

Statutory Compensation for Unlawful Dismissal

An unlawfully dismissed employee is entitled to statutory compensation pro-rata to his period of continuous employment with the employer who dismissed him.

Where, for example, prior to dismissal the employee has been employed for a continuous period of up to 4 years, he will be entitled to 2 weeks wages for every period of 52 weeks, and so on.

Statutory compensation entitlement will be additional to any contractual entitlements and any statutory notice period which may be applicable in any given case.

Annual Leave

Under Cyprus law minimum holiday requirement per annum is 20 working days (4 full weeks) for employees with a 5-day working week and 24 days for employees with a 6-day working week. There is no statutory maximum holiday requirement. Public holidays established by statute, custom or contract are not included.

Additional holidays do not accrue by law. These may, however, be a matter of agreement between employer and employee.

Entitlement to holiday is paid, either by social insurance or by the employer. As regards payment by social insurance there is a requirement that the employee has made use of at least 9 consecutive holiday days within that 'year'.

Where the employer wishes to operate his own annual leave scheme (i.e. personally undertake the payment of his employees' annual leave on his own terms) he must obtain an exemption from the obligation to pay annual leave contributions by applying to social insurance. To obtain the exemption the employer's terms must be more beneficial to the employees than those offered by the law (e.g. 21 days annual leave entitlement instead of 20, for a 5-day working week, etc).

Maternity Leave

Law 1009(I)/1997 as amended regulates a female employee's right to maternity leave on presentation of a certificate from a registered doctor that she expects childbirth during a week which is designated in the certificate.

Maternity leave entitlement is for a total duration of 16 continuous weeks, of which 9 must be taken within the period beginning on the second week before the week of expected childbirth.

In the event of adoption, the employee has the right to maternity leave for a total duration of 14 continuous weeks starting immediately from the date of commencement of the caring of a child under the age of 12 years. Prior notice must be given to the Services Department of Social Providence.

The statutory entitlement to maternity leave does not affect possible wider rights to which the employee is entitled to pursuant to a collective or private agreement.

During maternity leave the employee receives maternity entitlement from the Department of Social Insurance.

Parental Leave and Leave for Reasons of Force Majeure

Legislation in Cyprus has been recently enacted to strengthen employees' rights to take leave of absence from work for reasons of parenthood and pressing reasons beyond their control. This Law applies equally to both men and women.

There are certain minimum statutory rights which an employee can enjoy, allowing at the same time the implementation of more favorable provisions either through collective agreements or through agreements between employers and employees.

Parental Leave

Employees who have completed 6 months or more of continuous employment with the same employer, regardless of sex, can claim unpaid parental leave for up to 13 weeks in total on grounds of childbirth or adoption for the purposes of caring and raising the child.

In the case of natural parents, parental leave can be taken between the period from expiration of maternity leave (see above) and the completion of the 6th year of age of a child. In the case of adoption, until the completion of the 6th year of the date of adoption and after expiration of the maternity leave, provided that the child will not have exceeded its 12th year of age by that time.

Parental leave can be a minimum of 1 week and a maximum of 4 weeks annually.

The employee must give written notice to his employer at least 5 weeks before the first day of commencement of his parental leave, while the employer has the right to either refuse parental leave provided that he has reasonable cause to believe that the employee is not entitled to such leave or transfer the dates of the annual leave for reasons associated with the proper operation of the business.

Leave for Reasons of Force Majeure

The employee is entitled to unpaid leave of 7 days per year for reasons of force majeure which are connected to family reasons in relation to illness or accident of his dependants and necessitate the immediate presence of the employee. Such leave can be granted either partially or altogether.

Employees must give notice of their intention to take leave the soonest possible.

Army Reserve Duty

An employer must pay his employees in relation to any period of absence from work due to military service regardless of the fact that the employee has not served his employer during that period.

Sick Pay

Under Cyprus law there is no statutory obligation on the employer to pay sick pay. Where an employer does not enter into a specific arrangement with its employees about sick pay then sick pay is payable by the Social Insurance Department.

An employee is entitled to receive sick pay for any period of over 3 days in which he is unable to work in accordance at the prescribed statutory rate.

The maximum number of days for which sick pay is payable is 156 days in relation to every period of interrupted employment, which can be extended under certain circumstances where incapacity is not of a permanent nature.

Hours of Work

Generally, the number of working hours should not exceed 48 hours per week, including overtime. However, in certain areas (such as hotel industry) different considerations may apply (e.g. 38 hours).

The above rule allows for exemptions (where this does not conflict with the relevant law on any particular area). Firstly, the employee must freely consent to working longer hours; in addition, managerial members of the employees' stuff may be exempt from the statutory working hours' requirement.

Night workers should not, on average, exceed eight working hours per day, within a period of one month or within any other period specified in a contract. Night workers whose work involves hazards or physical or mental stress should not exceed 8 hours.

Minimum Salary

The minimum monthly salary for office employees, medical assistants, assistant child/ baby caregivers and salespersons (engaged in the sale of goods in shops) is currently set at CYP362.00 as of 1st April 2005. For any such person who has completed a continuous period of employment of 6 months with the same employer before and after 1st April 2005 the minimum salary is CYP385.00.

Discrimination (General)

One of the many international instruments against discrimination adopted by the Republic of Cyprus is the Convention Relating to Discrimination (Occupation and Profession) of 1958, Adopted by the General Conference of the International Organization of Employment During its Forty Second Summit in June 1958.

Under the Convention "discrimination" includes:
a) Every discrimination, exception or preference based on the grounds of race, color, sex, religion, political beliefs, ethnic origin or social background, which results to elimination or reduction of the principle of equality of opportunity or treatment in relation to occupation or profession; and
b) Any discrimination exception or preference which may result to elimination or reduction of the principle of equality of opportunities or treatment in relation to occupation or profession, as may be determined from time to time by the State, after consultation with the representative employment and employer organizations or other competent bodies.

Discrimination, exception or preference in relation to a specific profession, which is based on the needs of that specific profession are not considered discriminatory.

Equal treatment is a legal obligation of every employer under national law. This applies to full time as well as part time employees. The general scope of the law in this area is the elimination of discrimination. Briefly, any direct or indirect discrimination or harassment or order which aims to discriminate on the grounds of religion or beliefs, age, sexual orientation, racial or ethnic origin in relation to the terms of entry into employment, self employment and work, terms and conditions of employment, etc, is prohibited.

Equal Pay for the Same or Equal Work

The law imposes an obligation on the employer to provide to his employees equal payment for equal work regardless of sex.

Where a system of professional classification is applied for the purposes of determining pay, this system must be based on common criteria applicable to both male and female employees in such a way so that any sex discrimination is abolished.

The comparison is made with reference between employees who have been employed by the same employer or by businesses controlled by the same employer during the two preceding or following years.

Equal Treatment of Part Time Employees

The equal treatment at work obligation applies to full time as well as part time employees.

Where the employee is a part time employee, permanent or temporary, the aim of the law is to ensure that he enjoys proportionately equal rights as full time employees.

The principle of proportionality requires that a comparable part time employee is entitled to such salary or other benefits in proportion to the number of weekly working hours, compared to the number of working hours of the corresponding comparable full time employee.

Health and Safety at Work

Generally, there is a statutory obligation on every employer to ensure the safety, health and prosperity at work of all his employees.

Furthermore, both employers and employees have specific statutory obligations in relation to health and safety at the workplace which must be followed.

The above general obligation extends to a number of specific obligations, of a rather wide nature, including, inter alia, the provision of such information, directions, training and supervision to ensure the safety and health of employees.

There is also a general statutory obligation for employers to ensure that every employee is provided with the necessary and sufficient training on the matter of safety and health, especially in the form of information and instructions relating to his specific work position or duties.

Risk Assessment

The employer must apply preventive measures by following a number of general principles relating to health and safety, which include risk assessment, risk avoidance, eliminating risks at source, adjusting work to people, monitoring technological progress, replacement of dangerous things by non-dangerous or less dangerous etc.

The employer must have a written assessment of safety and health risks for its employees at work, including those risks relating to groups of employees which are exposed to special dangers and of persons who are not employed by him for reasons which relate to the operation or management of its business. Based on this assessment the employer must take all protective and preventive measures and means necessary.

Accident Book/ Record

Every employer must keep a record of accidents at work which resulted to employees' incapacity to work for more than 3 continuous days and note the total number of working days lost by each injured employee.

Furthermore, every employer must keep a registry of reports of all lethal or serious accidents and dangerous occurrences at work on which the causes, the date, the persons involved and the preventive measures for the future which have been taken, must be noted.

Non-competion

As regards the restraint of trade clauses, according to Cyprus law any agreement by which any one is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void.

Certain specific (yet exhaustive) statutory exemptions concern the sale of good-will of a business and partnerships after dissolution but not restraint of trade in employment. Such clauses are therefore unlikely to be considered valid by Cyprus courts.

Confidentiality/ duty of fidelity

Under Cypriot employment law there is an implied duty of fidelity which goes to the basis of the existence of a contract of employment. It has been long recognized by the Cyprus courts that the employee should offer his services to his employer in a trustworthy and faithful manner.

This obligation, which stems from the duty of trust and good faith which must exist in every employment relationship, requires the employee not to act in a manner directly and substantially prejudicial to his employer's interests or generally in a manner which is capable of causing real or substantial harm to the employer's interests.

The duty of fidelity, as regards confidentiality in employment contracts, extends only to information classed as trade secrets or so confidential that it requires the same protection as a trade secret.

Trade secrets do not generally include the employee's skill and knowledge, information which is publicly available and knowledge of general methods of running a business. Trade secrets can be described as ideas or information which the creator used financial resources to create and made efforts to keep secret.

Social Insurance

General Obligations

The law imposes an obligation on employers to register with the Social Insurance Department. Where the employer maintains branches in various districts or has more than one economic activity he must register separately for each district or activity.

Cypriot residents or EU nationals who reside and work in Cyprus have a general obligation to register with Social Insurance. Social Insurance registration and contributions is compulsory in relation to the employment of any person under an employment contract in Cyprus by a Cypriot employer.

Where a non-Cypriot EU national is temporarily employed in Cyprus for a period of up to 6 months, although he has an obligation to make Social Insurance contributions in Cyprus he can apply to the Ministry for an exemption so that he can continue making Social Insurance payments in his home country.

As regards Cypriot residents who work abroad for a Cypriot employer there is no obligation to register but registration may be possible on a voluntary basis.

The employer must make contributions to all five Funds (Social Insurance, Annual Leave, Termination of Employment, Human Resources Development and Defense).

Every employer must keep an emoluments book or other register in which he must have the following information for each of his employees: Full name, I.D. and Social Insurance Numbers, date of hiring, date of termination of employment, weekly or monthly emoluments as the case may be, the dates and duration of annual leave taken.

The law makes provision to distinguish between certain classes of employees, regulates the calculation of contributions, the method and time of making the contributions, penalties for delay or non-payment, supervision, etc.

Pension Schemes

Old age pension is payable to all insured persons, irrespective of category, in accordance with the relevant statutory provisions.

Another type of pension, the Social Pension, is payable by the State to all residents of the Republic who have completed the age of 65 but are not allowed to receive Old Age pensions under the law.

In general the "pensionable age" is the age of 65 with the possibility of being reduced to the age of 63 or extended to the age of 68, subject to certain statutory conditions.

There is no statutory obligation on the employer to provide occupational pension schemes. However, an employer may establish a "Providence Fund" to which the employees (and/ or the employer) can contribute a percentage of their salary. The overall operation of such Fund is governed by its Memorandum, which must be approved and registered by the Registrar of Providence Funds in advance.