What Is Payroll?
Payroll is compensation a business must pay to its employees for a set period or on a given date. It's usually managed by the accounting or human resources department of a company but small business payrolls might be handled directly by the owner or an associate. Payroll is increasingly outsourced to specialized firms that handle paycheck processing, employee benefits, insurance, and accounting tasks such as tax withholding.
Payroll Contributions
It's important to understand that the payroll is payed by both - the employee and the employer.
Employer contribution
Employers in Cyprus make several contributions on behalf of their employees to support them. These contributions are made directly to the governing bodies that handle these funds. Look at some expected employer contributions in Cyprus:
| Contributions | Rate |
|---|---|
| Social Insurance | 8.30% |
| Social Cohesion | 2.00% |
| Redundancy | 1.20% |
| Training and Development | 0.50% |
| National Health System | 2.90% |
| Holiday Fund | 8.00% |
Employee contribution
Employees also contribute to different funds that can help them during health emergencies and retirement. Let’s look at some contributions deducted from the employee’s gross pay.
| Contributions | Rate |
|---|---|
| Social Insurance | 8.30% |
| National Health System | 2.65% |
Taxes
Every employee in Cyprus is required to pay taxes on the money they make there. These taxes are paid to the tax authorities straight from the employee’s salary. The employees must, however, submit annual tax returns.
Cyprus follows a progressive taxation system where the tax rate increases with income level. The current tax rates in Cyprus are as follows:
| Income | Tax Rate |
|---|---|
| <€19,500 | 0% |
| €19,500 – €28,000 | 20% |
| €28,000 – €36,300 | 25% |
| €36,300 – €60,000 | 30% |
| >€60,000 | 35% |
