Paraguay has become an attractive destination for not only investments but for businesses to operate in. There are great tax incentives that draw in investors from other countries.
But, when it comes to starting a business in a new country, there are many challenges you have to overcome and one that is most important is understanding how to pay your employees.
The laws that guide the way employees are pay are the Labour Code, Law 213/93, modified and partially updated by Law 496/95. The Labour Procedural Code, Law 742/61 and special laws are applied to legal matters regarding pay. These laws cover all matters related to labour and the relationship between employers and employees in Paraguay. Paying employees in Paraguay depends on the type of economic activity that the company performs since there are more than 70 laws and regulation decrees. With this many variables, it is important to have local knowledge before paying employees.
The standard work week in Paraguay is 48 hours for daily work and 42 hours for overnight work. There is overtime compensation paid for excess work with 50% paid for daytime overtime, 30% for overnight work, 100% for overnight overtime and 100% for public holidays. Employees are paid in the official currency of Paraguay, the Paraguayan guaraní (PYG). The national minimum is 2.11 million guaraníes per month (approximately $352). Wage growth in Paraguay is typically slow for most employees. Workers who are terminated without cause are entitled to 15 days of wages for each year worked. Employees that have worked for 10 years with the same employer have tenure are not allowed to be dismissed for unjust reasons.
Employees in Paraguay contribute 9% monthly to Social Security (called IPS, in Spanish) while their employers contribute 16.5% of their gross salaries. The IPS is in charge of social security, medical services, retirement and pensions. Medical services extend to the employees' families which provides medicine, hospitals and other specialized services. The IPS also covers work/occupational illnesses, work accidents, death and it provides pensions.
In Paraguay, vacation days are earned after working for one year for the employer. Employees earn 12 days if they worked from one to five years, 18 days for five to 10 years and 30 days for 10 years of employment. Employees also receive off for 12 national holidays a year.
For sick leave, employees that have a justified illness may take medical leave with the salary paid by the government at 50% of the salary. Paraguay has both maternity and paternity leave with maternity leave for 18 weeks paid by IPS at 100% of her salary and paternity leave for 2 weeks after the delivery date with the salary paid by the employer.
According to Law 213/93 article 243, a complementary annual compensation or thirteenth salary is paid to employees. This is paid in December and is the equivalent to one month's salary.
How we can help
TMF Paraguay has the local knowledge and experience to provide you with tailor-made solutions to all your payroll needs from the recruitment process, from hiring to dismissing an employee and setting up and managing payroll and human resources. Whether you want to set up a new business in Paraguay or wish to get assistance with your payroll processing, talk to us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.