El Salvador PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in El Salvador to companies that want to enter the El Salvador market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in El Salvador.  However our solution allows you to start the operations in El Salvador 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. 

El Salvador fast facts

Population, million: 6,486,205
Land area: 21,041 km²
Capital:San Salvador
Local currency: Salvadoran colón  (SVC) / United States Dollar (USD)

GDP per capita:$ 3350.00
GDP in currency:$ 24.70 billion
Economic growth percentage: 4.04%
Inflation rate (consumer prices): 0.21%
Volume of export: $ 508.63 million
Import of goods and services: $ 12.8 billion
Total population: 6,486,205
Population of working age (15-65): 63.41 %

Doing business in El Salvador means initiating operations in a free market, export-oriented economy that is strategically located between North and South America. 

Doing business in El Salvador has become easier given the fact that the country has one of the freest economies in Latin America.  It offers macro-economic stability due to its use of the US dollar as its national currency and offers openness to both foreign trade and investment.  In El Salvador there is no restriction on foreign ownership and mergers, as well as on acquisitions and joint-ventures.  The country has duty-free access to 1.2 billion consumers due to the free trade agreements that it is a party to.

The main sources of employment law are:

The Constitution of El Salvador, 1987 (Decree No. 38)

1. Law No. 1263 promulgating the Social Insurance Act
2. Decretonúm. 15 de 31 de Julio de 1972, Código de Trabajo, last amended in 2019
3. General Law of Health and Safety in the workplace, 2010 (Legislative Decree no. 254)
4. Decretonúm. 1263 por el que se dicta la Ley del Seguro Social
5. Decretonúm. 927, Ley del sistema de ahorroparapensiones
6. Decretonúm. 926, por el que se dicta la Ley Orgánica de la Superintendencia de Pensiones

Hiring, Negotiating and Doing Business in El Salvador

Necessity of written employment contract

The written contract is a guarantee in favour of the employee, and its lack is attributable to the employer. It is obligatory for an employer to provide employment contract to the worker within 8 days of commencement of employment.

Following information must be present in an employment contract: 

• date and place of the contract; 
• identification of the parties, including the employee’s sex, marital status,
• nationality and date of birth; 
• nature of the job; 
• place where the work must be done;
• salary and payment terms; working hours; 
• and the term of the contract, etc.

El Salvador Employment Contract

Types of employment agreements

El Salvadoran labour Law prohibits hiring fixed term contract workers for tasks of permanent nature. At the same time, however, it does not place any limit on maximum term (including renewals) of the fixed term contracts. An employment contract is considered a fixed term contract if it fulfils certain requirements. The reasons for executing the agreement must reflect that the task to be performed by the employee can be qualified as transitory, temporal, or eventual; and the circumstances or events to terminate the agreement must have been included in the contract or already considered.

El Salvador working hours

In accordance with the Labour Code, normal working hours are 8 hours per day and 44 hours per week.

Overtime

 If a worker works beyond the stipulated working hours, i.e., 8 hours a day and 44 hours a week, he/she is entitled to an overtime pay that is 100% over and above the rate of his ordinary pay (200% of the normal wage rate for overtime hours). The maximum working hours (normal + overtime) have not been defined in the Labour Code.

Vacation leave in El Salvador

An employee is entitled to at least 21 consecutive days of paid annual

leave. National and religious holidays are not included. Collective agreements must provide at least one day of annual leave on fullremuneration for every 17 days on which the employee worked or was entitled to be paid.

A worker should be entitled to paid leave during national and officially recognized public holidays.

Workers should enjoy a rest period of at least twenty-four consecutive hours in every 7-day period, i.e., a week.

Sick leave: 

In accordance with the Labour Code, the individual employment contract suspends due to non-occupational sickness or accident of a worker. Paid sick leave is provided in the following manner:

• Employees with one or more year of service are entitled to 60 days of paid sick leave at the rate of 75% of basic salary;
• Employees with at least 5 months but less than 1 year of service are entitled to 40 days of paid sick leave at the rate of 75% of basic salary; 
• Employees with at least 1 month but less than 5 months of service are entitled to 20 days of paid sick leave at the rate of 75% of basic.

El Salvador Maternity Leave

A later convention (No. 183 from year 2000) requires that maternity leave be at least 14 weeks of which a period of six weeks compulsory leave should be after childbirth.

El Salvador Severance Laws

For individual dismissals, an employer must provide a written termination letter stating the reason for the dismissal. Otherwise, the dismissal is considered void.  

Notice Period

Notice period is not required by law. 

Severance Pay

Compensation is only required when an unjustified dismissal occurs.  

For cases in which a labor court deems a dismissal unfair, the employee is entitled to pay from the date of the dismissal as well as severance pay.  Severance pay is 30 days’ salary for each year worked.

El Salvador Tax

Personal Income Tax Rate in El Salvador is e to 30.00 percent.

Taxes in El Salvador apply to both employers and employees. Required municipal taxes vary by location, but the corporate tax rate remains fixed at 30%. Personal income taxes should be deducted from employees’ paychecks, as the country uses a Pay As You Earn (PAYE) system.

As an employer, you have to pay social security at a rate of 7.5%, while employees owe 3%. All the revenue you make abroad is subject to a 1.75% tax, and VAT is set at 13%.

Health Insurance Benefits in El Salvador

In accordance with the Law on Safety and Health at Work, provides that every employer shall adopt and implement, in the workplace, adequate safety measures and hygiene to protect life, health and bodily integrity of its employees.

The Directorate General of Social Welfare and the Directorate General for Labour Inspection is responsible to ensure the enforcement of OSH legislation, to monitor the application of OSH legislation, to provide technical advice in OSH, and to verify the compliance with OSH legislation in the workplace.

Additional Benefits in El Salvador

Providing guaranteed benefits as part of your El Salvador benefits management plan can help you stay compliant and give you a starting point for providing other benefits. Start by giving employees time off for the country’s seven holidays, as well as 15 annual vacation days. Employers also pay for an employee’s first three sick days in full, and then social security covers 75% of any remaining sick time.

Your employees will also care about maternity and paternity leave. Expecting mothers should get 12 weeks of maternity leave — 75% paid for by the government and 25% covered by you. Although El Salvador does not have any paternity leave regulations, you can still provide a few days off.

El Salvador Holidays

• New Years Day
• Maundy Thursday
• Good Friday
• Celebrations of San Salvador
• Independence Day
• All Saints’ Day
• Christmas 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.