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Anyone looking for register a business in El Salvador or already active in this Central American market, getting to grips with and properly implementing employment law is critical to maintaining your company’s good standing and maximizing its chances of success.
El Salvador’s Employment Law is managed by the Ministry of Labor and Social WelfareWhile many regulations can be compared to others, there are some aspects that the Salvadoran system is unique to.
Anyone who is planning a limited-scale engagement with the market — be that the employment of a small number of local executives, or an operation that will only last for a short period of time — hiring through an employer of record (EOR) in El SalvadorCould be the best.
An EOR allows you to hire without the necessity of establishing and then liquifying a local entity. You also have the assurance that your EOR provider is compliant with all local regulations.
This guide will provide basic information on El Salvadoran employment law.
You can contact us to learn more about our services and how you can help you negotiate employment law in El Salvador. contact us today
Standard working hours in El Salvador’s employment law
El Salvador’s employment law states that a typical work week lasts 44 hours. A normal shift does not exceed eight hours.
Night work is defined as employees working between 19:00 to 06:00 on the following day. This workweek can be 39 hours. It’s based seven-hour work shifts.
It is important to note that El Salvador generally has 10-11 national holidays on weekdays in each year. There are also two or three regional holidays.
Common contracts under employment law in El Salvador
Foreign investors most often use two types of contract that El Salvador has allowed for employment.
- Indefinite-term employment contracts These are the most popular type of contract. They only terminate when the employee and employer reach a mutual understanding or one party has the authority to take unilateral action.
These situations include an employee quitting their job or a case of misconduct by employees that is grounds for dismissal, as defined in the contract.
- Fixed-term employment contractsThey typically last for days, weeks or months and usually last no more than one year. However, they may last up to two years if the employee has a technical or professional qualification or the job at hand warrants it.
Contracts must clearly describe the work to be done and provide details about termination options.
Severance or termination
Employees can terminate their contracts without giving notice within the 30-day probation period. For most employees this will be 30 days. But, it may extend to longer for certain types.
To be discharged with just cause, employees must have served their probation.
You can be accused of neglect, failure to fulfill duties for two consecutive working days, intoxication at work, or disrespectful behavior toward the employer and fellow employees.
In the event of an employee’s contract being terminated without cause, they will receive a liquidation payment totaling 15 days of standard pay for every year of service they have provided the company.
This benefit is similarly conferred to employees when they resign, and the employer is obliged to provide the payment within 15 days of the employee’s final day of employment.
In both cases, employees who leave are eligible to receive an amount equal to their statutory end-of-year bonus.
Not all employees must give notice when they quit. But, El Salvador employment law states that they can.
However, if they are in a management position or undertaking a specialized task, they are obliged to provide 30 days of written “advanced notice” of their intention to resign.
Salvadoran law allows for vacations and leave.
After completing one year of employment — during which they have worked at least 200 days — an employee is entitled to 15 days of paid vacation leave. This leave must be earned before the employee can begin the vacation period. It is calculated at 130% of the average daily earnings.
You cannot exchange vacation allowance for more pay unless you are leaving your job. The vacation rate for jobs with room and board is also increased to 25%.
Leave for paternity or maternity
The total amount of 12 weeks paid maternity leave is granted to mothers who have given birth. Of these, at least six must be taken before the due date. The state social security fund pays maternity leave at 100% of your monthly salary, up to $514.40.
Not to be confused with the fact that pregnant women cannot dismiss workers or assign tasks that may pose risk to their unborn children,
Employment law in El Salvador allows for paternity leave of three days in cases of birth and adoption. This leave must be used within fifteen days.
Take a sick leave
The length of time employees have served the company determines whether they are eligible to take sick leave. For employees with a service history of between one to five months, 20 days are eligible for sick pay at 75%.
Employers who are serving between five to 12 months have their leave allowance extended to 40 days at 75%. Employees who have been in the workforce for more than one calendar year have 60 days of sick paid leave.
Notice that an employee diagnosed with chronic illness must be treated within three months of receiving the diagnosis.
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In the case of the death of a spouse, parent, child or partner, bereavement leave can be granted. It lasts as long as it is needed. Employers are only required to pay two days salary per month and maximum 15 days of bereavement leaves in a given calendar year.
Employment law in El Salvador: statutory contributions
Deductions for employees:
Employment law in El Salvador allows for deductions from salaries to pay social security, national death and pension funds, and total 10.25% of any income up to $1,000.
For social security there is a 3% tax. This deduction can be taken for the first $1,000 of earnings, but it cannot exceed $30.
A 7.25% deductibility is made from every salary above $7,029 per monthly for the pension fund. The maximum amount of deduction allowed is $509.60.
Employer contributions
The equivalent of 15.25% per month in employer contributions to social insurance and the pension fund is paid by employers. The figure is based on a 7.5% payment to social security and a $7.75% to the pension fund. Contributions to higher salary earners are similarly restricted.
Employers with more than 10 workers must contribute an equivalent amount of 1% to the Salvadoran Institute for Professional Education.
An annual bonus
An annual bonus is available to employees who have provided continuous service for at least one calendar year by December 12. A proportional bonus is available to employees who work for less than one year.
The El Salvador employment law states that the bonus has to be paid in December between 12 and 20 years of the calendar year it corresponds. It is calculated based upon length of service.
The bonus for employees who have been with the company at least 3 years must be equal to at least 10 days’ base salary. Those who worked between 3 and 10 years need at minimum 15 days. Anybody who worked more than 10 years must be paid at least 18-days of base salary.
Employees lose the right to an annual bonus if two unexcused absences occur within two months of the date the bonus is issued.
Biz Latin Hub can assist you doing business in El Salvador
Biz Latin Hub’s bilingual team of corporate support specialists is here to assist you in understanding and correctly implementing El Salvadoran employment law, as well other aspects of business operations in El Salvador.
The complete portfolio of services we offer back-office includes company formation, accounting & taxation, corporate legal services, visa processing, and hiring & PEOWe offer a range of services that can be tailored to meet every individual’s needs.
Additionally, we also have representatives in 15 markets throughout Latin America and Caribbean as well as trusted partners who can help expand our coverage into every corner of the country.
Contact us today to find out more about how we can support you doing business in El Salvador.
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