With a mixture of emerging and booming economies, political uncertainty and extreme contrasts in business customs, the Americas can never be categorized as one homogeneous whole.

When you operate in multiple countries and start to hire your employees, you must be aware to be fully compliant with the local labor regulations as well as your internal HR and payroll policies. Here we take a look at how HR & Payroll works in Peru.

Social Security System

  • Peru's mandatory social security system is managed by the Social Security Administration for Heath Services (EsSalud). The monthly contribution is of 9% of an employee's gross salary.
  • Employees are required to contribute towards the national pension (pension to retired employees) or private pension systems (contributions are withheld by the employer).

    • The monthly contribution to the National Pension Fund is of 13% of the employee gross salaries.
    • Private pension fund administrators (AFPs) also offer pensions for retirement, as well as handicap and survivorship pensions and burial expenses. Employees are required to contribute 10% of their gross monthly salary as well as commissions for the AFP and insurance premiums for handicap and burial coverage, leading to a total contribution of about 13%.

Hiring/Retrenchment Issues

  • An employment contract can be written or verbal. Employers can also enter into collective bargaining agreements with employees.
  • Employees under indefinite contracts, who are dismissed without cause, are entitled to reinstatement or a severance payment of 1.5 months' salary for each year of service, up to a maximum of 12 months' salary. Employees under fixed-term contracts are entitled to a severance payment of 1.5 months' salary for each month left in the contract term.

Foreign Personnel & Work Permits

  • Foreign nationals can comprise a maximum of 20% of an employer's workforce, and can account for a maximum of 30% of the total remuneration paid by an employer (exceptions apply).
  • Foreign employees are required to obtain a valid work visa and sign a labor agreement with an employer to work in Peru.

    • Employment contracts with foreigners are for a maximum term of three years and can be renewed.
    • Main types of visas are:

      • Business Visa: Issued to foreigners who wish to enter Peru for short-term business visits.
      • Work Visa: Issued to foreigners who wish to work in Peru on an employment contract approved by the Ministry of Labor.
      • Designated Work Visa: Issued to foreigners who wish to carry out specific work requiring specialized knowledge in Peru for a pre-defined duration.
      • Work Visa for Service Providers: Issued to foreigners investing or carrying out their profession independently.

Payroll Cycles

  • Salaries are generally paid on a monthly basis.
  • The minimum wage in Peru is PEN 850 per month effective from May 2016.
  • Overtime is payable at a rate of at least 25% of the normal pay rate for the first two hours, and at least 35% of the normal pay rate for the subsequent hours.
  • Employees are entitled to a share in the profits of a company when the company has more than 20 employees.
  • Employees receive two additional month's salary as a legal bonus payment, one in July and one in December.
  • One additional salary per year is paid as Working Compensation (CTS), 50% in May for the period worked from November to April and 50% in November for the period worked from May to October.
  • Employees who have worked for a year, are entitled to a paid annual leave of one month, subject to a minimum attendance of 260 days for a six-day work week and 210 days for a five-day work week.

HR Legislation

  • Employment in Peru is governed by multiple laws and regulations. However, Peru is expected to formulate a single labor law.
  • The Labor Productivity and Competitiveness Statute of 1997 regulates the main aspects of the employment relationship, including terms and conditions of employment, employee benefits and termination of employment.
  • Peruvian labor regulations apply to all employees in Peru regardless of their nationality.

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.