Guatemala PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Guatemala to companies willing to enter the Guatemala market or recruit local/expat employees in this country.

Traditional methods requires establishing a subsidiary in Guatemala.  However our solution allows you to start the operations in Guatemala within days hence save time and money.  WeHG would hire 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. 

Guatemala fast facts

Population, million: 17.91
Land area: 108,889 km²
Capital: Guatemala City
Local currency: Guatemalan quetzal (GTQ)

GDP per capita:$ 3340.00
GDP in currency:$ 82 billion
Economic growth percentage: -2 %
Inflation rate (consumer prices): 2.14%
Volume of export: $ 590 million
Import of goods and services: $ 19.88 billion
Total population: 17.91 million
Population of working age (15-64): 64.48 %

Guatemalan labour laws (including laws related to social security) apply to all employment relationships and employment contracts concluded in Guatemala, regardless of the parties’ nationality. An employment contract cannot be subject to a choice of law from a different jurisdiction.

Hiring, Negotiating and Doing Business in Guatemala

Necessity of written employment contract

Employment contracts must be executed in writing, in Spanish, and a copy must be sent to the Labour Ministry. The burden of proof concerning the contents of the written agreement lies on the employer and, if no written contract can be produced as evidence before a labour judge in cases of dispute, the terms and conditions of employment argued by the employee will be taken as fact. 

The written contract must contain:

• The full name, age, sex, marital status, nationality and municipal residence of the parties.
• The date on which the labour relationship started.
• A description of the services to be rendered or the work to be executed, specifying as far as possible the characteristics and conditions of the work.
• The place (or places) where the services or work are to be carried out.
• The employee’s address, if hired to work outside of the place where he or she usually resides.
• The contract’s duration, or an indication that it is for either an indefinite period or for a fixed term for specific work.
• The working hours and schedule.
• The remuneration and its method of calculation (by time unit, by work unit or other), the form, period and place of payment.
• Other legal terms and conditions agreed to by the parties.
• The place and date where and when the contract is signed.
• The parties’ signatures (or a fingerprint, if they cannot sign), and their legal identification numbers (for Guatemalan nationals, this is their national identification number, and for foreign nationals, this is their passport number).

Guatemala Employment Contract

Types of employment agreements

Employment contracts may be for fixed or indefinite terms.

Guatemala working hours

Guatemalan labour law classifies three types of standard working time on which the restrictions on working hours are based:

Standard daytime work. Between 6:00am and 6:00pm of the same day. Within these parameters, the standard working hours cannot exceed eight hours per day or 44 hours per week.

Standard night-time work. Between 6:00pm of one day and 6:00am of the next day. Within these parameters, the standard working hours cannot exceed six hours per day or 36 hours per week.

Standard mixed-time work. This is any time that comprises both standard daytime and standard night-time work. Within these parameters, the standard working hours cannot exceed seven hours per day or 42 hours per week However, if four or more of the effective working hours occur within the standard night-time period, then the entire period of work is legally considered night-time work, and therefore the standard night-time working hour restrictions will apply.

Overtime

Any work carried out beyond the standard working time restrictions is considered extraordinary hours (overtime), and is subject to an additional payment of 50% of the employee’s contracted salary. In any event, both standard working time and overtime cannot exceed a total of 12 hours a day.

Vacation leave in Guatemala

An employee is legally entitled to a minimum paid holiday (vacation) of 15 days after each year of continuous service. The right to holiday arises after a minimum of 150 days have been worked by the employee within the year.

Aside from paid vacation, employees are entitled to at least one day off of paid rest after each five- or six-day week of labour, as well as on official holidays.

An employee is also entitled to statutory paid leave (licencia), though this is not technically a holiday (asueto), in the following cases:

• Three days’ paid leave on the death of a civil or common-law spouse, parent or child.
• Five days’ paid leave upon the employee’s wedding.
• Two days’ paid leave upon the birth of an employee’s child.
• Half a day, or a day, of paid leave to attend a judicial summons, depending on whether the summoning court is located inside (a half-day) or outside (a full day) of the employee’s departmental jurisdiction.
• Up to six days’ paid leave a month for members of a labour union’s executive committee. Such labour union leaders are also entitled to additional unpaid leave, if required, to carry out their union duties.

Sick leave: 

Employees are entitled to paid time off in cases of illness or injury. Sick pay will be paid either by the Guatemalan Institute of Social Security (Instituto Guatemalteco de Seguridad Social) (IGSS) under its own regulations, or by the employer if the employee, the illness or the injury are not covered by the IGSS regulated benefits.

Guatemala Maternity Leave

Working mothers are entitled to paid leave during the 30 days before the birth (pre-natal leave) and the 54 days following birth (post-natal leave). Any paid leave not taken during pre-natal leave period must be accumulated to the post-natal leave period, to ensure that the employee receives a total of 84 leave days during the maternity leave. An employee is entitled to half of this paid leave (that is, 42 days’ paid leave) in cases of miscarriage or stillbirth, and up to three months’ paid leave in cases of illness arising from pregnancy or childbirth.

Paternity rights

Guatemala Severance Laws

Each individual employment contract will govern the notice period to be given by employees who wish to terminate their indefinite period contract. If the contract has no provisions to this effect, the law provides statutory notice periods depending on the duration that the employee has been providing their services:

• Before six months of continuous service, the notice period is at least one week.
• Between six months and one year of continuous service, the notice period is at least ten days.
• Between one year and five years of continuous service, the notice period is at least two weeks.
• After five years of continuous service, the notice period is at least one month.

These statutory notice periods are not binding on the employer, and the employer must only provide a notice period where the employment contract stipulates that this applies. Where an employer dismisses an employee with just cause, the dismissal takes effect the moment the employee is notified in writing of the dismissal.

Guatemala Tax

Personal income from employment is taxed at progressive rates of 5% or 7%. Nonresident individuals are taxed via withholding at a flat rate of 15% on Guatemala-source employment or professional services income. Capital gains – Capital gains are taxed at a rate of 10%.

Social insurance system covers all employees, including agricultural workers. Public sector employees are covered by a separate program. The pensions for old age, survivorship, and disability are funded by a small contribution from employees and larger contribution from employers, while 25% is covered by the government.

Retirement is set at 62 years of age with at least 216 months (18 years) of contributions to social security.

Cash and medical benefits are provided for sickness and maternity for employees of firms with more than five workers. Free medical care is provided for those receiving pensions.

Social security contributions:

• Social security employer contribution 12.67%
• Social security employee withholding 4.83%

Employers must contribute to the social security system (IGGS) with an overall percentage of:

• Social security 10.67%
• INTECAP 1.00%, entity in charge of the training and training of workers
• IRTRA 1.00%, entity responsible for providing recreation and space to workers and their families

Monthly social security contributions are to be paid to the local authority on the 20th of each month, what corresponds to the previous month.

Health Insurance Benefits in Guatemala

Employers must adopt and implement health and safety measures to protect the life, health and integrity of their employees, especially in relation to:

• Operations and processes.
• Supply, use and maintenance of personal protection equipment.
• Buildings, installations and environmental conditions of the workplace.
• Use and maintenance of safety, protective and emergency systems in machinery, equipment and installations.

Government Accords 229-2014 and 23-2017 contain more detailed rules on workplace health and safety, including rules about toxic and hazardous materials, buildings, equipment, workspace, loads, storage, fire prevention, excavations, demolitions, hygiene, ventilation, lighting, personal protection equipment and electricity, among other things.

The main obligations on employers arising from this regulation are that they must have both a:

• Health and Safety Committee, comprising both employer and employee representatives. The Committee must have session diaries approved and inspected by the Labour Ministry.
• Health and Safety Plan and Policy, supervised and designed by a government-approved medical practitioner.

Additional Benefits in Guatemala

Employees are generally eligible for the following bonuses:

• Annual bonus that is equal to one month of regular salary for Christmas and New Year’s
• Annual bonus of one month of regular salary paid in July

Guatemala Holidays

• New Year’s Day
• Maundy Thursday
• Good Friday
• Holy Saturday
• Labour Day
• Army Day
• Independence Day
• Revolution Day
• All Saints’ Day
• Christmas
• New Year’s Eve

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.