Social Insurance in Cyprus
The Social Insurance Scheme covers compulsorily every person gainfully occupied in Cyprus either as an employed person or as a self-employed person. The insured persons are classified in three categories; employed persons, self-employed persons and voluntary contributors.
The Scheme is financed by contributions payable by the employers, the insured persons and the State. The rate of contribution for the employed persons as from the 1st of April 2009 is 17,9% and for the self-employed persons as from the 6th of April 2009 is 16,9% on their insurable earnings.
The Scheme provides cash benefits for marriage, maternity, sickness, unemployment, widowhood, invalidity, orphanhood, old age, death and employment injury. The Scheme provides also free medical treatment for persons receiving invalidity pension and for employed persons who sustain injuries as a result or an employment accident or an occupational disease.
REGISTRATION OF EMPLOYER
Every employer in Cyprus Must register with the Employers’ Register of the Social Insurance Services.
In the event that the employer has business branches in other districts in Cyprus or performs more than one economic activity,such employer must register in alldistricts or/and for all activities.
DECLARATION OF HIRING EMPLOYEES
Each employer in Cyprus, after hiring new employees, must complete the form “Declaration of Hiring Employees” (Form YKA1-003) and submit it to the nearest Cyprus District Social Insurance Office.
In the case that an employee does not have a social insurance number, the employer must simultaneously submit the application form for the registration of the employee to the Social Insurance Scheme (“Application for Registration of an Employed Person”, Form YKA1-008).
With the submission of the “Declaration of Hiring Employees”, the “Statement of Earnings and Contributions” (Form YKA 2-002) is issued, on which statement the details of both the employer and the employees are shown. The “Statement of Earnings and Contributions”, after being duly completed by the employer, is presented to the Cyprus District Social Insurance Office for the payment of contributions each month.A separate statement is issued for each category of employees
LIABILITY FOR THE PAYMENT OF CONTRIBUTIONS
An employer is liable to pay contributions to the Funds (Social Insurance, Annual Holidays with Pay, Redundancy, Human Resource Development and Social Cohesion) for each of his employees, whose remuneration is not less than €1,71 per week, or not less than €6,83 per month, if he is a salaried employee. For apprentices, the employer is liable to pay contributions to the Social Insurance Fund, even if the apprentice does not receive any remuneration.
The employer’s liability for paying contributions to the above Funds exists even if the employee is working for another employer for the same period or is working as a self-employed person.
The employer’s liability for paying contributions to the Social Insurance Fund ceases on the day the employee reaches the pensionable age, i.e. the age of 65. In the case the employee reaches the pensionable age and does not satisfy the contribution conditions for old age pension, the employer is obliged to continue to pay contributions until the employee is entitled to old age pension. Under no circumstances are contributions payable after the age of 68.
The employer is obliged to pay contributions to the Central Holiday Fund, the Redundancy Fund, the Human Resource Development Fund and the Social Cohesion Fund even if the employee receives old age pension and irrespective of his age.
The employer is not obliged to pay contributions to the Central Holiday Fund if the relevant exemption has been obtained. The exemption for the payment of contributions to the Central Holiday Fund is given by the Minister of Labour and Social Insurance, after the employer files an application. The exemption is granted with the completion of the “Application of the Employer for Exemption from the Obligation of Payment of Contributions” (Form YKA1-005) which is submitted to the nearest Cyprus Social Insurance Office. Exemption is granted in cases where the employer provides annual holidays to his employees on more favourable terms than those provided under the Annual Holidays with Pay legislation.
EARNINGS TAKEN INTO CONSIDERATION FOR THE PAYMENT OF CONTRIBUTIONS
The earnings taken into consideration for the purpose of payment of contributions to the Social Insurance, Annual Holidays with Pay, Redundancy and Human Resource Development Funds are up to a maximum amount which is fixed every year. For 2009, the maximum amount is €924 per week or €4.004 per month. For the Social Cohesion Fund the total earnings are taken into consideration without a maximum amount. Earnings include the basic salary, the cost of living allowance, commissions, the 13th and 14th salary or the 53rd/56th week, overtime etc. For the purpose of payment of contribution, the gross amount of earnings, i.e. before the deduction of any taxes and contributions is taken into consideration.
The amount of contributions paid by the employer to the Central Holiday Fund is considered as part of the earnings for the purpose of payment of contributions to the Social Insurance Fund, the Redundancy Fund, the Human Resource Development Fund and the Social Cohesion Fund.
Earnings payable to the employee for periods exceeding one week or one month, such as 13th salary, earnings of the 54th week, commissions etc., are taken into consideration for the purpose of payment of contributions to the Social Insurance, Annual Holiday with Pay, Redundancy and Human Resource Development and Social Cohesion Funds, up to the amount that when added to the earnings of the employee for the above period are not higher than the maximum amount for that period.
Apprentices whose earnings are lower than half of the amount of the basic insurable earnings are considered to receive earnings equal to the half of this amount for the purpose of payment of contributions to the Social Insurance Fund. For the purpose of payment of contributions to the other Funds, the real earnings are taken into account. The amount of basic insurable earnings is fixed every year. For 2009, this amount is €147,45 per week.
AMOUNT OF CONTRIBUTIONS
Contributions payable by the employers to the above mentioned Funds are calculated as a percentage on the earnings of the employee as set out below:
(a) Social Insurance Fund
- Rate 13,6%: 6,8% is payable by the employer and 6,8% by the employee. In case an employer implements an occupational pension scheme without payment of contributions on the part of the employees, then the employer pays 10,15% and the employee 3,45%.
- For apprentices, the rate of contribution is the same as of all other employees, i.e. 13,6%. However, the rate of contribution of the apprentice is 6,8% on his real earnings. If the real earnings of the apprentice are lower than half the amount of the basic insurable earnings, then any amount of contribution on the difference between the real and the half amount of the basic insurable earnings is payable by the employer.
- The employer is responsible for the payment of his and his employee’s contributions. He is entitled, however, to deduct the amount of contributions he pays on behalf of his employee from the earnings of the employee for the period for which he pays contributions.
(b) Central Holiday Fund
- The rate of contribution to the Central Holiday Fund varies according to the length of annual leave, to which the employed person is entitled, as shown in Tables I and II .
- The contribution to the Central Holiday Fund is payable wholly by the employer.
(c) Redundancy Fund
- Rate 1,2%. The contribution to the Redundancy Fund is payable wholly by the employer.
(d) Human Resource Development Fund
- Rate 0,5%. The contribution to the Human Resource Development Fund is payable wholly by the employer.
(e) Social Cohesion Fund
- As from 1.1.2003 Rate 2%. The contribution to the Social Cohesion Fund is payable wholly by the employer.
Example
An employer who employs, in 2009 an employee with earnings €1.025 per month and entitled to 20 days of annual leave (five days per week of work), pays contributions to the five Funds as follows:
(a) Calculation of earnings
(i) Earnings ………………………………………………………………..€1.025
(ii) Annual holiday contribution (8% on €1.025) ………………..€82
Total …………………………………………………………………………..€1.107
(b) Calculation of contributions
(i) Social insurance contribution (12,8% on €1.107) ………… €141,70
(ii) Annual holiday contribution (8% on €1.025) ………………..€82
(iii) Redundancy contribution (1,2% on €1.107) ……………….. €13,28
(iv) Human Resource development (0,5% on €1.107) ………..€5,54
(v) Social Cohesion contribution (2% on €1.107) ………………€22,14
Total …………………………………………………………………………..€264,66
REFUND OF CONTRIBUTIONS
If for any reason, the employer pays contributions in excess of those he was liable to pay, he can request a refund to the extend of this excess amount. For this the employer completes and submits to the Social Insurance Office the “Application for Refund of Contributions” (Form YKA2-003). The form should be submitted within two years from the end of the contribution year for which the excess contributions were paid.
METHOD OF PAYMENT OF CONTRIBUTIONS
For the payment of contributions each employer is obliged every month to complete the “Statement of Earnings and Contributions” (Form YKA2-002) and present it to the Cyprus District Social Insurance Office. A separate “Statement of Earnings and Contributions” is required for each month of contributions.
For the purpose of payment of contributions, employees are divided into categories (e.g. employed persons for which a liability for the payment of contributions exists, pensioners, voluntary insured persons abroad etc.). For every category of employees a separate “Statement of Earnings and Contributions” must be completed.
The “Statement of Earnings and Contributions” is divided into three parts. In Part A-Statement of Earnings-details regarding earnings, annual holidays and the employment of the employees are recorded.
In Part B-Contributions Payable- details in connection with the earnings on which contributions to the different Funds are calculated and the amounts of contributions are recorded. In Part C- New Employees – details relating to new employees who were hired during the month for which contributions are payable are inserted. Contributions can be paid in cash or with a bank/postal cheque issued in favour of the Director of Social Insurance Services.
The employer or a representative of the employer can visit the Social Insurance Office. He can also send the “Statement of Earnings and Contributions” by post to the District Social Insurance Office. In such case the payment of contributions must be made by a bank or a postal cheque.
ONLINE PAYMENT
Employers, self employed persons, and other persons (accounting, audit offices) who are responsible for the payment of contributions on behalf of employed/self-employed persons, can pay the contributions online using the method of Direct Debit.
In order to make online payments of contributions, the “Applications of Employer/Self-Employed person for payment of contributions online” (Form YKA 1-021) must be submitted to the Social Insurance Services and the “Direct Debit Authorisation” to the Bank/Cooperative Institutions.
Time of Payment
In Cyprus the employer’s contributions are payable by the end of the calendar month following the month that the contributions relate.
Additional Fee
In case the employer fails to pay the contributions within the time limit an additional fee will be imposed ranging between 3% and 27%, depending on the period of delay, and on the amount of social insurance and social cohesion due for payment.
RECORD OF EARNGINS
Every employer in Cyprus is obliged to keep a record of earnings or any other record which must include the following details for each of his employees:
(a) full name,
(b) identification number and the social insurance number,
(c) date of commencement of employment,
(d) date of termination of employment,
(e) amount of earnings for each week or month,
(f) date and duration of annual leave.
INSPECTION OF EMPLOYERS
An employer may be subject to inspection by a Cyprus Social Insurance Inspector for verification of whether he complies with the obligations provided under the relevant legislations.
The inspection can include the examination of the record of earnings or any other document which is relevant to the employment, the earnings of the employees and the payment of contributions.
Any employer or self-employed person who fails to pay any contribution is guilty of an offence and is liable upon conviction to a fine not exceeding €3.400 or to imprisonment up to 1 year or both.
