Public consultation has begun in Cyprus on a draft bill that introduces a cap on the increase of administrative fines for undeclared employment in cases of late payment. The bill forms part of amendments to the Social Insurance Law and will remain open for consultation until January 17, 2026. The aim of the initiative is to establish a fairer and more predictable mechanism for calculating penalties imposed on employers and self-employed individuals who violate employee declaration requirements.
How Fines for Illegal Employment Will Be Calculated
Under the proposed changes, the total amount of an administrative fine—including all surcharges—will not be allowed to exceed twice the amount of the original fine. This means that even in cases of prolonged non-payment, the total penalty will be legally capped and will not continue to grow indefinitely.
A similar principle already applies in legislation governing the activities of the Labour Inspection Service of the Ministry of Labour, and lawmakers now plan to extend this approach to the social insurance framework as well. Legislators stress that the measure is not intended to reduce liability, but rather to establish clear and predictable limits.
Strengthening the Fight Against Undeclared Employment
The authorities recall that in October 2024, the Cyprus Parliament unanimously approved a package of measures aimed at strengthening controls against illegal and undeclared work. At that time, the powers of the Ministry of Labour were expanded, including the authority to require employers to register key employment terms in the electronic “Ergani” system.
At the same time, fines for undeclared employment were significantly increased. Previously set at €500 per worker, the penalty was raised to €1,000 for each month of violation. If the same offense is detected again within two years, the fine increases to €2,000, and to €3,000 per worker for subsequent violations.
Why the State Is Tightening Controls
According to the Ministry of Labour, annual losses to the Social Insurance Fund due to undeclared employment amount to approximately €10 million. For this reason, the authorities are focusing on systematic oversight, digitalization of records, and stricter enforcement.
A separate draft bill proposing fixed out-of-court fines for illegal employment had also been considered earlier. However, after discussions in a parliamentary committee, it was withdrawn as unnecessary in light of the measures already adopted.
What This Means for Employers and Workers
The new legislative framework is intended to strike a balance between strict enforcement and legal predictability. On one hand, the state is increasing pressure on those who fail to register employees properly. On the other, it is introducing clear limits on sanctions, reducing the risk of disproportionate financial penalties.
Experts note that in 2026, employers should pay particular attention to compliance with labor legislation, timely employee declarations, and proper employment documentation in order to avoid serious financial consequences.