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Illegal Employment on the Rise in Cyprus as Undeclared Work Declines

A recent report on the labour market in Cyprus has revealed a worrying increase in illegal employment, even as the rate of undeclared work shows signs of decline. The findings, which were discussed during a parliamentary session, have raised concerns among lawmakers and authorities alike about the ongoing challenges in combating labour exploitation and maintaining fair employment practices.

According to data presented by the Ministry of Labour, the issue of illegal employment—workers being hired without proper work permits or contracts—has escalated in recent months. This rise comes at a time when efforts to reduce undeclared work, where employees are not registered or insured, have seen moderate success. Despite progress in regulating the labour market, illegal employment remains a significant issue, especially in industries such as construction, agriculture, and hospitality.

Understanding the Distinction Between Illegal and Undeclared Employment

Illegal employment refers to the hiring of individuals who are not legally permitted to work, often due to their immigration status or lack of proper documentation. These workers are typically vulnerable to exploitation, receiving lower wages and lacking access to basic protections such as healthcare and social security benefits. In contrast, undeclared work involves the employment of individuals who may be legally allowed to work but are not officially registered, depriving them of insurance coverage and other legal protections.

While authorities have made strides in reducing undeclared work, particularly through stricter inspections and penalties, the rise in illegal employment presents a new challenge. Lawmakers pointed out that illegal employment poses even greater risks, as it not only harms the workers involved but also undermines the integrity of the labour market and contributes to unfair competition among businesses.

Factors Driving Illegal Employment

Several factors contribute to the increase in illegal employment, according to the Ministry of Labour. One key driver is the influx of migrant workers, many of whom lack the necessary documentation to work legally in Cyprus. Without proper channels for legal employment, these individuals often turn to unregulated jobs where they are vulnerable to exploitation.

The growing demand for cheap labour, particularly in sectors like construction and agriculture, also plays a significant role. Employers seeking to cut costs may resort to hiring illegal workers, bypassing the legal requirements for contracts, wages, and benefits. This practice not only puts workers at risk but also creates an uneven playing field, where businesses that comply with legal standards struggle to compete with those exploiting illegal labour.

Efforts to Combat Illegal Employment

In response to these findings, the government has pledged to intensify its efforts to combat illegal employment. This includes increasing inspections, imposing harsher penalties on employers found guilty of hiring illegal workers, and strengthening collaboration with immigration authorities. Additionally, there is a push to create more pathways for legal employment for migrant workers, ensuring they can enter the labour market with proper documentation and protections.

Cyprus Tightens Oversight Of Foreign-Interest Companies

yprus is revising the framework for companies with foreign interests, introducing stricter compliance checks and new requirements designed to attract businesses that make a substantive contribution to the economy.

The Cabinet approved the changes on Tuesday following a proposal from the Ministry of Energy, Commerce and Industry. In a post on X, Energy Minister Michalis Damianos said the revised framework aims to attract companies with a genuine presence in Cyprus and the potential to create added value.

Greater Focus On Real Economic Activity

The revised framework prioritises companies’ actual economic activity, regardless of the origin of their capital. As part of the changes, the existing register will be renamed the “Business Facilitation Centre Register”.

The new rules also strengthen compliance monitoring and establish procedures for removing companies that fail to meet their obligations. Checks on the 70%–30% employment ratio will be conducted seven years after registration.

Annual Employment Reporting From 2027

From January 1, 2027, registered companies will be required to submit annual employment reports. The measure is intended to improve transparency and help authorities monitor compliance with the framework.

The revisions also clarify the conditions under which companies may retain their registration if their ultimate beneficial owners obtain Cypriot or other EU citizenship.

Part Of A Wider Business And Talent Strategy

According to Damianos, the changes aim to attract companies with a substantive presence, growth potential and a measurable contribution to Cyprus’s economy. The framework introduces clearer procedures and oversight while reinforcing existing obligations.

The decision forms part of a broader review of Cyprus’s Strategy for Attracting Businesses and Talent, which is expected to be completed by December 2026.

The first consultation workshop with the business community and other stakeholders took place on October 28, with a second scheduled for October 29.

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