Cyprus Labour Market

Cyprus Labour Market & Employment law overview The labour force in Cyprus is estimated at 380,400 persons. Of these, 8.0 percent work in agriculture, 0.5 percent in fishing and mining, 10.6 percent in manufacturing and utilities, 9.9 percent in construction, and the remaining 71.0 percent in services (including 28.0 percent in trade and tourism).

According to Eurostat’s Labour Force Survey, Cyprus exhibits an employment rate of 68,5% for the age class 15-64; the rate is the highest among the new ten EU member states and above the average employment rate of the EU 15 (65,2%). This rate positions Cyprus in line with the EU/s Lisbon target of 70% by 2010.

The tertiary sector for the provision of services accounts for the largest percentage of the workforce (71.2%), while the secondary and primary sectors account for a percentage of 24.1% and 4.7% respectively.

Since 1977, the rate of unemployment in Cyprus has not exceeded 4.0 percent of the economically active population, significantly lower than the EU average rate of unemployment. At the end of 2008, unemployment edged up to 3.9 percent with a rising trend, albeit still third-lowest in the EU.

Cyprus has a high per capita rate of college graduates, including many U.S. graduates, and offers an abundant supply of white-collar workers with English widely spoken.

In response to labour shortages in recent years, more women have joined the labour force (women are now about 58.4 percent of the labour force, compared with 33.4 percent in 1980) compared to 56,3% of the EU average. . In 2008, Cyprus hosted about 65,000 legally-registered foreign workers, including about 15,000 live-in domestic servants. There are also many illegal workers — more than 30,000 according to one unofficial estimate -–with the rate of illegal immigration increasing.

The legislated minimum wage (As at March 2010) for prescribed positions[sales staff, clerical workers, auxiliary healthcare staff, auxiliary staff in nursery schools, auxiliary staff in crèches and auxiliary staff in schools] is currently €835 – at appointment per month, rising to €887 after six months’ employment. All other occupations, including unskilled workers, are covered under collective bargaining agreements between trade unions and employers within the same economic sector, and the wages set in these agreements are significantly higher than the legislated minimum wage. Existing legislation in Cyprus requires that foreign workers receive at least the minimum wage. Labour relations in Cyprus Since Cyprus’s accession to the EU, the European Union’s legislation framework regarding labour regulations has been adopted.

The Cyprus labour market has a tradition of social dialogue and a well-developed institution of free collective bargaining. Terms and conditions of employment are negotiated either directly between the employer and the employee or through collective bargaining between trade unions and employers’ organisations.

Currently, about 70.0 percent of the labour force in Cyprus is unionized (compared to 80.0 percent in 1980), which gives the unions a strong say in collective agreements. Head-on confrontations between management and unions do occur, although long-term work stoppages are rare. Collective agreements regulate employment conditions such as remuneration, working hours, health and safety, annual holidays and provident fund.

A recent study by Harvard University covering 60 countries found that union power in Cyprus was perceived to be “the strongest in the world,” while labor relations were perceived to be “relatively peaceful.” International business companies are not required to hire union labor. Cyprus Labour legislation As far as Cyprus employment law is concerned, a number of legal principles such as the right to work, the right to belong to trade unions, and the prohibition of discrimination on grounds of race or sex stem directly from the constitution. Cyprus has also ratified all the major international conventions of the

International Labour Organisation.

The harmonisation of Cyprus law with the acquis communautaire brought substantial changes in many areas of labour law. Some important legislation that was introduced and affected Cyprus domestic law are:

• The Preserving and Securing the Rights of Employees during the Transfer of Businesses, Undertakings or Parts of Business Law (Law 104(I)/2000), referred to as the Transfer of Undertakings Law, Law 104(I)/2000. This law harmonised Cyprus law with the provisions of the Transfer of Undertakings Directive 77/187EC.
• The Collective Dismissals Law (Law 28(I)/2001) which harmonised domestic law with the Collective Dismissals Directive 98/59/EC.
• The Protection of the Rights of Employees in the event of Insolvency of the Employer Law (Law 25(I)/2001) which harmonised domestic law with Directive 80/987/EC.

Employment contracts in Cyprus Employment contracts are concluded freely between employers and employees. Any term agreed is valid provided that it does not contradict any law. Basic employee rights are safeguarded by statute and may be summarised as follows:

• A working week cannot exceed 48 hours, including overtime.
• Parents are entitled to maternity and parental leave (20 weeks for maternity leave).
• Equal pay for equal work is safeguarded.
• Minimum wage is guaranteed.
• Dismissal from employment can take place for specific reasons.

Termination of employment The Termination of Employment Law (Law 24/1967) is one of the principal employment law statutes in Cyprus and governs the termination of the employment relationship. It is composed of six parts and four schedules. The first and fourth schedules set the basis of compensation for arbitrary dismissal and redundancy, respectively; the second schedule sets the rules for “computation of period of employment”; and the third schedule deals with “continuity of employment”.

In Part one of the law an employee is defined as any person who works under a contract of service. Irrespective of this definition, the court may consider a person to be an employee without a contract if it believes that an employer and employee relation exists.

Part two of the law deals with unfair dismissal situations. The basic rule is that a dismissal is unfair if the employer terminates the employment for any reason other than the exceptions included in section five of the law.

To qualify for unfair dismissal compensation an employee must be less than 65 years of age and must have been continuously employed by the employer for not less than 26 weeks, unless there is a written agreement that may extend the qualifying period of continuous employment up to 104 weeks. In cases where a dismissal is declared unfair, the employer must compensate the employee. The compensation is calculated in accordance with the first schedule of the law. This provides compensation of not less than what the employee would have received under the fourth schedule (dealing with redundancy payments) up to a maximum of two years’ wages. Factors to be considered in the award are wages, length of service, loss of career prospects, circumstances of the dismissal and the employee’s age.

The fourth schedule of the Termination of Employment Law determines the level of compensation according to the years of employment which are codified in the table below.

Section five of part two deals with cases where termination of employment does not give rise to compensation. These are:

• If the employee fails to carry out his work in a reasonably efficient manner.
• If the employee becomes redundant within the meaning of part four of the law.
• The termination is due to an act of God or force majeure.
• The contract is for a fixed term and has expired.
• The employee renders himself liable to dismissal without notice.

When it is clear that the employer-employee relationship cannot reasonably be expected to continue. The employer-employee relationship cannot reasonably be expected to continue when the employee is guilty of gross misconduct; he commits a criminal offence in the course of his duties without the agreement of his employer; he is guilty of immoral behaviour in the course of his duties; or he repeatedly disregards work and other rules.

It should also be noted that a lawful termination by the employee, as a result of the conduct of the employer, may be considered as a constructive dismissal or termination by the employer within the meaning of the law. The contracting parties agree the period of notice for termination of an employment contract but it cannot be less than what the law provides. The tables below show the minimum periods of notice that must be given.

From the employer to the employee.

From the employee to the employer

Employment of foreigners Non-Cypriots employed by local employers

It is very difficult for a non-Cypriot to obtain a work permit to work in Cyprus for a local employer. For such a permit to be given it must be shown that, because of qualifications and know-how, no Cypriots are readily available for that particular post. The Ministry of Labour through the local labour office supervises this process. Work permits are usually given for six months and are renewable. A non-Cypriot that works for a local employer will be part of the social security scheme. The employer will, therefore, be obliged to make social security deductions from the employee’s salary and remit these deductions, together with an equal amount, being the employer’s contribution, to the social security authorities.

Non-Cypriots employed by international business companies

It is a simple procedure for non-Cypriots that international business companies employ staff to obtain a work permit for the first 24 months of employment. Renewals are given annually thereafter, provided that the employee and employer comply with the regulations that the Ministry of Interior and the immigration authorities impose.

To be eligible to obtain a work and residence permit as a director or employee of a company, the company has to show that it has made a minimum investment in Cyprus of at least €171,000. In addition, the directors have to show that they have available funds for their salary, at least €41,000, i.e., to cover their salary for one year.

The main criteria can be summarised as follows:

• The applicant company must have transparent ownership, i.e., the beneficial shareholders have to be disclosed to the immigration department.
• The company must maintain offices in Cyprus. As proof of this a lease is required.
• The company should operate during normal business hours with its own personnel.
• It should be able to prove that it is economically active and viable. Each year it has to file audited accounts and annual returns.
• The minimum share capital is €42,700.

For the employment of more than two alien directors a bank reference is required from a Cypriot Bank that certifies the ability of the company to pay its employees.

• A company that fulfils the above criteria can employ foreigners in the position of directors or managers.
• The maximum number is three unless the Department of Immigration is convinced that a greater number is required.
• The requirements that each candidate must fulfill are:

• to be at least 24 years old;
• to be qualified for the position, i.e., possess the necessary academic qualifications and education;
• to receive remuneration analogous to his/her position. The minimum accepted salary is €41,000 per year; and
• to prove that he can support himself and his family for a period of one year. This is usually proven by producing statements of a bank account that show that the candidate has at least an amount of money equal to his salary for one year.

Non-Cypriots employed by international business companies are not part of the social security scheme and are exempt from any contributions.

Workers safety, health and welfare

Legislation safeguards the workers’ right to safe and healthy working conditions. The core of the legislation is the Safety and Health at Work Law, which is in line with the provisions of ILO Convention 155 of 1981 on Occupational Safety and Health, as well as with the principles and most of the provisions of EU Directive 89/391/EEC (Framework Directive).

Social insurance

In October 1980, a new social insurance scheme was put into operation. With some minor exceptions, the scheme covers all employed and self-employed persons on the island. Non-employed persons may, under certain conditions, join the scheme on a voluntary basis.

Trade unions

After independence in 1960, the Cypriot trade union movement became more organised and substantial. The white- and blue-collar labour forces increased spectacularly due to the development of industry, commerce and services. Apart from the Pancyprian Federation of Labour (PEO) and the Cyprus Workers’ Confederation (SEK), many other trade unions and occupational organisations came into being, such as the Pancyprian Public Employees Trade Union (PASYDY), the Cyprus Greek Teachers’ Organisation (POED), the Organisation of Secondary School Teachers of Cyprus (OELMEK), the Association of Teachers of Technical Education Cyprus (OLTEK), the Cyprus Union of Bank Employees (ETYK), the Pancyprian Federation of Independent Trade Unions (POAS) and the Democratic Labour Federation of Cyprus (DEOK). Conflict between trade unions in Cyprus is rare. This unity became the principal reason for the successful establishment of joint action among the leadership of the PEO, the SEK and the other occupational organisations. In the spirit of united action, the PEO and the SEK submit joint claims and undertake, with other trade unions, common struggles.

Sex discrimination

Article 28 of the constitution prohibits all forms of discrimination. A number of laws have also been passed that are aimed at the elimination of sex discrimination. The source of these laws has been certain international conventions, most notably the ILO conventions. In addition, case law has offered some assistance towards the development of the law, albeit of limited impact.

Minimum Wage

Though Cyprus has no statutory national minimum wage, the Law on Minimum Wage Levels provides for minimum salaries and wages to be set for six occupations

• sales staff
• clerical workers
• auxiliary healthcare staff
• auxiliary staff in nursery schools
• auxiliary staff in crèches
• auxiliary staff in schools

Salaries in Cyprus are negotiated by collective agreements by the relevant trade unions, except from the six occupations stated above.

Other occupations not included above or specifically covered by a trade union agreement can seek to collective bargain their employee agreements via a trade union. If an agreement is not in place its up to the individual employee to negotiate on an individual basis their employment contract.

As at March 2010 the labour ministry decided to increase the minimum amounts by 5.6% to
× €835 – at appointment
× €887 – after 6 months employment