Definitive Guide to Hiring in
El Salvador

Hiring in El Salvador

Hiring employees compliantly in El Salvador means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in El Salvador so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in El Salvador; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in El Salvador

Employee Probation Period

• Probation cannot be more than 30 days.

Annual Leave in El Salvador

• If an employee has been employed for at least year, an employee is entitled to 15 days of paid annual leave.
• The remuneration for annual leave is 15 calendar days' wages plus 30% of the wages for 15 days, which has to be paid to the worker before the commencement of annual leave.
• Compensation in lieu of annual leave is prohibited except in the case of termination of employment contract before a worker.

Holidays in El Salvador

Maternity Leave El Salvador

• In El Salvador, a woman is entitled to a total of 16 weeks of paid maternity leave at the rate of 75% and is paid by social security.
• 6 of the weeks can be taken before the expected due date and 10 weeks after the birth of the child.
• If the mother becomes temporarily disabled due to the pregnancy, she may be entitled to 100% of the regular pay.
• This is granted by social security to those who paid their contributions.

Paternity Leave El Salvador

• Fathers receive 3 days of paternity leave paid at 100% of the regular pay and can be used within the first 15 days of the birth of the child.

Sick Leave in El Salvador

• For a serious illness, employers will cover the first three days of the illness, and social security will cover the rest of the medical leave at 75% of the salary.
• Disability for a period of one year or less is also covered by social security.

Working Hours in El Salvador

• El Salvador operates on a 6-day work week of 44 hours.
• The hours of work shall not exceed 8 hours per day.

Overtime in El Salvador

• Overtime is paid at 100% of the base salary, and workers are allowed to structure their hours by working an extra hour on weekdays (when applicable) to get additional time off at the weekend.

Termination of Employment in El Salvador

The employer can legally terminate (without notice) the contract under the following grounds:

• • if the worker deceived the employer by means of false letters of recommendation or certificates when the contract was concluded. This ground ceases to be operative after the worker has completed 30 day's employment;
  • due to the worker's repeated negligence;
  • if the employer lost confidence in an employee exercising managerial surveillance or similar functions;
  • if the worker reveals manufacturing secrets or communicates administrative matters to the detriment of the undertaking;
  • if the worker commits serious acts of immorality inside the undertaking or while performing work outside the workplace
  • if the worker commits disrespectful acts against the employer or his/her relatives, except in the case of provocation
  • if the workers commit acts causing serious disruption to the company's activity;
  • if the worker (either intentionally or by negligence) seriously endangers the safety or operation of the establishment, or the persons therein safety or activity of the workers, or their health;
  • if the worker deliberately damages the plant, machinery, tools, work implements, goods or merchandise
  • if the worker is absent from work without any justification for two consecutive working days, or a total of three days within the same months; or
  • If the worker, after imprisonment or pre-trial detention, comes back to work, within three days from the date of release, and s/he committed a crime against the employer or his/her relatives
  • If the worker commits serious breaches of the obligations under the contract of employment
  • In the event of disobedience to the employer (or employer's representative)
  • If the worker drinks alcohol or takes drugs during working time or if s/he works under the effect of alcohol or drugs
  • If the worker does not fulfil his/her obligations under art 24 LC

• 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.

Notice Period in El Salvador

• Employees are not obligated to provide advance notice

Severance in El Salvador

• 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 Salary and Wages

• Nonresident individuals are subject to income tax from Salvadoran sources at a flat 30% rate.

• Social security contributions are levied monthly on salaries at a rate of 7.5% for employers and 3% for resident and nonresident employees, with a monthly salary ceiling of USD1,000.
• Death and pension funds are covered by private institutions, which are funded through monthly contributions levied on salaries at a monthly rate of 8.75% for employers and 7.25% for employees, with a monthly salary ceiling of USD6,500.
• The Pension Fund Administration considers any compensation for services provided in El Salvador under an existing employment relationship to be taxable, regardless of the migratory status of the individual.
• For foreign individuals, the Pension Fund Administration has established a refund mechanism for such contributions, and a refund may be requested after the foreign individual leaves El Salvador.
• In principle, salary-in-kind is not subject to Pension Fund contributions because the Pension Fund Law states that only compensation received in cash by the employee for ordinary services rendered to the employer is subject to Pension Fund contributions.

Immigration El Salvador

• Foreigners must apply for a work permit to work in El Salvador, regardless of where the compensation is paid.
• The government of El Salvador grants work authorization to foreign employees, under the option of temporary resident.
• This is subject to certain rules that have to be checked on a case-by-case basis because these rules vary among employees and by country of citizenship.
• The application may be filed before arrival in El Salvador.
• The approximate time for obtaining a work permit after all documents are filed with the immigration authorities ranges from three months to four months.
• However, after the required documents are filed with the immigration authorities, a receipt may be obtained and used as a temporary permit until final approval is received.
• Work permits are valid for one year and are renewable for similar periods of time.
• The government of El Salvador may grant residencies to foreign nationals who are interested in residing in El Salvador as foreign workers as well as to the dependents of foreign workers.
• Dependents must prove that they receive income from the foreign worker or that the foreign worker covers their living expenses.
• However, immigration and visa requirements generally are amended frequently in El Salvador, and applicable requirements may vary among workers.
• As a result, the rules should be checked on a case-by-case basis.
• Foreigners may apply for local residency with the General Direction of Immigration and Foreigner Issues (Dirección General de Migración y Extranjería) if certain requirements are met.
• Residency is granted for a renewable one-year period.

Value Added Tax (VAT) in
El Salvador

• VAT (i.e. Impuesto al Valor Agregado or IVA) is levied at a rate of 13% over the taxable amount.
• As a general rule, the taxable amount is the price or remuneration agreed upon by the parties.
• For imports, the taxable amount is the customs value.

Mandatory Benefits in
El Salvador

• These are mandatory benefits as postulated by law
• These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, severance pay and 13th month pay.
• Statutory benefits also include social security benefits

Accrued Benefits in El Salvador

Payroll Accrual in El Salvador

Country Accruals Additional Information

Description

In El Salvador, the social security system consists of the following benefits: Health/maternity benefits: For health disability, the employer pays for the first three days; after the third day, social security covers 75% of the salary. In case of maternity leave, social security covers 100% of the monthly salary, and the employer grants a four-month leave for maternity care. Disability: For a year or less of disability, social security pays a percentage of the salary; for disabilities over a year, pension funds will recognise a percentage of the salary, depending on the level of disability. Old age: Retirement age for men is at 60 and for women is at 55 years, or they can retire after 30 years of labour services. Death: Pension funds will pay the victim's family an allowance depending on the victim's amount of savings. Pension fund (AFP): Savings for employees are obligatory through pension funds administrated by private Pension Fund Administrators. Social security contributions (ISSS) are mandatory for both employee and employer and are destined to public health services.

Payroll Accruals Additional Information

Why use Global Expansion to hire in El Salvador

Establishing a branch office or subsidiary in El Salvador can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because El Salvador labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by El Salvador law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into El Salvador. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our El Salvador Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.