What Severance Pay Rules Must Employers Follow in Cyprus?

Which Employees Qualify for Severance Pay?

• Employees working mainly in Cyprus under a contract of service, whether written or oral, with at least 26 weeks of continuous employment.
• Employees dismissed due to redundancy as defined in the Termination of Employment Law, including economic or organizational reasons not related to their conduct.
• Employees whose employment ends following closure or relocation of the business, where no suitable alternative role is reasonably available.
• Employees who successfully claim unlawful dismissal and are awarded compensation that effectively includes a severance-type payment.
• Employees who are not dismissed for a lawful serious reason such as gross misconduct, repeated poor performance after warnings, or other grounds recognized by law.
• Employees who are not casual workers genuinely engaged on short, intermittent assignments with no expectation of continuity.

What Are the Legal Timelines for Paying Severance?

In Cyprus, redundancy payments are usually made through the state Redundancy Fund, but you must still follow strict timelines for any amounts you owe directly. As a rule of thumb, you should calculate and pay contractual or ex gratia severance, plus all final wages and accrued leave, on or very shortly after the last working day. Where a Labour Disputes Court or the Ministry of Labour becomes involved, they may set specific deadlines for payment once a decision is issued. Delays can trigger complaints to the Department of Labour Relations and expose your company to interest, penalties, and legal costs. To stay safe, build internal processes so severance calculations are completed before notice expires and payments are released within a few days of termination.

What Penalties Apply if Severance Is Not Paid Correctly?

If you fail to pay severance correctly in Cyprus, you risk both administrative and court-driven consequences. Employees can file complaints with the Ministry of Labour or bring claims before the Industrial Disputes Court, which can order back pay, compensation, and interest. Non-compliance can also damage your company’s reputation with regulators and make future inspections more intensive.

• Employees can file claims before the Industrial Disputes Court for unpaid severance or unlawful dismissal.
• Courts may order payment of outstanding severance, compensation, and statutory interest.
• You may incur legal costs and administrative expenses in defending claims and investigations.
• Repeated non-compliance can attract closer scrutiny from labour authorities and damage your employer brand.
• Disputes over severance can delay workforce changes and distract management from core operations.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as the service described at https://www.playroll.com/employer-of-record does not remove the underlying obligation to respect Cyprus termination and severance rules. In most EOR setups, the EOR is the legal employer on paper and is responsible for administering statutory payments, while your company directs day-to-day work and decisions on termination. Cypriot authorities will look at the real employment relationship, so if you instruct an unlawful dismissal, both you and the EOR can face claims. Your contract with the EOR should clearly allocate who funds statutory redundancy, who approves terminations, and how disputes are handled. Always ensure the EOR’s local processes match Cyprus law on notice, redundancy, and severance before you authorize an exit.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance in Cyprus means juggling statutory redundancy rules, Redundancy Fund procedures, and your own contractual promises to employees. Playroll helps your team align all three by standardizing how you collect service data, classify the reason for termination, and confirm whether a case qualifies as redundancy or another type of dismissal. That way, you avoid promising severance where it is not due, or worse, failing to pay where the law requires it.

With Playroll, you can centralize approvals for terminations, automate reminders for notice and payment dates, and document the rationale for each exit in case of a later dispute. Our platform works alongside local legal advice, not instead of it, giving you clear workflows, auditable records, and consistent treatment of employees across roles and locations. The result is fewer surprises, smoother offboarding, and a much lower risk of penalties or court claims tied to severance.