Blogs

Peru – Employer of Record

EWS helps you to hire an international workforce quickly and compliantly, without setting up a legal entity locally. If you’d like to get in touch about our employer of record solution in Peru, click here

Country Introduction – Peru

Capital –  Lima
Currency –  Peruvian Sol (PEN)
GDP –  $230 Billion (2022)
People/Nationality- Peruvian
Language –  Spanish
Major Religions – Catholicism, Christianity and Evangelical
Population – estimated 33,734,422 Million as of August 2022

Peru is found in South America, being the third largest country next to Brazil and Argentina. The name ‘Peru’ is derived from a Quechua word implying land of abundance, a reference to the economic wealth produced by the rich and highly organized Inca civilization that ruled Peru for centuries. The country’s vast mineral, agricultural, and marine resources long have served as the economic foundation of the country, and up until no , tourism has been a major element of Peru’s economic development. The best destinations for international travellers include Machu Picchu and museums housing artifacts excavated from ancient tombs in northern coastal Peru. Wherever you choose to live or work in Peru, your quality of life will be exceptional- low costs, friendly people, and modern conveniences all come alongside a thriving traditional culture.

Peru has one of the fastest growing economies in Latin America. Over the past two decades, the country has experienced economic growth thanks to the process of modernization and development. This includes the establishment of a reliable legal framework that supports the stability of private sector activities and investment.

Ease of doing business in Peru is one of the main factors foreigners take into consideration when choosing this destination for either direct or indirect investment. This includes market-entry, company formation and company incorporation. There are no restrictions for foreign shareholders, foreign investment, foreign exchange or the remittance of profits. Legal Stability Agreements are available to investors who meet the minimum legal amounts. In addition, the company incorporation process in Peru is relatively simple and straight-forward. The most frequent company structures are the corporation and the limited liability company; both protect the shareholders up to a certain extent.

Contract of Employment

Indefinite-term employment contracts are the rule of thumb for hiring in Peru. Without prejudice to the foregoing, fixed-term and part-time employment contracts may be executed in special cases. All contracts set between the employee and employer must be in writing.

Probation Period

Generally, the probationary period is up to 3 months. In some cases and companies, employees assigned in the ‘position of trust’ may last up to 6 months in probation and management workers may reach up to 12 months.

Termination

According to Peruvian law, the first three months of services constitute an employee’s probationary period. During this time, the employee is not legally protected against dismissal and therefore may be dismissed by the employer without invoking any reason or complying with any formality.

The law authorises parties to establish a probationary period of a maximum of six months for qualified employees or persons of trust who work closely with senior staff and have access to the company’s confidential information. In these cases, the term of the probationary period in the contract must reflect the requirement for training, adjustment requirements or the position’s level of responsibility.

Dismissal due to lack of capability requires a 30-day notice while termination due to related major faults or misconduct needs a 6-day notice.

Working Hours

The allowed maximum working days per week is 6 days, with either eight working hours per day, or 48 hours per week. An employee has an entitlement to a minimum of 45 minutes of lunch break.

Overtime

Every employee shall be entitled to overtime for work that exceeds 8 hours per day or 48 hours per week and is compensated with a minimum surcharge. The amount of the surcharge must be agreed between employee and employer. Typically, the first 2 hours of overtime should not be paid with less than 25% of the total remuneration of the employee and for every additional hour of overtime, the surcharge should at least be 35% per hour.

Annual Leave

Upon completion of one year continuous service with a sole employer, employees are entitled to 30 days of paid vacation leave. A minimum of 15 days must be taken and the other 15 can be cashed out.

Sick leave

In Peru, health is of utmost priority. With this, employees are entitled to 365 days of paid sick leave. The employer compensates the first 20 days of sickness and the remaining 245 days are to be paid by social security.

Maternity and Paternity Leave

In Peru, working mothers are entitled to 98 days of fully paid maternity leave paid by the state. This can be taken in fractions: 49 days for prenatal leave and 49 days of postnatal leave. Working dads are also entitled to 10 consecutive days of paternity leave paid by the employer.

VAT / GST:

The standard VAT rate for Peru is 18%, which is a combination of 16% VAT plus a municipal tax of 2%, while export goods are subject to a nil VAT rate.

Income Tax

Income tax on non-domiciled employees is imposed at a flat rate of 30% on their gross Peruvian-source income. Individuals not domiciled in Peru are only taxed in this country on their Peruvian sourced income. Below are as follows:

Employer/Employee Contributions

Employer’s contribution for Health Insurance- 9% of the salary towards the National Health System.

Corporate Income Tax- Levied at the rate of 29.5%.

Employee’s contribution towards Pension Plan- 13% towards a pension through the National Pension System, or 12.5% if affiliated with a Private Pension System.

Public Holidays

– New Year’s Day
– Maundy Thursday
– Good Friday
– Easter
– Labour Day
– Feast of Saints Peter and Paul
– Peru Independence Day
– Peruvian National Holidays
– Great Military Parade of Peru
– Feast of Saint Rose of Lima
– Angamos Battle Celebration
– Reformation Day
– Al Saints’ Day
– Feast of the Immaculate Conception
– Christmas Day

Severance Pay

Severance pay is not usually granted in the case of separation due to their conduct of capacity; however, if an employee is terminated without cause, severance pay of up to twelve months is often given. There is no specific redundancy pay required under Peruvian law.

13^th Month Pay

13th-month and 14th-month payments are mandatory in Peru. The employer must pay an additional month’s salary twice a year, once at the end of July around Peru’s Independence Day and the other at the end of the year during Christmas.

Work and Residence Permits (Expatriates)

Processing of most visas in Peru usually takes 5 to 7 business days. But in the case of work visas, it can take up to 30 days. Here’s the general list of documents needed for a Peru visa:

– Two copies of the completed visa application
– Passport with validity of at least 6 months from the date of arrival
– Copies of passport (front and back)
– Signed cover letter explaining the purpose of visit to Peru
– Recent ID photos
– Itinerary in Peru
– Hotel reservations
– Bank statements, income tax returns as proof of financial support for your stay in Peru
– Endorsement letter from your employer if you already have a job in Peru. It should have details of your work duration and duration of stay.

Interested in global expansion? click here