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Labour Minister Pushes for Crackdown on Undeclared Work in Cyprus

The Labour Minister of Cyprus has announced a concerted effort to tackle the widespread issue of undeclared work, which has long been a challenge for the Cypriot economy. To formalise the labour market and safeguard workers’ rights, the Ministry is pushing forward new measures aimed at cracking down on employers who engage in illegal employment practices, including failure to declare workers, pay fair wages, or contribute to social security.

The campaign, which is part of a broader government initiative to enhance labour rights and ensure compliance with employment laws, seeks to address both the economic and social impact of undeclared work. With undeclared employment affecting a significant portion of the workforce, particularly in sectors such as construction, hospitality, and domestic services, the Labour Ministry has made it a top priority to enforce stricter regulations and penalties.

Undeclared Work: A Persistent Challenge

Undeclared work, often referred to as the “shadow economy,” is a global issue that has long plagued Cyprus. It encompasses a range of illegal employment practices, including the hiring of workers without contracts, underpayment of wages, and failure to contribute to social insurance schemes. For years, such practices have not only deprived workers of their legal rights and protections but also cost the government millions in unpaid taxes and social security contributions.

In Cyprus, the problem has been particularly pronounced in sectors that rely heavily on seasonal or informal labour. Construction, tourism, agriculture, and domestic services have been identified as industries where undeclared work is more common, with many workers vulnerable to exploitation due to lack of proper oversight or enforcement.

According to government estimates, undeclared work in Cyprus accounts for a considerable portion of the labour market. This not only weakens workers’ protection but also creates unfair competition between businesses that follow the rules and those that cut costs by circumventing legal employment obligations.

Stricter Enforcement and Penalties

To address these challenges, the Labour Ministry is introducing stricter enforcement mechanisms, including more frequent inspections of workplaces, harsher penalties for employers found violating the law, and enhanced cooperation between government agencies responsible for labour and tax compliance. Employers who are caught engaging in undeclared work may face heavy fines, legal action, and, in some cases, closure of their businesses.

The Ministry also aims to strengthen workers’ awareness of their rights through information campaigns. By educating workers about their entitlements, including the right to minimum wage, insurance, and other legal protections, the government hopes to reduce the number of people falling victim to exploitative practices.

Moreover, the use of digital tools to track employment data and improve transparency within the labour market is also part of the government’s long-term plan to combat undeclared work. These technological measures are expected to make it easier for authorities to detect and address violations more efficiently.

Cyprus Construction Trends: Permit Count Slips While Value and Scale Surge in 2025

The Cyprus Statistical Service (Cystat) has reported a notable shift in the construction landscape for 2025. The latest figures reveal a modest 1.9% decline in building permits issued in March compared to the same month last year, signaling a nuanced trend in the nation’s developmental activities.

Permit Count Decline in March

In March 2025, authorities authorised 572 building permits—down from 583 in March 2024. The permits, which total a value of €361.5 million and cover 296,900 square metres of construction, underscore a cautious pace in permit approval despite ongoing projects. Notably, these permits are set to facilitate the construction of 1,480 dwelling units, reflecting an underlying demand in the housing sector.

Q1 2025: Growth in Value, Construction Area, and Dwelling Units

While the number of permits in the first quarter (January to March) decreased by 15.8% from 1,876 to 1,580, more significant, economically relevant metrics saw robust growth. Total permit value surged by 21.7%, and the authorised construction area expanded by 15.6%. Additionally, the number of prospective dwelling units increased by 16.7% compared to the corresponding period last year. This divergence suggests that although fewer permits were issued, the scale and ambition of the approved projects have intensified.

New Regulatory Framework and the Ippodamos System

Since 1 July 2024, a pivotal transition has taken place in permit administration. The responsibility for issuing permits has moved from municipalities and district administration offices to the newly established local government organisations (EOAs). The integrated information system, Ippodamos, now oversees the licensing process, streamlining data collection on both residential and non-residential projects across urban and rural areas.

Comprehensive Data Collection for Enhanced Oversight

The Ippodamos system categorises construction projects using the EU Classification of Types of Construction (CC). This platform gathers extensive data on the number of permits authorised, project area and value, and the expected number of dwelling units. It covers a broad spectrum of construction activities—from new builds and civil engineering projects to plot divisions and road construction—while excluding renewals and building divisions. The thoroughness of this new regulatory structure promises greater operational transparency and more informed decision-making for policymakers and industry stakeholders.

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