How To Hire And Pay Employees In Peru

With the local government recently helping to promote entrepreneurship, Peru should be on your radar when considering expanding internationally. With an economy that is growing year on year, the tech sector has a widely educated workforce with a decent level of English proficiency. Spanish is still expected for most business-related documentation and processes.

New laws regarding remote working in Peru were approved in 2022. Employers are now obligated to provide all working tools needed by the employee, as well as funding the employee’s internet access and electricity bill.

Employee costs in Peru are expected to be 10-15% of their salary.

Full-time employees are entitled to 30 calendar days’ annual leave per annum. There are 12 public holidays in Peru. Some companies may also offer additional holiday or have more favourable holiday rules in place through a unilateral decision by the employer, agreement, or a collective labour agreement.

January 1st: New Year's Day
April 14th: Maundy Thursday
April 15th; Good Friday 
April 17th: Easter Sunday
May 1st: Labor Day 
June 29th: Saint Peter and Saint Paul
July 28th: Independence Day 
August 30th: Santa Rosa de Lima
October 8th: Battle of Angamos
November 1st: All Saints Day 
December 8th: Immaculate Day
December 25th: Christmas Day 

Most employment probation periods in Peru are 3 months. Probation periods can be extended to 6 months for executive level and skilled employees.

The employee may unilaterally terminate the employment contract by giving the employer notice in writing of 30 days.

Following the probation period, an employee can only be dismissed if there is a just cause established in Peruvian employment law. The cause will need to be related to the conduct or capability of the employee, or the operational requirements of the business. Below are examples of operational requirements.

• Liquidation of the company due to bankruptcy or insolvency.
• Economic, technical, or structural.
• Force majeure i.e. acts of God.
• Forced liquidation or dissolution by court order.

In the case of forced liquidation or dissolution by court order, or dismissal for structural reasons, employees will be entitled to the following compensation.

• 22 days salary for each complete year of service up to eight years
• 10 days salary for each additional year up to four years
• 7 days salary for each additional year up to four years

Employees in Peru are entitled to certain notice procedures prior to separation. Generally, an employer will need to provide a period of written notice of 6-30 calendar days, depending on the reason for dismissal.

An employer will not be required to provide written notice if the employee has displayed serious misconduct which would make it unreasonable for the employer to continue the employment relationship. An employer will always be required to communicate in writing to the employee, or as required a trade union or other representative, the dismissal decision and reason.

Examples of misconduct are failure to comply with employment obligations, attending work under the influence of drugs or alcohol, violence, deliberate damage to company property, failing to attend work without reason for three consecutive days, repeated lateness where written warnings have already been provided, and unprofessional conduct towards the employer inside and outside of work.

If an employee is terminated without a justified cause, they will be entitled to compensation as below.

• 45 days for each completed year of service, a minimum of 90 days up to a maximum of 8 years.
• 30 days for each additional year up to 8 years.
• 15 days for each additional year up to 8 years.

Fractions are paid for twelfths and thirtieths, provided that the compensation exceeds the minimum amount.

Non-compete obligations are not legally regulated in Peru. Any non-compete clauses would be a contractual provision that equates to the employee’s legal obligation not to compete unfairly with their employer. It is generally advisable to include a non-compete clause in a written employment contract.

Contracts of employment can be written or verbal in Peru. However, it is always best practice for these to be provided in writing, in the local language. The contract should include an overview of benefits, compensation, and termination procedures. Fixed term contracts must always be in writing and are permitted for up to 5 years. Employers are required to register fixed-term contracts with Peru’s Labour Ministry. Companies in Peru may only employ foreign workers if the proportion of foreign employees does not exceed 20% of total employees within the company. Contracts of employment for foreign employees must always be writing and cannot exceed 3 years but can be extended.

Expectant mothers in Peru are entitled to 14 weeks’ paid maternity leave, of which seven weeks are taken before the birth and seven weeks after. To qualify for maternity benefits, the employee must have worked for three consecutive or four non-consecutive months of the six months before maternity leave. The National Health System (EsSalud) or the Private Health System (Entidades Promotoras de Salud or EPS) compensates maternity leave. Fathers are entitled to 10 days of paid paternity leave after the birth.

Employees are entitled to 365 days of sick leave (1 year). The first 20 days of sick leave are paid by the employer. After the first 20 days the sick pay is then paid by social security. After one year, if the employee is not fit to return to work, they can apply for a disability pension. To qualify for the social security fund sick payments, an employee must have at least 3 months continuous service.

Both employers and employees are required to make contributions towards social security in Peru. Generally, the employer will contribute 9% of the employee’s salary towards the health insurance side. Through this, an employee can receive medications, consultations, and treatments in case of illness or accident. The employee will contribute 12.5-13% towards the pension funds. Within the pension system, there are two options for workers: the SNP, or national pension system, and the SPP, or private pension system. The employer contributions to the SNP are 13%, and to the SPP, 10-12.5%.

Most of the Peruvian population are covered by some type of health insurance. Health insurance in Peru is split between the state-subsidised Comprehensive Health Insurance (SIS) and the Social Health Insurance (EsSalud). There is also the Private Health System (Entidades Promotoras de Salud or EPS). 25% of the amount paid to the EPS can be used as credit against EsSalud contributions. Employers may also provide supplemental health insurance.

CTS (Service Time Contribution) is a social benefit provided to an employee, similar to ‘mandatory savings’, that will help them face possible future issues such as termination of employment and supporting family whilst seeking employment. An employee will receive money accumulated in the CTS fund. Employees working within the private sector are entitled to this benefit and must have worked for at least one month with their employer and work a minimum of 20 hours per week. The employer will need to make payments within the first 15 days of the months of May and November.

Work visas need to be applied for with the General Directorate of Immigration and Naturalisation (DIGEMIN) which issues the Peruvian work visas. Applicants will need to have a contract of employment for at least 12 months approved by the Peruvian Labour Ministry for a resident work visa. Applicants with a contract duration of less than 12 months or with a probation period will need to apply for a temporary work visa. If an applicant is already in Peru on a tourist visa, they will need a permiso para firmar contratos (a special permission to sign contracts) before they can legally sign the contract.

Applicants can apply for a visa for independent professionals or Peru professional visa so they can work as a freelancer whilst living in Peru. This gives the right to work in Peru as a freelancer, whilst not being employed under a contract.

The national minimum wage in Peru increased in May 2022 to 1,025 PEN (Sol) per month.

The Peruvian tax year runs from January to December. It is the employer’s responsibility to ensure taxes are paid from salaries before payments are made to employees. The general personal income tax rates are listed below as guidance. One unit is equal to approximately 4,400 PEN. Non-residents are subject to a flat tax rate of 30% on total taxable income.

Salaries in Peru are generally paid on a monthly basis. A 13th and 14th month salary payment is mandatory. These payments are both equal to a month’s salary and are paid in July around Peru’s Independence Day and December around Christmas.

Social security contributions in Peru are the responsibility of the employer to deduct from an employee’s salary before payment. Both the employer and employee are subject to social security contributions. Below are approximate contribution rates for employers and employees, please note that these can vary. 

CTS is only mandatory for the private sector and has minimum eligibility, including the company being over a certain size and the employee working a minimum of four hours a day or 20 per week.

The pension percentage varies depending on the scheme. Generally, it is 13% for employees associated with the National Pension System and 12.5% for employees associated with the Private Pension System.