Aruba
Table of Contents
Aruba PEO & Employer of Record
WeHG provides an International PEO and global Employer of Record service in Aruba to companies willing to enter the Arubian market or hire local/expat employees in this country.
Traditional approach requires establishing a subsidiary in Aruba. However our solution allows you to start a business in Aruba within days hence save time and money. WeHG would recruit candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf.
Aruba fast facts
Population, million: 106,766
Land area: 179 km²
Capital: Oranjestad
Local currency: Aruban florin (AWG)
GDP per capita:$ 37,576
GDP in currency:$ 3.369 billion
Aruba is an island that is located in the southern part of the Caribbean sea 25 kilometers (15 miles) north of the coast of Venezuela and 68 kilometers (42 miles) northwest of Curacao. Aruba belongs to the Leeward Antilles, together with Bonaire and Curacao the three islands form the ABC-Islands.
The main sources of employment law are:
- The Civil Code of Aruba;
- Separate labor laws;
- Case law; and
- Individual and/or collective employment agreements.
Hiring, Negotiating and Doing Business in Aruba
Necessity of written employment contract
Contracts can be enforced either when they are merely oral or when put in writing. The Civil Code offers important protection to relatively vulnerable parties in contractual relations, such as employees in labor law and consumers when buying goods or acquiring services from professional providers.
There are no requirements as to the form of an employment agreement. The employment agreement can be made in writing or verbally. However, for certain provisions (e.g. non-competition) the written form is mandatory.
Aruba Employment Contract
Types of employment agreements
The agreement can be entered into for an indefinite period of time or for a definite period of time.
However, an employment agreement for a definite period of time must be concluded in writing and should meet the following criteria:
- It should meet a need for temporary labor, which need only exists in a certain part of the calendar year, and is the result of the increase in the activities of the company during this period;
- It is related to the replacement of one or more temporarily absent workers;
- It is related to the execution of a precisely described work or project;
- It is related to the performance of casual, irregular work.
In the event an employment agreement for a definite period of time has been concluded without due observance of the criteria above, the provisions concerning the termination of an employment agreement for an indefinite period of time shall apply to such agreement for its termination.
Aruba working hours
The Labor Ordinance (Arbeidsverordening) that contains rules and regulations with respect to employment hours and overtime regulates the maximum number of working hours for employees who earn less than a certain annual income determined by national decree. Employees who earn more than the determined income are exempt from this Ordinance. The abovementioned ordinance only applies to regular workers. Regular workers are employees who work within the regular office hours while irregular workers are employees working outside of regular office hours in accordance with a recurrent schedule (timetable).
For regular workers the maximum working hours per week is 45 hours provided the employee does not work more than eight hours a day.
If the workweek consists of five days or less, the employee should not work more than 8½ hours a day. The period during which the employee has to work longer than six hours each day should be interrupted for a break of at least half an hour after a maximum of five hours.
Overtime
In the event the employer requires its employees to work overtime, an overtime permit has to be obtained. After obtaining the permit an employee is allowed to work longer hours, in which event the employer is obliged to pay the employee overtime. Such longer hours can be during the employee’s break or if the employee works longer than the maximum amount of hours allowed per day.
Non-compliance with certain articles of the Ordinance can result with imprisonment or a fine.
Vacation leave in Aruba
The Vacation Ordinance (Vakantieverordening) regulates the minimum number of vacation days an employee is entitled to per year of continued employment by the same employer. Every employee is entitled to an amount of vacation days equal to at least three times the contracted number of working days per week with the understanding that an employee who works six days a week is entitled to at least fifteen vacation days per year.
Aruba Maternity Leave
An employee is entitled to payment of 100% of her salary when she is on pregnancy- and maternity leave. The pregnancy leave can be two to six weeks before the estimated due date and the maternity leave can be eight to twelve weeks as of the date the employee gave birth. The total amount of time on leave (pregnancy leave and maternity leave combined) must in all events be at least fourteen weeks.
Sick Leave
In the event an employee is unable to perform his/her labor due to sickness (that is not intentionally caused by the employee), the employer is obligated to continue payment of (100% of) the employee’s salary during a relative short period of time (unless otherwise stipulated in the labor agreement).
Other leave
For other situations (such as weddings, funerals, delivery of children (fathers) and personal leave) there is no legal stipulation granting the employee a specific amount of time for permitted leave. However, (unless agreed otherwise) an employee remains entitled to its wages for a fair short period of time, in the event the employee was not able to work during such time due to (i) the fulfillment of an obligation imposed by law or by the government which could not be fulfilled in the employee’s free time or due to (ii) special circumstances not caused by the employee’s fault.
Aruba Severance Laws
For dismissing personnel, the mandatory rules and regulations regarding termination of employment agreements have to be taken into account.
Generally, there are four ways to terminate an employment agreement:
- Termination by giving notice, in which event the prior approval from the Director of the Department of Labor and Research (Directie Arbeid en Onderzoek) has to be obtained pursuant to the Ordinance on Termination of Employment Agreements (Landsverordening Beëindiging Arbeidsovereenkomsten);
- Without such consent any termination by giving notice will be considered null and void;
- For completeness sake it is pointed out that the Ordinance on Termination of Employment Agreements does not apply in all events;
- Termination by mutual consent. In such event the employer and the employee themselves negotiate the terms and conditions for the termination of the employment agreement;
- Dissolution of the employment agreement by the Court of First Instance of Aruba;
Immediate termination of the employment agreement, which is only allowed if there is an urgent reason, justifying an immediate termination. Such urgent reason and the immediate termination would immediately have to be informed to the employee.
In event of termination by giving notice after obtaining the required approval or in event of dissolution of the employment agreement by the Court of First Instance, it is possible that it is decided that a (termination) compensation will have to be granted to the employee.
Notice period
When an employment agreement is terminated by giving notice, a notice period must be taken into account, which notice period is related to the years of service of the employee at the time of termination. The mandatory notice period to be taken into by an employer is:
- In case of an employment of less than five years: one month;
- In case the employee has been employed more than five but less than ten years: two months;
- In case the employment has lasted longer than ten years but less than fifteen years: three months;
- In case the employment has lasted more than fifteen years: four months.
The aforementioned notice period for the employer can be prolonged, but it can only be shortened in a collective labor agreement. If the agreement is terminated with the approval of the Director of the Department of Labor and Research, the term of the dismissal permit procedure can be deducted from the notice period. However, the minimum notice period must at least be one month. If an employer wants to prolong the notice period for employees, the notice period of the employer should then be twice as long as the notice period for the employee.
Employees are in principle required to work during the notice period. An employer may, however, relieve an employee from performing his duties prior to the expiration of the notice period. In such event the employer will, however, remain obliged to pay out the salary of the employee concerned.
Aruba Tax
Aruba is part of the Kingdom of the Netherlands. The Kingdom has a Tax Regulations for the Kingdom (Belastingregeling voor het Koninkrijk or BKR). The main purpose of the BKR is to avoid double taxation within the Kingdom. Additionally Aruba is party to the treaty between the Kingdom of the Netherlands and the United States of America concerning the exchange of information with regard to taxation.
The important Aruba taxes on corporations are profits tax (winstbelasting) and company turnover tax (belasting op bedrijfsomzetten or BBO). The BBO rate is 1, 5%. The Aruba tax is levied on the turnover that the company realized with the providing of goods and services in Aruba. Also Aruban tax law offers a system that eliminates double taxation of cash payouts from a corporation to its shareholders (dividendbelasting and imputatiebelasting).
The social security premiums in Aruba are levied separately from the income and/or wage tax. Aruba knows 5 different social security taxes: old age pension (“AOV”) and widow & orphans pension insurance (“AWW”), general health insurance (“AZV”), sickness insurance (“ZV”), accident insurance (“OV”) and cessantia.
In principle Aruba residents are subject to the AOV/AWW and AZV social security premiums. Under circumstances there might be an exemption for the AOW and AWW premiums. In case of employment, the AOV, AWW and AZV premiums are paid by the employee and the employer. In case of employment Aruba residents are in principle also subject to ZV and OV premiums. Under specific circumstances non-residents are also subject to ZV and OV premiums.
Aruba has published the individual income tax table for 2020. The brackets and rates are as follows:
- up to AWG 34,930 – 14%
- over AWG 34,930 to 65,904 – 25%
- over AWG 65,904 to 147,454 – 42%
- over AWG 147,454 – 52%
Health Insurance Benefits in Aruba
Aruba has one modern hospital, the Dr. Horacio Oduber Hospitaal (HOH), which is located on Eagle Beach in Oranjestad. It has approximately 280 beds. Furthermore there is a medical centre, Instituto Medico San Nicolas, which offers 24-hours emergency assistance. Drug stores cannot fill a prescription from a doctor who is not on the island.
Additional Benefits in Aruba
Cessantia
The employee whose employment agreement is terminated without fault on his part or for a reason that cannot be attributed to him is entitled to a onetime monetary compensation known as the “cessantia” (provided the employee has been employed at least one year). This cessantia payment is regulated in the Cessantia Ordinance (Cessantia-landsverordening) and is calculated based on the years of service. The employee must claim his cessantia pay from his employer or, if his employer has been declared bankrupt, from the Social Security Bank of Aruba (SVB), within one year after termination of the employment agreement.
The cessantia entitlement only applies to employees who will become entitled to a pension or general old age pension after termination of their employment agreement, provided that the pension is not less than the old age pension and if the old age pension, when deducted from the pension, is not less than twice the amount of the old age pension applicable at that time.
Aruba Holidays
- New Year’s Day
- G.F Betico Croes Day
- Carnival
- National Anthem & Flag Day
- Good Friday
- Easter Monday
- Ascension Day
- Christmas Day
- Boxing Day
Why Choose WeHireGlobally
WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.
FAQ Aruba
For regular workers the maximum working hours per week is 45 hours provided the employee does not work more than eight hours a day.
- New Year’s Day
- G.F Betico Croes Day
- Carnival
- National Anthem & Flag Day
- Good Friday
- Easter Monday
- Ascension Day
- Christmas Day
- Boxing Day
Aruba is part of the Kingdom of the Netherlands. The Kingdom has a Tax Regulations for the Kingdom (Belastingregeling voor het Koninkrijk or BKR). The main purpose of the BKR is to avoid double taxation within the Kingdom. Additionally Aruba is party to the treaty between the Kingdom of the Netherlands and the United States of America concerning the exchange of information with regard to taxation.
The important Aruba taxes on corporations are profits tax (winstbelasting) and company turnover tax (belasting op bedrijfsomzetten or BBO). The BBO rate is 1, 5%.
The social security premiums in Aruba are levied separately from the income and/or wage tax. Aruba knows 5 different social security taxes: old age pension (“AOV”) and widow & orphans pension insurance (“AWW”), general health insurance (“AZV”), sickness insurance (“ZV”), accident insurance (“OV”) and cessantia.
Aruba has published the individual income tax table for 2020. The brackets and rates are as follows:
- up to AWG 34,930 – 14%
- over AWG 34,930 to 65,904 – 25%
- over AWG 65,904 to 147,454 – 42%
- over AWG 147,454 – 52%