How to hire and pay Cyprus contractors

Hiring and paying Cyprus contractors is relatively straightforward, but only if you stay compliant with classification norms, local labor laws, and tax obligations. Whether you’re outsourcing a one-off project or building a distributed team, leveraging platforms like Payoneer WFM can help you simplify operations, reduce risk, and focus on results.

In this guide, we’ll walk you through everything you need to know to hire contractors in Cyprus—from understanding how Cyprus contractors are legally defined to ensuring smooth and compliant cross-border payments. Whether you’re a startup founder, a global hiring manager, or a freelancer marketplace platform, this article is your one-stop resource for contractor success in Cyprus.

How to hire contractors in Cyprus

Hiring independent contractors in Cyprus allows you to access skilled talent without the legal and financial obligations of hiring full-time employees. But to do it right, you need to follow a few critical steps:

1. Understand contractor vs. employee classification

Before hiring talent in Cyprus, you must properly classify them as either independent contractors or employees. Misclassification can result in legal liabilities, fines, and back payments of social contributions or taxes.

Let’s understand the difference between them:

Cyprus Contractors	Employees in Cyprus
Have work on a time or project-based basis.They exercise control over how, when, and where they deliver their services.They charge for work done and don’t receive employment benefits.They pay their social insurance and taxes.	Work under the direction and supervision of the employer.Have regular working hours and adhere to internal policies.Employees are to receive benefits such as paid leave, notice of termination, and severance.You are liable for the deduction of income tax and payment into social insurance.

2. Understand local labor laws

Cypriot labor law consists of statute and case law. A worker can be either an employee or an independent contractor based on the entire character of the working relationship, particularly the rights and liabilities in question. 

Employment relationships are regulated by certain labor legislation, whereas independent contractor agreements are regulated by contract law.

Some of the principal labor law considerations include:

Topic	Details
Minimum Wage	Cyprus has established a national minimum wage of €1000 per month. Market rates tend to serve as a benchmark for contractor payments.
Working Hours	The usual working week is a maximum of 40 hours.Cyprus contractors can choose their working hours unless otherwise specified in a contract.
Termination Notice	Employees are entitled to a termination notice between 1 to 8 weeks based on the length of service. For contractors, notice periods are specified in the contract. It’s advisable to put mutually agreed-upon termination provisions in writing.

The Industrial Disputes Tribunal (IDT) resolves employment disputes like unfair dismissal, leave, and discrimination up to a compensation limit of two years’ pay. More significant claims are referred to the district courts. 

Most labor legislation is enforced by the Ministry of Labour and Social Insurance, with the Ombudsman’s Office monitoring equal treatment legislation.

3. Find independent contractors in Cyprus

You can locate professionals in Cyprus via numerous sources:

• Freelancing Platforms: Employ platforms such as Upwork, Freelancer, or Toptal for temporary work.
• LinkedIn: Find specialists in particular fields and approach them directly.
• Local Job Boards: Cyprus-local sites like JobsCyprus advertise freelance work.

How to pay contractors in Cyprus

Once you’ve hired independent contractors in Cyprus, the next important step is ensuring smooth, compliant, and transparent payments. Here’s how to pay contractors in Cyprus:

1. Determine how to pay 

Your agreement should accurately set out the payment amount, currency, frequency, invoicing requirements, and taxes or deductions where appropriate.

Standard payment methods are:

• Hourly rate: Great for recurring, elastic work.
• Fixed project fee: Good for well-defined, deliverable-based work.
• Retainer: Monthly fixed fee for ongoing services.

2. Ensure your Cyprus contractors have the right tax information

Cyprus contractors must:

• Register with the Tax Department.
• Payment of self-employment tax and VAT (if your annual income is more than €15,600).
• Payment of social insurance contributions.

You, as the hiring business, should:

• Ask for a Tax Identification Number (TIN) and/or a VAT number.
• Get invoices with complete tax and registration information.
• Make it clear in the contract that the contractor pays their tax.

3. Pay in Brazilian Real or US Dollars

Cyprus operates with the Euro (EUR). Yet, international companies might opt to receive payments in USD if agreed upon between both parties.

Facilitators such as Payoneer or direct bank transfers allow for multi-currency payments and currency exchange. Make sure to define the responsibility for transfer fees to the payer or payee in the contractor agreement. 

4. Maintain compliant records

Have well-organized records for:

• Contractor contracts.
• Invoices and payment receipts.
• Communication records on project delivery.
• Tax documents (particularly for audits or financial reporting).

Making use of an automated payment facility can help simplify compliance and reduce administrative strain.

Why Payoneer WFM is the easiest way to hire and pay contractors in Cyprus

Payoneer’s Workforce Management (WFM) solution is a robust platform for hiring, paying, and managing international contractors, such as those in Cyprus. Here’s how it excels:

• Create invoices, track VAT, and collect tax documents – no local entity needed
• Handle onboarding, documents, and compliance checks in one platform.
• Send payments in 160+ countries and currencies like USD and EUR.

FAQs on managing Cyprus contractors

Do I need to register a business entity in Cyprus to hire contractors?

No. You can hire contractors in Cyprus without establishing a local entity if you maintain proper contracts and follow compliance guidelines.

Do Cyprus contractors pay their taxes?

Yes. Contractors are responsible for their income tax, VAT registration (if applicable), and social insurance payments.

Can I pay Cyprus contractors in USD or another currency?

Yes, with mutual agreement. Platforms like Payoneer support cross-currency transactions with fair exchange rates.

What’s the risk of misclassification in Cyprus?

Misclassifying an employee as a contractor may lead to penalties, back payments of social contributions, and legal complications. Always define roles clearly in contracts.