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Hiring Overseas Employees in Peru: A Guide for Global Companies

When recruiting global talent, you never know where you are going to find a remote employee with the perfect skill set, so you need to be prepared for overseas hiring in almost any country.  This goes beyond managing time zone differences, work schedules or cultural barriers, as your company will also be obliged to follow local employment regulations.

If you are planning on hiring in Peru, you will want to know what your employees will expect and what the law requires to stay in compliance.  This guide will give you an outline of the key areas to pay attention to, and suggestions for the optimal hiring method.

What you need to know about hiring employees in Peru

Once you have completed recruitment of your new employee, there are a number of parameters to be aware of during the onboarding process.  This is important not only for compliance, but to meet your employee’s expectations as an employer and avoid any complaints or conflicts.

Employment in Peru

Employment Contracts

Locals can be hired under indefinite, open-ended contracts but fixed-term, written contracts are required for expats, for a maximum three-year term with extensions permitted.  Expat contracts are subject to approval by the labor ministry.  Remote, home working contracts for residents or expats must also be approved.

Employee Entitlements

Entitlements are important for employees as they support their time for leisure, illness, or childbirth.  Peru has generous entitlements, including:

  • 30 calendar days of paid vacation each year
  • 20 days of sick leave each year, paid by the employer (after 20 days it is paid by public health insurance)
  • 98 days of paid maternity leave and 10 days of paternity leave
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Work Permits

Work permits for expats must be sponsored by a local entity and will be issued after approval of the employment contract by the labor ministry.

Collective Bargaining Agreements

Collective bargaining agreements and union representation are common in the mining and manufacturing industries and could affect employee entitlements and labor rights.

Termination and Severance

Termination is only permitted for cause, such as employee misconduct and incapacity.  The notice period is only six days (except for incapacity where it is 30 days), so pay in lieu of notice is not allowed.

There is severance only for unfair dismissals, equal to 5 times monthly compensation for each year of service.  This is a fairly high amount, so it is best to only terminate for cause.

Payroll and Taxes in Peru

Minimum Wage

The minimum wage in Peru is USD$282 per month, which on a global scale is relatively low.  However, skilled and professional employees will naturally expect a higher salary than the minimum.

Here are some average salary ranges for common remote work roles in Peru:

  • Accounting/Finance: $2146
  • IT specialist: $2115
  • Marketing: $2357
  • Customer Service: $1440

Payroll and Social Security Contributions

National Health Insurance:9%0%

Tax Rates

Income tax rates are progressive and range from 8% to 30%.  Expat employees who are domiciled in Peru for less than 183 days in a calendar year pay a flat 30% tax on income.

13th and 14th Month Salary

13th and 14th month salaries are mandatory and paid in July and December as a bonus equal to one-month salary for each.  This should be taken into account when setting compensation levels, as the annual salary will need to be split into 14 parts.

How to hire your employees in Peru

Once you have secured your employee’s commitment and arrived at compensation and benefits for the position, the next step is to decide how to hire them.  You do have a few choices, which will depend on your company’s degree of commitment to Peru, number of employees being hired and how the work is structured.

Setup your own entity in Peru

For companies that have other business activity in Peru, or who want to assemble an entire Peruvian remote team, it may be practical to set up an entity or subsidiary.  This will mean incorporation and registration steps, as well as hiring local legal and accounting experts to assist with compliance.

Setting up an entity does allow a company to have control over the entire hiring and employment process, but it also carries more cost and time to implement than other options.

Use an employer of record to hire your employee

For hiring one or more remote employees, you can use an employer of record (EOR) in Peru.  The EOR steps into the shoes of the legal employer, and is already set up to hire, onboard, and payroll both resident and expat employees in Peru.

The advantage is that the EOR can hire employees quickly and for minimal administrative cost, while assuring compliance through its team of local experts.

Hire them as a contractor instead

If your company is unsure about the commitment of hiring a full-time employee, then you could hire the worker as an independent contractor.  With this option, the worker takes care of all their own taxes and contributions, and receives no employee benefits or entitlements.

It carries less cost for the company, and can be one way to hire part time workers or offer a temporary trial period.  However, long term there is risk that at some point the worker attempts to claim they were misclassified, and are entitled to employment status and benefits. 

To avoid misclassification in Peru the contractor must be non-exclusive to the company (have other clients), control their own work hours and charge a fee for service that is not like a fixed salary.

How to stay compliant in Peru

Foreign employers have to prioritize legal compliance when hiring in Peru so that they are not subject to fines, employee complaints or even blacklisting from the country.  There are certainly compliance risks when you begin to employ abroad, and those can be minimized by having a local partner to administer employment on your behalf.

Here are a few issues that you could encounter with a DIY approach:

  • Miscalculation of employee/employer tax withholding and social contributions
  • Failure to offer statutory employee entitlements, violating labor laws
  • Unjust termination of employees, resulting in high severance payments
  • Hiring contractors and then treating them like employees without benefits

A better approach is to use the Shield GEO employer of record solution, where we can eliminate any unintended non-compliance and ensure that your employees in Peru are onboarded and paid in accord with all employment regulations.  The entire relationship is handled by our regional account manager who can help you bridge differences in language, culture, employment rules and compliance standards.  We make international employment simple.

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