Payroll Services Cyprus 2026 — SISC, GHS, PAYE and the IR63 Return

Social Insurance Services (SISC) contributions are 8.8% for the employee and 8.8% for the employer. Both rates are withheld by the employer from the monthly payroll and paid to SISC by the last day of the month following the payroll month. January payroll means the SISC contribution is due by 28 February. Late payment attracts interest and surcharges.

The annual insurable earnings cap is €68,904. Contributions are calculated on earnings up to this ceiling — so for an employee earning €100,000 per year, SISC is calculated on €68,904, not €100,000. The cap applies to SISC, the redundancy fund and the industrial training fund. It does not apply to GHS, which has its own much higher ceiling of €180,000 a year, or to the social cohesion fund, which has no ceiling.

SISC contributions build entitlement to the state pension, unemployment benefit, sickness benefit, maternity benefit and redundancy payments. The employee's share is deducted from their net pay; the employer's share is an additional cost above the gross salary. The registration process requires the employer to open an SISC employer account before the first payroll run — you cannot process the first salary without an employer registration number.

The practical implication of the cap: for salaries above approximately €5,239 per month (€68,904 / 12), the SISC contribution stops growing. An employee on €6,000 per month pays the same SISC as one on €5,239 — the percentage on the excess is zero. This is why the gross-to-net calculator above shows SISC deductions levelling off at higher salaries. GHS, by contrast, keeps rising up to its own ceiling of €180,000 a year.

If you are a new employer, the SISC registration process involves submitting the employer registration form (EE1) to the District Labour Inspection Office or the Social Insurance Services district office, providing company registration details, the registered office address and the first employee's details. The process typically takes 5 to 10 working days. Once registered, you receive an employer registration number that you use on all SISC correspondence and monthly contributions.

The General Healthcare System (GHS, or GeSY in Greek) is the contribution that funds Cyprus's universal health insurance. The employee pays 2.6% and the employer pays 2.9%. GHS is charged on income up to €180,000 a year — far above the SISC cap — and applies to the full salary up to that ceiling, including bonuses, 13th salary and benefits in kind. The rate is set by the Minister of Health and has been at these levels since 2024.

The redundancy fund is an employer-only contribution at 1.2%, capped at the same €68,904 annual ceiling as SISC. It funds statutory redundancy payments to employees who are dismissed after at least two years of continuous service. When an employee qualifies for a redundancy payment, the amount is drawn from the fund — the employer does not pay it out of pocket unless the fund payment is insufficient.

The Human Resource Development (HRD) fund — also called the industrial training levy — is an employer-only contribution at 0.50%, capped at the SISC ceiling. It funds training subsidies for employees through the Human Resource Development Authority (HRDA). Employers can claim back training costs (language courses, professional qualifications, upskilling) against this fund, so it is not purely a tax — it is a ring-fenced training budget administered by the HRDA.

The social cohesion fund is an employer-only contribution at 2.0% with no earnings cap. It funds the central welfare system administered by the Ministry of Labour. Unlike the redundancy fund and HRD, there is no clawback mechanism — it is a genuine employer tax. Combined with GHS, which runs on to €180,000, this means the employer on-cost percentage actually rises for salaries above the SISC cap, because SISC, redundancy and HRD stop growing while GHS and cohesion continue.

Provident funds are separate from the statutory contributions. They are voluntary schemes where employer and employee each contribute a percentage (typically 5% to 10% each) into a fund that pays out on retirement, death or resignation. They are common in professional sectors and are often written into individual employment contracts or collective agreements. Provident fund contributions are tax-deductible for the employer and are not taxed as income for the employee until withdrawal. They are not mandatory — if your contract does not mention one, there is no legal requirement to contribute.

PAYE (Pay As You Earn) is the mechanism for withholding income tax from salaries at source. The employer calculates the monthly income tax based on the 2026 tax bands — 0% up to €22,000, 20% to €32,000, 25% to €42,000, 30% to €72,000 and 35% above — divides the annual liability by 12, and deducts it from the employee's gross pay. The net amount reaches the employee; the withheld tax is held by the employer pending payment to the Tax Department.

The deadline is the end of the month following the payroll month. January payroll means PAYE must reach the Tax Department by 28 February. February payroll means 31 March. This is the same deadline as SISC, which is convenient — but the payments go to different authorities. SISC goes to the Social Insurance Services; PAYE goes to the Tax Department via TaxisNet. Missing one does not automatically mean missing the other, though they share the same due date.

The calculation for monthly PAYE is straightforward in principle but has edges. The employer annualises the monthly salary, calculates the annual tax liability using the progressive bands, divides by 12, and withholds that amount. Adjustments happen at year-end: if the employee worked fewer than 12 months, or received a one-off bonus that pushed them into a higher band, the reconciliation happens on the IR63 annual return. Over-withheld tax is refunded; under-withheld tax is collected.

New resident employees earning above €55,000 per year get a 50% income tax exemption for the first 17 years of Cyprus tax residency. This is the post-2024 reform that replaced the old 20% expat relief. For these employees, the employer calculates PAYE on 50% of the taxable income, not 100%. The exemption must be claimed through the Tax Department — the employer does not apply it unilaterally; the employee must have a ruling or confirmation in place. The gross-to-net calculator above includes this option.

Late PAYE payment triggers a 5% surcharge on the unpaid amount plus interest, which is charged on overdue tax. Repeated late payments can result in the Tax Department blocking the employer's TaxisNet account, which prevents filing other returns until the PAYE arrears are cleared. The practical consequence is that payroll compliance is not optional — a blocked TaxisNet account means you cannot file your VAT return, your corporate tax return or any other tax filing until the PAYE is settled.

The IR63 is the annual employer return. It reports every employee who worked for the company during the tax year — their full name, social insurance number, gross earnings, benefits in kind, income tax withheld, SISC contributions and GHS contributions. It is filed through TaxisNet, the Tax Department's online portal. The deadline is 31 March of the year following the tax year: the IR63 for tax year 2026 is due 31 March 2027.

Before the IR63 is filed, every employee must receive a TD63 certificate — the individual statement of earnings and deductions — by 31 January of the following year. The TD63 is what the employee uses to file their own IR1 personal income tax return. If an employee has not received their TD63 by the end of January, they cannot file their IR1 by the 31 July deadline, and the employer is in breach. The TD63 and the IR63 report the same data from different perspectives: the TD63 is per employee, the IR63 is the consolidated return for all employees.

The IR63 is distinct from the IR1. The IR63 is the employer's return; the IR1 is the individual employee's return. Employers file the IR63; employees file the IR1. The IR1 deadline is 31 July of the following year — later than the IR63 — which gives employees time to receive their TD63 and prepare their personal return. Getting these forms confused means filing the wrong document to the wrong authority, which causes delays and potential penalties.

The IR63 must reconcile with the monthly PAYE payments made during the year. If the total income tax withheld across all 12 months does not match the total reported on the IR63, the Tax Department will flag the discrepancy. The most common cause is a year-end bonus that pushed an employee into a higher tax band, or a mid-year salary increase that was not reflected in the monthly PAYE calculation. The reconciliation is done on the IR63 — any shortfall is collected, any overpayment is refunded.

The deadline calendar above shows all 12 monthly SISC and PAYE deadlines plus the TD63 and IR63 annual deadlines. You can export them as a .ics file and import it into Outlook, Google Calendar or Apple Calendar — so you never miss a filing. Every monthly deadline is the last day of the month following the payroll month; the two annual deadlines are 31 January (TD63) and 31 March (IR63).

Outsourced payroll in Cyprus typically costs between €25 and €60 per employee per month, depending on the complexity of the payroll, the number of employees and the level of HR support included. A company with 5 employees on straightforward monthly salaries will be at the lower end. A company with 50 employees across multiple pay grades, bonuses, overtime and shift allowances will be at the higher end. The estimator above gives a range based on headcount — the actual quote will depend on the specifics.

What is included in the fee: monthly payslip generation, SISC and GHS calculations, PAYE income tax withholding, monthly SISC payment filing to the Social Insurance Services, the IR63 annual employer return, TD63 certificates to employees, new-hire and leaver processing, and year-end reconciliation. What is typically not included unless separately priced: employment contract drafting, disciplinary procedures, redundancy calculations and HR advisory — these are billed separately or as a retainer.

The break-even point — where outsourcing becomes cheaper than employing an in-house payroll administrator — is roughly 15 to 25 employees. Below that headcount, a full-time payroll person costs more than outsourcing. Above it, an in-house administrator may be more cost-effective, especially if they also handle HR and accounting functions. The crossover depends on the complexity of the payroll and the salary of the administrator — a qualified payroll clerk in Cyprus earns €1,800 to €2,500 per month.

The risk of not outsourcing is not the monthly cost — it is the compliance exposure. Late SISC payments attract interest. Late PAYE triggers a 5% surcharge. A missed IR63 filing means the company is non-compliant with its employer obligations, which surfaces during a Tax Department audit. The cost of a single compliance breach — interest, surcharges, professional fees to resolve it — typically exceeds a full year of outsourced payroll fees. For most SMEs, outsourcing is not just cheaper than in-house; it is risk insurance.

When choosing a provider, ask three things. First: do they file directly with SISC and the Tax Department, or do they prepare the calculations and you file? A provider that files on your behalf eliminates the administrative burden entirely. Second: do they carry professional indemnity insurance? If they make an error in PAYE calculation that results in a penalty, their insurance should cover it. Third: do they have a track record with companies of your size and sector? Payroll for a 5-person tech company is different from payroll for a 50-person construction firm with shift workers and union agreements. Book a consultation to discuss your payroll requirements with our team.

The 13th salary is a standard Cyprus convention, typically paid in December. It is not a bonus — it is an additional month of salary, equal to the regular monthly gross. For budgeting annual payroll costs, you must include 13 months of salary plus 13 months of employer contributions, not 12. This is the most common error first-time employers in Cyprus make when projecting their annual payroll budget.

The 13th salary is subject to the same income tax, SISC and GHS as a regular monthly salary. It is not a tax-free benefit. The income tax is calculated using the annualised tax bands — since the employee has already received 12 months of salary, the 13th salary is likely to fall entirely in the highest band the employee has reached. For an employee on €4,000 per month, the 13th salary adds €4,000 of income that is taxed at 30% or 35% depending on the cumulative position.

The SISC cap matters here. If the employee's 12-month cumulative earnings have already reached the €68,904 annual insurable earnings cap, the 13th salary attracts zero SISC contribution — both employee and employer. GHS, however, continues to apply up to its own ceiling of €180,000 a year. So the 13th salary still costs the employer 2.9% GHS plus 2.0% social cohesion, even when SISC has been maxed out. This is a nuance that many payroll systems miss — the 13th salary is not free of employer contributions just because the SISC cap has been hit.

Some employers negotiate a 12-month salary structure instead of the 13-month convention. This is permissible — the employment contract specifies the annual gross, and the payment schedule is a contractual matter. But if the contract or collective agreement specifies a 13th salary, the employer cannot unilaterally switch to 12 months. The convention is deeply embedded in Cyprus employment culture, and employees expect it. Removing it requires renegotiation of the employment contract.

The employer cost calculator above assumes a monthly salary — to see the full annual cost including the 13th salary, multiply the monthly employer cost by 13, not 12. Or set the headcount to your actual number and multiply the monthly figure by 13. The difference between 12 and 13 months is the cost of the 13th salary — roughly one month of gross plus one month of employer contributions.

Termination of employment in Cyprus is governed by the Termination of Employment Law (Cap. 186). The minimum notice period depends on length of service: 1 week for 26 weeks to 2 years, 2 weeks for 2 to 5 years, 1 month for 5 to 10 years, and 2 months for over 10 years. The notice must be given in writing. Payment in lieu of notice is permitted — the employer pays the salary for the notice period and the employment ends immediately.

Redundancy — dismissal for operational reasons, not performance — triggers a statutory redundancy payment from the Redundancy Fund for employees with at least 2 years of continuous service. The calculation is based on length of service and weekly earnings, capped at a statutory weekly amount. The employer files a claim with the Social Insurance Services, and the fund pays the employee directly. If the employer dismisses for cause (misconduct, capability), no redundancy payment is due — but the employer must be able to justify the dismissal if challenged at the Industrial Disputes Tribunal.

Severance — the payment above the statutory minimum — is a contractual matter. Employment contracts may specify a severance formula that is more generous than the statutory redundancy payment. This is common for senior roles and is often negotiated at the point of hire. If the contract specifies a severance formula, it is binding. If it does not, the statutory redundancy payment is the only obligation (for qualifying employees).

Unfair dismissal — termination without a valid reason, or without following the correct procedure — can be challenged at the Industrial Disputes Tribunal. The tribunal can order reinstatement or compensation. The maximum compensation is 2 years' salary, but awards are typically lower. The process takes 6 to 18 months. Employers should document performance issues, disciplinary warnings and the rationale for any termination — a paper trail is the best defence against an unfair dismissal claim.

The final payslip for a terminating employee must include all accrued salary, accrued holiday pay, the 13th salary pro-rata (if the contract includes one), any overtime or bonuses due, and the PAYE on the total. The employer must also notify SISC of the termination and file a leaver form. If the employee has reached the SISC cap, the final payslip may attract zero SISC — but GHS continues to apply. See the gross-to-net calculator above to model the final payment.

For a collective redundancy — 20 or more dismissals within 90 days — the employer must consult employee representatives and notify the Ministry of Labour at least 30 days before the first dismissal. Failure to follow the consultation procedure can result in penalties and extended notice periods. This is separate from individual termination law and applies regardless of the reason for the redundancies.

This page was last reviewed on 30 July 2026 by the tax.com.cy advisory team. The content reflects the Social Insurance Services contribution rates, the General Healthcare System (GHS/GeSY) rates, the Tax Department filing deadlines for PAYE and the IR63 employer return, and the Termination of Employment Law (Cap. 186). The SISC rate is 8.8% for employees and 8.8% for employers, capped at €68,904 annual insurable earnings. GHS is 2.6% employee and 2.9% employer, on income up to €180,000 a year. PAYE is due by the end of the month following the payroll month. The IR63 is due 31 March of the following year.

This guide is informational and does not constitute legal or tax advice. Payroll obligations depend on the specific circumstances of each employer and employee. Book a consultation to discuss your payroll requirements with our team.