Gratuity in Cyprus is a broad term covering both a traditional end-of-year bonus and an end-of-service payment. The 13th-month payment, equivalent to one additional month of gross salary, is deeply embedded in Cyprus employment culture and is treated by many employees as a contractual expectation even where it is not explicitly written into the employment contract. In sectors such as banking, professional services, and the public sector, the 13th month is effectively standard. Employers should address it explicitly in employment agreements to avoid disputes.
End-of-service gratuity is distinct from statutory redundancy entitlements under the Termination of Employment Law. It is common in sectors where provident fund arrangements are not in place, particularly for longer-serving employees. The amount is typically negotiated individually or defined in a collective agreement. Where a provident fund exists, the employer contribution to the fund often substitutes for a separate gratuity arrangement.
For payroll and HR purposes, 13th-month payments are subject to income tax and social insurance contributions in the same manner as regular salary. They must be included in the monthly payroll run in which they are paid and declared in the employer's annual return. Accurate accrual is important for financial planning and for managing employment cost expectations when budgeting headcount in Cyprus.