Hire Employees in El Salvador

Two routes exist. Registering a Salvadoran entity gives you direct employment and permit sponsorship, and requires enrolment with the ISSS and an AFP before anyone starts. Budget one to two months.

An Employer of Record removes that lead time. The EOR is the legal employer in El Salvador, runs payroll, remits ISSS and AFP contributions, withholds ISR and manages the statutory thirteenth-month salary (aguinaldo) and severance provisioning, while day-to-day direction stays with you.

Engaging someone as a contractor is a third option, but only where the work is independent, see the risk check further down this page.

El Salvador is dollarised, which removes exchange exposure from payroll entirely, unusual in Latin America and a genuine advantage when budgeting a nearshore team in USD.

Two thresholds change your cost as you grow. At ten employees the INCAF training levy of 1% of payroll begins to apply. And from January 2027 the Quincena 25 payment, an extra half-month of salary for employees earning up to $1,500 a month, becomes mandatory for private employers, having been optional through 2026.

Break-even rule of thumb: EOR fees begin to exceed the running cost of a small Salvadoran entity somewhere between 15 and 20 employees. Model both before committing, see EOR vs Entity for the full comparison.

Employer contributions are 17.25% of gross, but the two components behave very differently. The ISSS health contribution is 7.5% charged only on the first $1,000 of monthly salary, a hard maximum of $75 a month. The AFP pension contribution is 8.75% of full salary with no practical cap below the maximum insurable income of $7,045.06 a month.

The consequence is that employer cost as a percentage falls sharply above $1,000 of salary, because only the pension element continues to scale. On a $3,000 salary the ISSS charge is still $75.

The INCAF levy applies only at ten or more employees, at 1% of payroll, or 0.25% for agricultural employers. INSAFORP was dissolved and replaced by INCAF under a law approved in November 2023; the 1% employer contribution itself is unchanged, only the recipient body and the internal distribution of funds. Guides still naming INSAFORP are describing the same charge under its former administrator.

One published employer AFP figure is wrong. A current calculator states the employer contributes 7.75%, giving a 15% total. The correct figures are 7.25% employee and 8.75% employer, totalling 16%, as set by the 2022 pension reform.

Beyond contributions, budget provisions for aguinaldo, the 30% vacation premium and severance. Practitioners put the realistic all-in cost at 1.20 to 1.30 times gross salary.

Gross monthly salaries for full-time roles in San Salvador. Note that the ISSS cap means employer cost as a percentage falls above $1,000 of salary.

Benchmarks below are gross monthly salaries in US dollars for full-time roles in San Salvador. Add 17.25% for contributions, then provisions for aguinaldo, vacation premium and severance, the all-in figure is typically 1.20 to 1.30 times gross.

Payroll is commonly paid twice monthly, though ISSS, AFP and ISR are all calculated on the monthly base rather than per fortnight.

Every worker must be registered with the ISSS and an AFP from the first day of work. The Código de Trabajo also requires the employer to keep an updated register of workers, salaries paid and hours worked, which the Dirección General de Inspección de Trabajo can demand at any time. Not having it available is itself a sanctionable infraction, independent of whether the underlying payroll is correct.

ISR is withheld on a progressive scale with an exempt base of $550 a month, following the April 2025 reform to article 37 of the Ley de ISR. The taxable base is gross salary less ISSS and AFS contributions.

Quincena 25 is the change to plan for. It is a payment equal to 50% of monthly salary for employees earning up to $1,500 a month, free of ISR, ISSS and AFP and not subject to garnishment. It is mandatory for public employers now, optional for private employers during 2026, and mandatory for the private sector from January 2027. An employer paying it voluntarily in 2026 receives a 100% tax credit against income tax, which materially softens the cash impact of adopting it early.

ISR is withheld monthly on the base remaining after ISSS and AFP are deducted. The exempt base is $550 a month following the April 2025 reform.

The Código de Trabajo is the governing statute, supported by the Ley del Seguro Social and the Ley Integral del Sistema de Pensiones.

The standard working week is 44 hours over eight-hour days. Overtime, night work and work on rest days and public holidays attract premium rates.

Minimum wages are set by sector. The rates in force are $408.80 a month for commerce, industry and services, $402.26 for textile maquila and $272.72 for agriculture, under MTPS Decree No. 11. Note that one current source publishes $365 for commerce on one page and $408.80 on another, the decree figure is $408.80.

The minimum wage matters beyond pay, because it caps the severance calculation base at four times the sector minimum.

Written contracts are the norm and should record pay, hours, leave and termination terms.

Registration with the ISSS and an AFP is required from the first day of work, not from the first payroll.

Annual leave arises on completion of one continuous year of service. Where an employer offers leave before that point it is a contractual benefit rather than a statutory entitlement.

The standard week is 44 hours with eight-hour days. Overtime is worked outside the ordinary day and attracts premium rates that differ for daytime, night, rest days and public holidays.

Overtime is integrated into gross salary, so it increases the base on which ISSS, AFP and ISR are all calculated, a point often missed when quoting the cost of additional hours.

Employees are entitled to weekly rest and to statutory daily breaks.

El Salvador observes 11 public holidays in 2026. Work on a public holiday attracts premium pay under the Código de Trabajo.

El Salvador observes 11 paid public holidays in 2026, including the August festivities in San Salvador. Dates that fall at a weekend and any substitution rules are set out below; entitlement is separate from annual leave.

Maternity leave is 16 weeks, and the funding split is unusual: the ISSS covers 25% of salary and the employer the remaining 75%. That makes maternity a substantial direct employer cost rather than a fund-borne one.

Medical incapacity is better covered, the ISSS pays 75% of salary during a certified incapacity.

Time spent on ISSS-recognised temporary incapacity counts as effective service for aguinaldo purposes, so an employer cannot reduce the aguinaldo because an employee was signed off.

Severance under article 58 is 30 days of basic salary for each year of service, with a minimum of 15 days, payable on dismissal without justified cause. The calculation base is capped at four times the sector monthly minimum wage, so a high earner is indemnified on the capped figure rather than actual salary.

Severance carries no ISR, ISSS or AFP deduction. Article 4 of the Ley de ISR exempts it expressly, and deducting AFP or ISSS from it is described by Salvadoran practitioners as the single most frequent and most costly employer error. Pending salary, aguinaldo and vacation within the final settlement are subject to those deductions.

The full settlement covers pending salary, proportional aguinaldo, untaken vacation with its 30% premium, outstanding overtime and commissions, and severance where it applies.

Disputes go to the Ministerio de Trabajo y Previsión Social.

Foreign nationals need a work authorisation and residence permit, both employer-sponsored.

Dollarisation removes exchange exposure from expatriate packages entirely, which simplifies international assignments compared with most of the region.

Foreign employees are registered with the ISSS and an AFP on the same basis as nationals.

Deducting ISSS or AFP from severance is the most frequent error. Severance is exempt from ISR, ISSS and AFP; only pending salary, aguinaldo and vacation attract deductions. An employee short-changed this way can claim through the Ministerio de Trabajo.

Quincena 25 becomes mandatory in January 2027. Any multi-year cost model built on 2026 figures will understate salary cost for employees earning up to $1,500 a month by half a month a year from that point. Paying voluntarily in 2026 attracts a 100% income tax credit.

Crossing ten employees triggers the 1% INCAF levy. It is easy to miss because it is a headcount threshold rather than a rate that applies from the first hire.

Note also that published aguinaldo and minimum wage figures conflict between sources, that the aguinaldo exemption from ISR, ISSS and AFP runs only up to two commerce minimum wages, and that an employee concluding contracts locally can create a taxable presence for a foreign entity.

Work backwards from the start date. For a local hire through an EOR, two to three weeks is realistic once identity documents, the signed contract, ISSS registration and AFP enrolment are in hand.

Register with the ISSS and an AFP from day one, and set up the statutory register of workers, salaries and hours at the same time, its absence is independently sanctionable.

Decide the Quincena 25 question deliberately: voluntary adoption in 2026 carries a full tax credit, and it becomes compulsory in January 2027 in any case. Provision aguinaldo and severance monthly rather than meeting them as they fall due.