Running payroll in Cyprus means operating two parallel systems on every salary: Social Insurance (with its associated employer-only funds) and the General Healthcare System, known as GHS or GeSY, alongside the deduction of income tax under PAYE. For 2026 the headline figures are an 8.8% Social Insurance contribution from both the employee and the employer, employee GHS of 2.65% and employer GHS of 2.9%, plus three employer-only funds that together add 3.7% within the earnings cap.
The practical upshot is that the cost of employing someone in Cyprus is materially higher than their gross salary, while the amount that reaches their bank account is lower than gross by income tax and their own contributions. This guide sets out every rate that applies in 2026, the earnings ceiling that caps most of them, how a payslip is actually built, the monthly deadlines, and what an employee genuinely costs an employer. The rates below are unchanged by the 2026 tax reform, which focused on income tax and corporate measures rather than contributions.
Social Insurance: 8.8% from each side
Social Insurance is the backbone of the Cyprus contributory system, funding pensions, sickness, maternity, unemployment and related benefits. Both the employee and the employer contribute 8.8% of the employee's insurable earnings. That 8.8% rate took effect on 1 January 2024 and is fixed for the five-year period to the end of 2028; the rate steps up again on 1 January 2029 under the long-term schedule that gradually increases contributions to keep the fund actuarially sound.
Contributions are calculated on insurable earnings, which broadly means gross emoluments, but only up to a maximum. For 2026 the ceiling on insurable earnings is €68,904 per year, equivalent to €5,742 per month or €1,325 per week. Earnings above the ceiling do not attract further Social Insurance, so a high earner and a colleague paid at the ceiling pay the same Social Insurance in absolute terms.
Insurable earnings are the gross earnings on which Social Insurance and the capped funds are computed, subject to the annual ceiling (€68,904 in 2026). The ceiling is indexed and revised each year, so payroll software must be updated annually.
The employer-only funds
Beyond the matching 8.8% Social Insurance contribution, an employer in Cyprus pays into three further funds that the employee does not contribute to:
| Fund | Employer rate | Earnings ceiling |
|---|---|---|
| Redundancy Fund | 1.2% | Capped at €68,904 |
| Human Resource Development Fund (HRDA) | 0.5% | Capped at €68,904 |
| Social Cohesion Fund | 2.0% | No ceiling — on total emoluments |
The detail that catches employers out is the Social Cohesion Fund. Unlike Social Insurance and the other funds, it is not subject to the €68,904 ceiling — it is levied at 2.0% on the employee's total emoluments, however high. For a salary at or below the ceiling the distinction is invisible, but for a director or senior hire earning, say, €120,000, the Social Cohesion Fund applies to the full €120,000 while Social Insurance stops at €68,904.
GHS (GeSY): healthcare contributions
The General Healthcare System is funded by contributions from almost everyone with income in Cyprus. On employment income the employee contributes 2.65% and the employer contributes 2.9%. GHS contributions are calculated on a wider base than Social Insurance but are subject to their own cap: total income subject to GHS is limited to €180,000 per year across all sources.
GHS is deliberately broad. Beyond salaries it reaches pensions, rental income, dividends, interest and other income — and, importantly, it applies to everyone, including non-domiciled residents who are exempt from the Special Defence Contribution. For an employee, though, the only GHS that appears on the payslip is the 2.65% on salary; other GHS on personal investment income is settled separately. Our tax service for individuals and non-doms deals with that wider GHS picture.
How a Cyprus payslip is built
The order of operations matters, because Social Insurance and GHS are deducted before income tax is computed. From gross salary you subtract the employee's Social Insurance (8.8%) and GHS (2.65%); the result is the income subject to PAYE, against which the progressive income tax bands are applied. The 2026 bands start with a 0% band up to €22,000, so many ordinary salaries carry little or no income tax once contributions are stripped out.
An employee on a gross salary of €30,000 pays Social Insurance of €2,640 (8.8%) and GHS of €795 (2.65%), leaving taxable income of €26,565. Income tax applies only to the slice above €22,000: €4,565 at 20% = €913. Total deductions are €4,348, so net pay is €25,652 — an effective deduction rate of about 14.5%. You can model any salary with our net salary calculator.
The employer withholds the income tax under the PAYE system, deducting it month by month based on the employee's projected annual income and the bands, and remits it to the Tax Department. Cumulative PAYE smooths the deduction across the year so that, by December, the right total has been withheld.
What an employee really costs
For budgeting and pricing, the figure that matters is the total employment cost — gross salary plus the employer's contributions. Within the earnings ceiling, the employer's add-on is 8.8% (Social Insurance) + 1.2% (Redundancy) + 0.5% (HRDA) + 2.0% (Social Cohesion) + 2.9% (GHS) = 15.4% of gross.
On the same €30,000 salary the employer pays: Social Insurance €2,640, Redundancy €360, HRDA €150, Social Cohesion €600 and GHS €870 — total contributions of €4,620. The true cost of the role is therefore €34,620 a year, not €30,000. Our Social Insurance & payroll cost calculator produces this breakdown for any salary.
Above the €68,904 ceiling the marginal cost falls, because Social Insurance, Redundancy and HRDA stop — only the uncapped 2.0% Social Cohesion Fund and GHS (to its own €180,000 cap) continue. That is why total on-costs as a percentage of salary decline for very senior, highly paid staff.
Self-employed and director contributions
The figures above are for employees. The self-employed pay Social Insurance at 16.6% — combining what would otherwise be the employee and employer shares — calculated on notional insurable income set by occupational category rather than on actual profit, and they pay GHS at 4.0%. A director who is also an employee of their own company is treated as an employee for these purposes. We cover the self-employed position in detail in our guide to going self-employed in Cyprus.
Registration, deadlines and penalties
Before the first payday an employer must register with the Social Insurance Services and declare each employee on the Ergani labour platform — the employer must be registered before becoming an employer, and each employee must be registered before they start work. Each month the employer then files and pays through the Tax For All (TFA) portal.
The key recurring obligation is the monthly TD7 (the Employer's Return, formerly IR7), which reports PAYE income tax together with Social Insurance and GHS for all staff. As a rule, contributions and withheld tax are remitted by the end of the month following the payroll month — June's payroll, for example, is settled by the end of July.
Late payment is expensive. Overdue Social Insurance attracts a surcharge of around 3% per month of delay (capped at 27% of the amount due), and late PAYE carries interest plus an additional monthly penalty. Because the charges compound, a missed month is far cheaper to fix immediately than to let run.
Accurate, on-time payroll is one of the most visible signs of a well-run business — and one of the easiest to get wrong as headcount grows, salaries cross the ceiling, or staff join and leave mid-month. Our payroll and Social Insurance service runs the full monthly cycle — payslips, TD7 filing, Ergani declarations and the year-end Emoluments return — so the numbers are always right and always on time. Talk to us about taking payroll off your desk.