Unpaid wages in Cyprus: the employer's duties and how to recover

Payday passes and the money does not arrive. The employer says it will come next week, then the week after. Some employees wait for months rather than lose the job, and some businesses keep going for a while on wages they have not paid.

Cyprus law gives the employee more than a debt to chase. The Protection of Wages Law, Law 35(I)/2007, fixes how and how often wages are paid, closes the list of deductions and puts the burden of proving payment on the employer. A specialist court hears the claim, but only if it is filed in time, and the time is short. Where non-payment persists, the employee may be entitled to leave and be treated as dismissed. For an employer behind on payroll, each of these rules is also a measure of its exposure.

What counts as wages, and how often they must be paid

Wages are wider than the monthly salary. Section 2 of the Law defines them as any monetary remuneration and any benefit capable of valuation in money arising from the employment, and includes provident fund contributions and the contribution payable to the Central Holiday Fund; extraordinary commissions and ex gratia payments are excluded. An employer that pays the salary but not the provident fund contribution has not paid the wages in full.

Section 9 sets the minimum frequency: at least weekly, or at least monthly for staff paid by the month, unless a collective agreement or practice provides otherwise. The Law does not fix a payday. The contract or collective agreement does, and a salary that slips past that date month after month breaches the contract as well.

Section 3 governs the method. Wages go into a bank or payment account of the employee's choice, or are paid by bank cheque in the employee's name. Cash is allowed only in the narrow cases the section lists, such as the first four months after hiring while an account is being opened. With every payment the employer must issue a pay statement containing at least the items in the Schedule to the Law, including basic pay against weekly hours, overtime and how it was calculated, and the contributions of both sides, and give the employee a copy within five working days of the payment date.

If the problem is the rate rather than the timing, our article on the minimum wage explains how that is enforced.

Deductions are the exception, and the list is closed

An employer short of cash cannot make up the difference out of the wages. Section 10(1) permits deductions only where a law or regulation provides for them, under the rules of pension, provident or medical care funds, under a court judgment, under a collective or general agreement, or with the employee's written and signed consent.

Deductions for damage to the business are allowed only where the employee caused it intentionally or through gross negligence, and only after consultation with the employees' representatives or, where there is no recognised representation, with the employee. A disagreement goes to the Ministry of Labour for mediation and, failing agreement, to the Labour Disputes Court. Every deduction is limited to the extent that leaves the employee able to maintain themselves and their family (section 10(4)).

The employer has to prove it paid

The burden of proving that wages were paid is on the employer: section 12(3) says so in terms. Section 12(1) requires records showing, for each employee, gross and net pay, any deductions and the reasons for them. An employer that pays in cash, without records or pay statements, will find that burden hard to carry.

Proof assembled after the event does not help. In J.A. Cabras & Bros Ltd v. Charalambous and Others (1992) 1 A.A.D. 302, the employer's director produced cheques in each employee's name to show that the wages had been paid. The Labour Disputes Court rejected that evidence as untrue: the cheques had never been given to the employees and had been prepared on purpose to be produced at the trial.

Where the employee takes the claim

There are two routes, and the first can lead into the second.

A complaint to an inspector. Under section 16, an inspector designated by the Minister of Labour may receive a complaint about a dispute arising from the Law, from the person affected or on that person's behalf, provided the case has not already been brought before a court. The inspector investigates and tries to settle the dispute. A settlement is recorded in a minute signed by both sides; if there is none, the inspector's minute of his findings may be used before the Labour Disputes Court. Under section 16(5), from the day of the complaint until the day that minute is drawn up, the time limit for applying to the Labour Disputes Court and the limitation period of the claim are interrupted.

An application to the Labour Disputes Court. The Labour Disputes Court, also translated as the Industrial Disputes Court, has exclusive jurisdiction under section 12(1)(e) of the Annual Holidays with Pay Law, Law 8/1967, over independent claims arising from the contract of employment, including accrued wages, annual leave, gratuity, the thirteenth salary and any other right arising from law, custom or an individual or collective agreement. Section 19(1) of Law 35(I)/2007 sends every civil dispute under the Protection of Wages Law to the same court. It sits as a judge with two members representing employers and employees, and proceeds summarily. Under section 12A of Law 8/1967, its judgment carries interest from the date the application was filed until final payment.

Twelve months, and the clock may start on each payday

The time limit is short, and it is the trap. Section 12(10A) of Law 8/1967 requires an application to the Labour Disputes Court within twelve months from the date on which the right to apply arose. The Court of Appeal, in Alexandros Manamsidis v. Redundancy Fund, Civil Appeal 159/2018, decided on 10 November 2023, said that the provision gives an extinctive period to the employee's civil right on the termination of employment. An employee made redundant on 20 December 2012 lost the right to apply on 21 December 2013, and a later application to the Redundancy Fund, and its reply, did not start the period again.

It is tempting to assume that the twelve months start when the employee leaves. The Supreme Court rejected that argument in Pantelis Georgiou v. Ironhold Estates Ltd (2007) 1 A.A.D. 1051. A hotel employee claimed, after his employment ended, sums for days off worked, public holidays, Sundays, the 13th and 14th salary and annual leave, under a collective agreement that made each benefit payable at a fixed time. Much of the claim was held time-barred: the right to claim did not arise only when the employment ended, and the benefits could not be accumulated from year to year and claimed after it.

For wages owed during the employment, the safe count runs from the oldest unpaid sum, not from the last day at work.

When non-payment entitles the employee to leave and claim compensation

Persistent non-payment can turn a resignation into a dismissal. Under section 7(1) of the Termination of Employment Law, Law 24/1967, where an employee lawfully terminates the employment because of the employer's conduct, the termination is treated as one by the employer within section 3, which carries compensation for an employee with at least twenty six weeks of continuous employment.

The test comes from Louis Tourist Agency Ltd v. Ilia (1992) 1 A.A.D. 98: the employer's conduct must be objectively such as to shake the foundation of the employment relationship, whether by breach of fundamental terms of the contract or by conduct incompatible with the accepted framework of that relationship. Non-payment of wages meets it. In Cabras the employer had for a long period, two years on the employees' case, failed to pay seven employees' wages regularly and had not paid the agreed contributions to their provident and medical care funds. After their union's attempts to resolve it and repeated warnings, they left. The Labour Disputes Court held that they had terminated lawfully under section 7(1), and before the Supreme Court the employer's counsel accepted, rightly in the Court's view, that such conduct entitles the employee to rely on the section. Only the amount of compensation was sent back for reassessment.

A pay cut can have the same effect. In Lounic Confectionery Ltd v. Theodoros Theodorou (No. 2) (2015) 1 A.A.D. 2247, the employer changed unilaterally the way a salesman's pay was calculated. The Supreme Court upheld the finding that this was a unilateral and arbitrary modification of an essential term of the contract within section 7(1).

Two cautions. Section 7(2) presumes, until the contrary is proved, that the employee did not terminate lawfully, so the employee must prove the conduct, as Lounic confirms. And compensation is assessed under the First Schedule, never below the redundancy payment the employee would have received and never above two years' wages, weighing among other things the circumstances of the termination; our article on termination of employment explains the assessment. The employees in Cabras left after warnings, with the arrears established. An employee who walks out after one late payment, without a word in writing, starts from a weaker position.

What an employer behind on payroll risks

The exposure is criminal as well as civil. Under section 20(1) of Law 35(I)/2007, an employer that contravenes the Law commits an offence punishable by up to six months' imprisonment, a fine of up to 15,000 euro, or both. Where a company's offence is proved to have been committed with the consent or complicity of a director, chairman, manager, secretary or similar officer, that individual faces the same penalty (section 20(1A)). On conviction the court may order payment of the amount owed to the employee (section 20(2)), and section 19(2) allows the Labour Disputes Court, after a conviction, to order payment of sums owed through non-payment of wages. Resorting abusively to insolvency proceedings to deprive employees of their rights under the Law is a separate offence (section 20(3)).

Alongside that run the wages themselves, interest from the date a claim is filed, and, if employees leave under section 7, compensation for termination. A deduction outside section 10 or a pay cut imposed without agreement adds to the exposure rather than reducing it.

If the employer is insolvent

Unpaid wages do not disappear with the employer. The Protection of Employees' Rights in the Event of the Employer's Insolvency Law, Law 25(I)/2001, sets up a fund for this purpose (section 7). Under section 3(1) it pays an employee whose employment ends because the employer has become insolvent, or after winding up or bankruptcy proceedings have begun and the employer is finally insolvent, or after a receiver or administrator certifies that the employer has ceased business without enough property to pay the wages.

Under section 4, the payment covers unpaid wages for the last thirteen weeks of employment falling within the seventy eight weeks before the date of insolvency, and the proportion of the 13th and 14th salary for those weeks, with leave added where the employer was exempt from the Central Holiday Fund. Weekly pay above four times the weekly basic insurable earnings under the social insurance legislation is disregarded. The fund does not pay compensation for unlawful dismissal or payment for notice (section 11(1)), and it does not pay an employee who alone or with first-degree relatives owns a substantial part of the business and has significant influence over it (section 3(2)). The provisional liquidator or receiver must notify affected employees in writing within one month of being notified of the appointment (section 11(4)).

For a claim under the Termination of Employment Law, an amount awarded by the Labour Disputes Court ranks among the debts paid in priority in a bankruptcy or a winding up (section 31(2) of Law 24/1967). Where those proceedings had already begun when the award was made, the employee collects the whole amount from the redundancy fund (section 31(3)).

What this means in practice

Employees: keep the paper, and count from the oldest unpaid sum. Pay statements, bank statements, the contract and any messages about late pay are the evidence. Twelve months is short, and Georgiou shows that waiting until the employment ends can cost the older items. A complaint to an inspector interrupts the time limit, so keep proof of its date.

Leaving is a remedy, not a reflex. Section 7 can turn a resignation into a dismissal with compensation, but the burden is on the employee and the twenty six week threshold applies. Put the arrears to the employer in writing first, and take advice before resigning.

Employers: pay through the bank, issue the statements, and do not deduct or cut. Records are the only answer to section 12(3), and a deduction outside section 10 or a unilateral pay cut adds a second claim to the first. The insolvency fund protects employees for a limited period after a formal insolvency; it is not a plan for the business. Questions of this kind, for employees and employers alike, fall within our employment practice.

Questions we are asked

Sources

• Protection of Wages Law of 2007, Law 35(I)/2007, consolidated text, sections 2, 3, 9, 10, 12, 13, 16, 19 and 20 and the Schedule, CyLaw
• Annual Holidays with Pay Law of 1967, Law 8/1967, consolidated text, sections 12(1)(e), 12(2), 12(10A), 12(11) and 12A, CyLaw
• Termination of Employment Law of 1967, Law 24/1967, consolidated text, sections 3, 7 and 31 and the First Schedule, CyLaw
• Protection of Employees' Rights in the Event of the Employer's Insolvency Law of 2001, Law 25(I)/2001, consolidated text, sections 3, 4, 7 and 11, CyLaw
• J.A. Cabras & Bros Ltd v. Archontinos Charalambous and Others (1992) 1 A.A.D. 302, Supreme Court of Cyprus, 28 February 1992
• Louis Tourist Agency Ltd v. Antigoni Ilia (1992) 1 A.A.D. 98, Supreme Court of Cyprus, 21 January 1992
• Lounic Confectionery Ltd v. Theodoros Theodorou (No. 2) (2015) 1 A.A.D. 2247, Civil Appeal 78/2010, Supreme Court of Cyprus, 21 October 2015
• Pantelis Georgiou v. Ironhold Estates Ltd (2007) 1 A.A.D. 1051, Civil Appeal 261/2005, Supreme Court of Cyprus, 11 September 2007
• Alexandros Manamsidis v. Redundancy Fund, Civil Appeal 159/2018, Court of Appeal of Cyprus, 10 November 2023

This article is provided for general information purposes only and does not constitute legal advice.

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