Barrios & Fuentes Abogados

Forums For Adjudicating Employment Disputes

There are specialised labour judges and labour courts, at first instance and at appellate level, respectively, who deal with employment labour claims. Labour issues that reach the Supreme Court are reviewed by a Chamber of the Supreme Court specialised in Constitutional and Social matters. All the aforementioned judges and courts have exclusive jurisdiction for most employment claims even in constitutional rights linked with labour rights (e.g. right to labour freedom, reinstatement for violation of constitutional rights, etc.).

The Main Sources Of Employment Law

The main sources of Employment Law are the following:

  • The Political Constitution.
  • Ratified international treatments/agreements.
  • Laws and Legislative Decrees (Executive power-Government administration).
  • Decrees of Urgency/Supreme Decrees.
  • Collective bargaining agreements.
  • Individual agreements.
  • Internal work regulations.
  • Practice.
  • Case law.
  • Doctrine.

National Law And Employees Working For Foreign Companies

National Law applies to people who work within Peru, regardless of the nationality of the company and of the employees or workers.

National Law And Employees Of National Companies Working In Another Jurisdiction

The statutory rights under National Law will apply only when the employee or worker is working physically within the jurisdiction of Peru. However, National law may still be applied in appropriate cases if the employment contract has been signed in Peru even if the employee or worker is working in another jurisdiction and the labour relationship is kept current.

Data privacy

The employer must keep the confidentiality of the personal data of the worker who has knowledge as a result of the provision of services of the employment contract, as required in Law No. 29733, Law and Protection of Personal Data and access to information and its regulation.

Legal Requirements As To The Form Of Agreement

In general, there is no legal requirement as to the form of agreement (employment contract) when the employee or worker is hired with an indefinite term. The majority of employees are hired verbally under an employment contract with an indefinite term. If there is a reason to limit the period of the contract because of a temporary objective, a fixed term employment contract should be used, in which case it needs to be in writing. Likewise, a written employment contract is mandatory when the employee is not a national of Peru and must to be registered at the Peruvian Ministry of Labour. It is also permissible to use part-time employment contracts, by a written agreement, depending on the circumstances, the part-time contracts must be registered at the Peruvian Ministry of Labour too.

Mandatory Requirements
  • Trial Period
  • Under labour law, the trial period is three (3) months. This legal trial period may be extended to six (6) months when an employee holds a position of trust and up to one (1) year for high rank executives in the case of management staff (conventional trial periods). On the other hand, the parties may agree that the trial period is not applicable in the labour relationship.

  • Hours Of Work
  • The ordinary working hours for men and women over age is eight (8) hours per day or forty-eight (48) hours per week, as maximum. A lesser amount can be established, either by Law, by agreement of the parties or by the employer’s unilateral decision.

  • Special Rules For Part-time Work
  • Part-time contracts must be written and registered at the Peruvian Ministry of Labour.

  • Earnings
  • Remunerations are fixed under the rules of the market.

    In general terms there is a minimum wage (currently S/. 930.00 Nuevos Soles Peruvian Currency) per month. Employees or workers who work at night (from 10 p.m. to 6 a.m.) are paid with a special surcharge of 35% over the minimum wage aforementioned, (currently S/. 1,255.50 Nuevos Soles Peruvian Currency) per month

  • Holidays/Rest Periods
  • There are 12 nonworking holidays established by Law in Peru (e.g. January 1st, Thursday and Friday in Easter week, May 1st, Christmas, Independence Day, etc.).

    Likewise, employees and workers are entitled to one (1) or two (2) compulsory rest days in each week, normally Saturday and Sunday, depending on their work week in their workplace.

    Employees and workers are also entitled to 30 calendar days paid for rest period (vacation) per year, after one year of service.

  • Minimum/Maximum Age
  • Teenagers from 12 to 14 years old may work a maximum of 4 hours per day and 24 hours per week. Teenagers between 15 and 17 years old may work 6 hours per day and 36 hours per week.

    At the age of 70, retirement is mandatory and automatic, except if the parties agree to continue the employment.

  • Illness/Disability
  • The first 20 days of illness in a year are paid by the employer. If the Employee or worker is ill for more than 20 days, he/she will receive sick pay (subsidy) from the Employer, but the Employer is reimbursed by the Social Security.

    There are Pension Funds and Insurance to cover disability.

  • Location Of Work/Mobility
  • The employee’s normal workplace must be specified in the employment contract, if this contract is required in writing. When there is no requirement to have a written employment contract, the employer should establish it in a formal communication to avoid any misunderstanding.

    Mobility allowance can be included within the employment contract, but it cannot be an unreasonable amount. When the job requires travel to other temporary locations, it is normal for the employer to reimburse the employee or worker, as applicable, for all reasonable travel expenses.

  • Pension Plans
  • There are two pension plan systems. One is a public system and the other one is a private system. The public system is administered by a Government Agency (ONP) and the private one is administered by Pension Fund Administrators (AFP) The employer should withhold and pay monthly these pension contributions to the public Administrator (ONP) or the corresponding AFP, depending on the chosen system.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
  • A pregnant woman may not be dismissed from work during pregnancy or for 98 days after giving birth.

    A pregnant woman has a right to 49 days of prenatal rest and 49 further days of postnatal rest. In cases of multiple birth this right must be extended for a further 30 days.

    An employee is entitled to be paid a maternity subsidy for 98 days.

    Since 2018 there is also a paid paternity leave of ten (10) consecutive working days. This paid license could be extended to 20 days in the case of premature births and multiple births, 30 days in the case of births with terminal congenital disease or severe disability, or 30 days in the case of serious complications with the mother's health.

    Also, in the event that the mother dies during childbirth or while on her maternity leave, the father of the child born will be the beneficiary with the mother license.

    At the end of the postnatal period, the working mother is entitled to one hour a day of breastfeeding leave, until her child is one year old. In the case of multiple births, the leave for breastfeeding will be increased by one more hour a day.

    Finally, paid leave of up to 30 days is granted to an employee that adopts a child whose age does not exceed 12 years.

  • Compulsory Terms
  • Employment contracts with non-nationals (foreign employees) must be worded in accordance with certain forms provided by the labour regulations (e.g.: the term of the employment contract will not exceed three (3) years – however, renewals are possible; the obligation of the foreign employee to train a Peruvian national in the same position where the foreign employee performs labour activities in the local company; payment of return tickets at the termination of the employment contract, etc.).

    All the fixed-term employment contracts must include the following: objective cause of the temporal hiring (indicating the legal basis), the names of the parties, the date when employment begins, the remuneration, benefits, working day, working hours, place of work and job title/job description, etc.

  • Non-Compulsory Terms
  • The employer and the employee are free to agree any other terms in addition to the compulsory provisions, provided that these terms are no less favourable than certain statutory rights.

Types Of Agreement

Employment contracts with non-nationals as well as fixed-term and part-time employment contracts with national employees or workers, must be executed in writing and, in the case of foreign employees, submitted to the Labour Authority for approval and registration.


Rules regarding secrecy and confidentiality are normally included in written employment contracts or in separated agreements. Breach of secrecy is cause for dismissal according to national law.

Ownership of Inventions/Other Intellectual Property (IP) Rights

Normally inventions should be the property of the inventor, unless the employee or worker uses working tools provided to him/her by the employer for his/her invention and he/she creates this in the worksite or during his/her working hours, or when the inventor has been hired to create such an invention, in which case, the economical exploitation of the invention is agreed to belong to the employer.

Pre-Employment Considerations

There are no regulations regarding pre-employment considerations.

Hiring Non-Nationals

A specific labour law imposes a limit (in percentage terms) on the number of foreign employees or workers who can be hired in a local company.

The employment of non-nationals is limited to 20% of the total number of employees or workers and 30% of the overall payroll in the local company (employer). Employment contracts with non-nationals must be approved by the competent Labour Administrative Authority.

Once the non-national employment contract has been approved, the expatriate may initiate the corresponding migratory procedure at MIGRACIONES’S offices, to obtain his/her corresponding worker visa.

Andean Community members, as well as, Spanish people, Immigrants, etc., are exempt from such limits, but their employment contracts need to be registered with the Labour Authority. Once registered, such people may initiate the migratory procedure at MIGRACIONES’S offices, to obtain his/her corresponding worker visa.

Hiring Specified Categories Of Individuals

There are certain benefits for employers that hire disabled people and also there are age limits for employees engaged in certain types of jobs (e.g. underground work, hazardous conditions, night work, etc.)

Outsourcing And/Or Sub-Contracting/Temporary Agency Work

In Peru there are specific rules for special companies of services dedicated to the provision of a workforce (staffing for temporary activities, supplementary roles or/ and specialized services) regulated by Law 27626 and its rules; and for Outsourcing companies, when the latter develop services with permanent personnel provision related to the core business of the main company (user company) regulated by Law 29245, Legislative Decree 1038 and its rules.

Staffing companies, who must be duly registered with the Labour Authority, in general are dedicated to providing personnel for complementary or auxiliary activities of their clients (user companies). Outsourcing companies, who are dedicated to performing an integral service related to the main activity of their clients (user companies), should act at their own risk and with their own financial, technical, material and human resources. In both cases the clients are jointly liable with their contracted companies, for unpaid labour duties of the staff who has provided the services. Moreover, if legal requirements are not met, the clients (user companies) shall incorporate the personnel (of the staffing company or the outsourcing company) onto their payroll and pay penalties.

Staffing: under the provisions of Law N° 27626 and its regulations, approved by Supreme Decree N° 003-2002-TR, the hiring of staff through a special company that offers provision of workforce services will proceed in only three (3) cases:

    1. Highly specialised services unrelated to the main activity of the user company;
    2. Complementary services and therefore outside the core business of the user company (such as safety, repair, cleaning, external messaging, or similar, and
    3. Temporary services which are work of an occasional nature (Transitional activities other than regular business of the user company) or replacement (activities designed to replace a worker of the user company that has his/her contract suspended by justified cause, or – for administrative reasons – the worker is performing other work in the same company) and in no case should the number of workers hired under this modality exceed 20% of the entire staff in the user company.

It is forbidden for staffing services to be involved in the continued implementation of the core business of the user company.

During the period of assignment of workforce provided in favour of the user company, the staffing services company remains the legal employer, which means that the user company is not responsible for the payment of wages or social benefits or any other right or benefit of the workforce assigned because the user company is not its employer.

The hiring of services provided by staffing companies are subject to certain rules, among which it should be noted that the contract between both companies (the staffing company and the user company) should be in writing and duly filed at the Peruvian Ministry of Labour. Also, the staffing company is obliged to grant a letter of guarantee (carta fianza) – in favour of the user company or in favour of the Ministry of Labour – in order to ensure the payment of one month of social benefits and pension obligations in favour of the workforce assigned. If the letter of guarantee does not cover part or all of these obligations, the user company is severally liable thereon.

Additionally, the staffing company must be registered at the Ministry of Labour and its main and single core business should be the provision of staffing services (Workforce provision).

Outsourcing: the scope of the Outsourcing Law includes user companies whose workers belong to the private sector regime that outsource part of its core business, commissioning it to another company (outsourcing company) provided that there is continuous placement of workers from the outsourcing company to the workplace or place of business of the user company rendering the required services.

By outsourcing, a company hires another one to develop specialized activities or work which shall be performed at its own account and risk, assuming responsibility for the results of its activities. The services are carried out by the outsourcing company with its own financial, technical or material resources, and with workers under its exclusive subordination. Outsourcing companies should comply with the following requirements: plurality of clients, have proper equipment, own capital investment, and the form of its remuneration should be calculated by hours work or services completed.

If the integral service is performed with continuously appointing workers to the facilities of the user company, the outsourcing company must be registered at the Ministry of Labour and must inform its employees and the user company’s employees about the integral services to be provided. Further, a written outsourcing service agreement is required. In this case, the user company is jointly and severally liable for worker’s rights and obligations of social security of all the workers of the outsourcing company appointed to the facilities of the user company. Such liability remains for one year after the termination of the appointment and the user company might claim any amount paid against the outsourcing company.

Changes To The Contract

An employment contract cannot be changed unilaterally by either party. The Employer can, however, make reasonable changes to the working hours, holiday periods and other terms of the contract in order to ensure the performance of the work or required services. The employer cannot reduce an employee’s salary or lower the category without the consent of the employee or worker, and reasonable grounds for the change.

Change In Ownership Of The Business

There are certain rules which apply when there is a change in the ownership of the business. The general rule is that seniority will continue and the new owner is supposed to honour the terms and conditions of the employment contract of the employees and workers, taken over from the previous owner. This general rule applies unless agreed otherwise with the employees or workers. In such cases, an employee or worker, will cease in his/her previous labour relationship and be hired by the new owner. Certain formalities must be followed. Employees or workers are allowed to refuse to transfer to the new employer. However, normally employees or workers will not refuse a change of employer provided that their labour rights and social benefits will be respected.

Social Security Contributions

The employer exclusively must contribute 9% of each employee’s (worker’s) monthly pay to ESSALUD for health services in favour of his/her employee or worker, as applicable.

The employee or worker must contribute monthly between 10% up to 13% for pension plans (depending on which pension plan the Employee or Worker is a member of e.g. a Private or Public system). The employer will act as withholder agent.

Accidents At Work

Employers that are engaged in high-risk activities are under an obligation to take out a supplementary insurance policy for such work (Seguro Complementario de Trabajo de Riesgo – SCTR) to cover accidents at work or professional diseases. The law has listed the types of activities that are considered to be high risk. This insurance may be with ESSALUD (Health Public entity), or with a private health supplier (Empresas Prestadoras de Salud - EPS) regarding health services and with ONP (National Pension Administrator) regarding pensions. Alternatively, employers can seek cover with a private insurance company that will cover both health services and pensions.

Moreover, all employers must comply with Health and Safety Regulations (mining, oil and gas, electricity and other high-risk activities have more strict regulations). Companies are jointly liable with their contractors and subcontractors for failing to comply with the Health and Safety Regulations.

Law N° 29783, published on August 20th 2,011 as approved by Supreme Decree N° 005-2012-TR dated April 24, 2012 regulates all issues regarding the safety and health at Workplace. This law states that every company must implement an Environmental Health and Safety at Work System, and also that the company is responsible for the economic implications, legal and other nature that may result from an accident or illness suffered by the employee or worker in the performance of his/her duties or following it.

Companies with 20 or more employees or workers must have a Safety Committee and Health at Work (CSST), and companies with fewer employees or workers are obliged to appoint a Supervisor.

Supreme Decree N° 005-2012-TR establishes that companies which have 20 or more employees or workers should have an Internal Safety and Health at Work Rules dully filed at the Ministry of Labour. Staff must be made aware of this document.

Additionally, by virtue of Law N° 30222 an employer who deliberately violates compulsory rules regarding Health & Safety, having been previously warned by the competent Authority for not adopting the measures provided by the authority, and as a result of such non-compliance, puts in imminent danger the life, health or physical integrity of its workers, shall receive a sentence of imprisonment of between 1 and 4 years, as well as suffering joint and several liability between the user company and third parties (contractors, subcontractors, staffing companies, outsourcing companies, cooperatives, etc.) in terms of applicable insurance contracts in protecting employees and workers and in terms of monitoring compliance with this legislation.

If as a result of the deliberate non-compliance of the H&S rules, workers or third persons die or suffer serious injury and the employer could have prevented such an event, the general manager or the responsible H&S representative shall receive a sentence of imprisonment between 4 and 8 years in cases of death or between 3 and 6 years in cases of serious injury.

Discipline And Grievance

Warnings and unpaid suspension for acts of misconduct are not regulated by law. Companies with more than 100 employees should set out their internal grievance procedure in their Internal Regulations.

Harassment/Discrimination/Equal pay

The prevention and punishment of harassment at work is regulated by Law No. 27942, Law on Prevention and Punishment of Sexual Harassment, and its Regulations, which establishes the following obligations:

    1. Have an Internal Policy and a Committee or a Delegate.
    2. Provide at least two training sessions, one to all workers at the beginning of the employment relationship and a specialized one once a year addressed to the delegate and the human resources office.
    3. Investigate cases of sexual harassment following the established deadlines and procedures, as well as apply protection measures and medical or psychological care to the alleged victim.
    4. Inform the Ministry of Labour of the receipt of a complaint of sexual harassment and the final decision made by the company after following the investigation procedure.

In case of equal pay, the Law No. 30709, Law that prohibits remunerative discrimination between women and men, establishes the following obligations and prohibitions:

    1. The company must have a table of categories, functions and responsibilities, which will have objective criteria, based on the tasks carried out by the workers, the aptitudes and the profile of the position.
    2. Have a salary policy, which must be informed to the staff.
    3. Set the remunerations that correspond to each category without discrimination.
    4. Set objective criteria for promotions.

Compulsory Training Obligations

In case of the prevention and punishment of harassment at work, it is mandatory to provide at least two training sessions, one to all workers at the beginning of the employment relationship and a specialized one once a year addressed to the delegate and the human resources office.

And in the case of security and health at work, all workers must be provided with at least 4 trainings a year on Occupational Health and Safety as required by current legal regulations.

Offsetting Earnings

Employers may not offset earnings / incomes of their employees or workers, against the employee’s or worker’s receivables (labour debts), unless the employee or worker gives his/her prior written consent to the deduction, which can only be made for a specific purpose.

Payments For Maternity And Disability Leave

Both payments that are subsidies (called in Spanish: “Subsidios”) are granted through the Social Security System.

Compulsory Insurance

Employees are entitled to life insurance from the first day of the job.

Absence For Military Or Public Service Duties

Employees and workers are entitled to take leave for military or public service duties.

Works Councils or Trade Unions

Trade Unions are registered with the Labour Authority. After one year of the trade union being active, the employer must negotiate with the authorized representatives of the Trade Union about the benefits requested by the employees and workers. (This does not mean that a collective agreement necessarily has to be reached). An employee or worker who is a member of a Trade Union has certain rights in relation to his/her employment. For example: Dismissal for membership of, or for taking part in the activities of a Trade Union, is automatically considered invalid, unless the employer justifies the ground of dismissal; A Trade Union officer has the right to time off work with pay to take part in Trade Union activities.

Employees’ Right To Strike

Employees can strike if the strike is the outcome of a negotiation process in a collective bargaining or as a protest against the employer’s resistance to comply with laws, agreements or court decisions related to their work and benefits.

Employees On Strike

Employers can still dismiss employees or workers on strike, if the strike was declared illegal.

Employers’ Responsibility For Actions Of Their Employees

Employers are responsible for the acts of their employees or workers which take place within the scope of their duties within their job.

Procedures For Terminating the Agreement

Certain minimum steps must be followed before termination of the employment contract, to avoid severance indemnity for unfair dismissal or reinstatement. There is a strict list of dismissal grounds, which are related to incapacity and misconduct of the employee or worker.

Instant Dismissal

The employer can dismiss an employee or worker if he/she is guilty of gross misconduct, but in this instance the employer must still follow the minimum statutory steps for dismissal (see the previous answer). In general, an instant dismissal is not allowed except in cases of flagrant gross misconduct.

Employee's Resignation

The employment contract can be terminated by the employee’s resignation (or worker resignation). The employee or worker must give the employer 30 days of notice period.

Termination On Notice

The employer cannot terminate the employment contract by notice, unless it is provided for in the fixed-term employment contract and it is consistent with the temporal or transitory nature of the work or the specific temporary services, based on an objective ground, nevertheless, it is a moot issue.

Termination By Reason Of The Employee's Age

At the age of 70, retirement is mandatory and automatic, unless the parties agree to continue the employment.

Automatic Termination In Cases Of Force Majeure

In cases involving force majeure or fortuitous cases, employment is suspended and a process before the Labour Authorities is required.

Collective Dismissals

To terminate employment contracts collectively (more than a ten percent (10 %) of the personnel registered on the payroll), the employer can invoke economic, technologic, structural or similar reasons. A process before the Labour Authority is required. The employer must justify the reasons for the termination of the employment.

Termination By Parties’ Agreement

The parties are entirely free to agree termination of the labour relationship on any grounds they might choose.

Directors Or Other Senior Officers

There are no special rules which relate to the termination of the labour relationship of an executive director, manager or other senior officer. But jurisprudentially, withdrawal of trust has been established as a valid way to terminate the employment relationship in the case of trusted workers and management.

Special Rules For Categories Of Employee

There are no categories of employees or workers to whom special rules apply, but certain categories (e.g. pregnant women) benefit from more generous protection from unfair dismissal.

Whistleblower Laws

There are no specific regulations about whistleblower laws in a labour context.

Specific Rules For Companies in Financial Difficulties

In these situations, the collective dismissals process could be applied.

Special Rules For Garden Leave

There are no specific regulations about Garden Leave.

Restricting Future Activities

Such rules may be agreed provided that they will be reasonable.

Severance Payments

The amount of the indemnification for arbitrary dismissal (severance payment) depends on the type of employment contract used. In the case of Indeterminate Employment Contracts, employers must pay a salary and a half for each year of service plus fractions of twelfths and thirtieths for months and days worked.

Moreover, in the case of Fixed Term Employment Contracts, the indemnification is equivalent to a salary and a half for each month remaining to complete the term of the contract. Twelfths and thirtieths fractions are not applicable.

In both cases maximum severance payment is 12 months’ pay.

The dismissal of an employee or worker is considered null and void if it occurs as a result of: (i) an employee’s or worker’s membership to a union or participation in union activities; (ii) initiating legal proceedings against the employer; (iii) discrimination on grounds of sex, race, religion, opinion or language; and (iv) pregnancy until 98 days after birth. The nullity of the dismissal has two consequences: a) The reinstatement of the employee or worker in his/her usual place of work and b) the payment of wages earned from the date of dismissal to the effective reinstatement of the employee or worker to his/her place of work.

According to current case law, the employee or worker has the right to decide the level of protection against arbitrary dismissal that is: the payment of an indemnification or the reinstatement in the job.

There are “objective grounds of dismissal” in which the employer is exempt from payment of the indemnification of arbitrary dismissal, if the employee or worker has committed a serious misconduct that makes ineffectual the employment relationship, such as: (i) breach of working obligations, resistance to superiors’ orders, (ii) deliberate reduction in the performance at work, (iii) accomplished or frustrated appropriation of goods or services of the employer, (iv) the transmission of industrial secrets without permission from the employer; (v) attending the workplace while intoxicated under the influence of alcohol or drugs; (vi) absence from the workplace for more than 3 consecutive days without justification, or more than 5 days in a period of 30 days or more than 15 days in a period of 180 days; (vii) acts of violence, serious misconduct or verbal offense against their superiors or other employees or workers; and (viii) intentional damage to facilities and equipment of the employer.

There are also other grounds for dismissal, related to the employee’s or worker’s ability, such as: (i) the detriment of physical or mental capacity to do the job; (ii) poor performance in relation to the employee’s or worker’s ability and the average yield in the work; (iii) the unjustified refusal to undergo a medical examination previously agreed or required by law, and (iv) conviction of a felony.

Special Tax Provisions And Severance Payments

Severance payments are free of tax.

Allowances Payable To Employees After Termination

It depends on the concept, as detailed before.

Time Limits For Claims Following Termination

The time limit varies according to the law in force at the time of the termination of the employment relation and the reason for the complaint. In general, nowadays the statute of limitations is four (4) years. In case of severance payment or reinstatement, the term is 30 business days.

Specific Matters Which Are Important Or Unique To This Jurisdiction

The employer gives the employee or workers two (2) legal bonuses per year, one in July and another in December, which corresponds to the National holidays and Christmas, respectively. The legal bonus is equivalent to one month’s payment in each time.

The legal bonuses must be paid in the first half of July and December, respectively.

In order to receive these legal bonuses, the employee or worker should be working at the time that corresponds to perceive the benefit. However, those employees or workers who have not worked throughout the relevant period, but have worked at least a month during the period, are entitled to receive a pro rata bonus payment based on the number of months worked.

It is also important to mention that an employee or worker is entitled to receive a benefit known as “Compensation for Time of Services”, which is deposited twice a year into a bank and can be withdrawn by the employee or worker at the termination of his/her employment. Withdrawals can take place for housing as well.

Compensation or Time of Services (CTS) is a sum of money – like the unemployment insurance – similar in nature to a social benefit that is recognized based on an employee’s / worker’s length of service. The employee / worker who renders services more than 4 hours per day and reaches a month of effective service in the company is entitled to receive this social benefit while the labour relationship is in force.

CTS is equivalent to a monthly salary and fractions (if applicable) and it is calculated on the basis of ordinary monthly salary and any other amount received regularly by the employee/ worker (i.e. Family Allowance, etc.) either in cash or in kind.

Employers should deposit in May and November each year as many twelfths computable remuneration received by employees / workers in April and October respectively, and have worked full months in the respective semester. The fraction of a month should be deposited by thirtieths.

According to Law N° 30334 published on the Official Gazette “El Peruano” on June 2015, until the termination of employment, employees / workers may – in their CTS individual accounts – dispose 100% of the leftover of 4 gross remunerations.

Finally, there is also compulsory profit sharing when the employer employs more than 20 employees and workers. The rate goes from 5% to 10% depending on the kind of business the employer is engaged in.

Companies, which have more than 20 employees and workers, are obliged to distribute among their employees and workers a part of the profits obtained during the respective year.

The percentage to distribute depends on the activities, as follows:

  • Fishing, telecommunication and industrial companies will distribute: 10%;
  • Mining and commercial companies, as well as restaurants: 8%;
  • Other companies: 5%.

The distribution of profits is calculated as follows: 50% according to the effective days of work and the other 50% in proportion to the remunerations received by each worker. The participation in the profits for each worker should not exceed the equivalent of 18 monthly salaries. The excess is deposited into a special fund.

It is important to mention that from March 1st, 2014, the Superintendence of Labour Inspection started its functions in the country, and under its rules it has been established that a considerable increase in the value of penalties is to be imposed on employers for infractions (non-compliance) of the labour legislation. It is important to note that there are certain benefits to reduce fines if the breach is remediable.

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Claudia Tejada
Barrios & Fuentes Abogados


© 2021, Barrios & Fuentes Abogados. All rights reserved by Barrios & Fuentes Abogados as author and the owner of the copyright in this chapter. Barrios & Fuentes Abogados has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021