Establish your presence globally with Neeyamo as we help you go beyond borders to manage your international payroll and hire new talent in El Salvador.
Overview
Countries have gone to war for hundreds of reasons, but have you ever heard of two countries going to war over a football game? In 1971, El Salvador and Honduras went to war for four days after a heated football game. Tensions were brewing after a brief military conflict, and the game fueled the fire.
El Salvador, where one of the football games was played, is located in the continent of North America, sharing its borders with Honduras, Guatemala, and the Pacific Ocean. The country has vast resources to offer and a highly skilled workforce as well.
If your organization's expansion plans require you to hire employees in El Salvador and you lack a physical entity in the country – a key requisite to hire local talent, Neeyamo assists organizations worldwide with onboarding and managing employees in El Salvador - processing payroll, payroll accounting, managing local compliance requirements, benefits, and more.
Facts And Stats
Capital
San Salvador
Currency
United States Dollar (USD)
Official Language
Spanish
Fiscal Year
1 January – 31 December
Date Format
DD/MM/YYYY
Country Calling Code
+503
Other Languages
Lenca, Pipil, Q'eqchi, Cacaopera, and Nahautl
Time Zone
Central Standard Time (GMT+3:00 )
Global Payroll
Overview
Handling payroll for a widespread workforce can pose a significant challenge for any organization, and the added complication of compliance can make things worse. If companies spend more time processing payroll, it directly impacts day-to-day operations and their overall productivity.
Over the years, Neeyamo has observed these complexities and strived to provide a global payroll solution through a single technology platform - Neeyamo Payroll.
Payroll Taxes
Payroll tax is the percentage amount retained from an employee's salary and paid to the government to invest in the general population's welfare. These are statutory in nature and are levied from both the employer and employee. Additional statutory contributions are made by employers towards providing both short-term and long-term benefits for their employees.
Employee Taxes
The employee taxes in El Salvador are computed as follows:
- 3.00%- Social Security (up to a maximum monthly cap of 1,000 USD)
Employees who have salaries above 1,000 USD the Employee’s social security contributions applicable is 30.00 USD - 7.25%- AEP (Pension Fund)
- 10.25%- Total Employee Cost
Interest rate for late tax payments
With effect from February 1, 2023, the interest rate for late payments of tax till 60 days is 6.35%.
The interest rate for late payments of tax beyond 60 days is 10.35%.
Employer Taxes
The employer taxes in El Salvador are computed as follows:
7.50%- Social Security (up to a maximum monthly cap of 1,000 USD. For Employees who have salaries above 1,000 USD, the Employer’s social security contribution applicable is 51.49 USD)
7.75%- AEP -Pension Fund (maximum 6,523.20 USD)
1.00%- INESAFORP (applicable to companies with more than ten employees, based on employee monthly salary of less than 1,000 USD per month)
15.25% - 16.25% - Total Employment Cost
Payroll Cycle
Overview
Undoubtedly, payroll is a critical process for any organization. Pay cycle in El Salvador refers to the period for which an organization pays its employees, and this can vary depending on the pay frequency that the organization chooses to adopt.
Frequency
The payroll cycle in El Salvador can be weekly, biweekly, or monthly.
Payment should be made no later than one business day after the end of the work cycle.
13th Month Cycle
In El Salvador, it is common to pay a 13th-month salary payment to employees in December as a Christmas bonus.
Global Work
Overview
An Employer of Record (EOR) service provider helps you eliminate the hassle of handling complexities while onboarding a new employee in an international location. They help bridge the gap that otherwise mandates organizations to have a local registered entity and a local bank account before making a job offer to an international hire.
An EOR service provider acts as a legal employer, facilitates salary payments, and manages other statutory requirements such as health insurance, payroll taxes, and employee benefits, ensuring compliance with local tax laws and regulations.
This allows organizations to focus on collaborating with the employees in El Salvador for operational tasks, with the knowledge that they have a cost-effective solution to support their global business payroll & HR requirements as they continue their global expansion.
Neeyamo, using its cloud-based HR and Payroll services, strives to provide its customers with a seamless employee management experience and offers employer of record with our Global Payroll Technology Stack.
HR Mandates and Practices
Minimum Wage
In El Salvador, the national minimum wages range from 243.46 USD for agriculture employees to 365.00 USD for industry and commerce service employees.
Overtime
In El Salvador, all overtime hours in excess of 44 hours a week are generally paid at an overtime compensation rate of 200.00% of the employee’s regular salary payment.
Data Retention Policy
Employee records in El Salvador are kept for a period of 10 years.
Amendment to the Pension system
With effect from December 20, 2022, Old-age pension will get a 30% increment and the pension cap is set between US$400 and US$3,000.The retirement age is maintained at 55 years for women and 60 years for men. The employer's contribution rate is increased to 8.75% i.e. a 1% increase. The distribution of contribution rate is 9% for the affiliate's account; 6% for the Solidarity Guarantee Account and 1% as a commission for the AFPs.
Changes to the labor code on employer responsibilities
A fine of $57.14 for each violation irrespective of the provisions of the violated norm. Fines would be sanctioned accordingly:
An employer with (less than 10 employees) - US$730.00, (more than 10 and up to 50 employees) - US$1,460.00, (more than 50 and up to 100 employees) - US$2,920.00 and (more than 100 employees) - $4,380.00.
Hiring and Onboarding Requirements
Hiring
Employment contracts in El Salvador are done through a strong, written contract in place in Spanish which spells out the terms of the employee’s compensation, benefits, and termination requirements.
An offer letter and employment contract in El Salvador should always state the salary and any compensation amounts in U.S. dollars rather than a foreign currency.
Onboarding
In El Salvador, no specific legislation is required for employees. Employees are called to office to work and if needed, training is provided.
Probation
El Salvador’s probationary period depends on the type of role and is stipulated within the employment agreement. In general, probation periods can be no more than 30 days.
Leave
National Holidays
- Jan 1: New Year
- Apr 6: Maundy Thursday
- Apr 7: Good Friday
- Apr 8: Holy Saturday
- May 1: Labor Day
- May 10: Mother's Day
- Jun 17: Father's Day
- Aug 6: Celebration of San Salvador
- Sept 15: Independence Day
- Nov 2: All Souls Day
- Dec 25: Christmas Day
Sick Leave
The amount of sick leave an employee is entitled to in El Salvador is determined by their years of service:
- 1-5 months of employment entitles the employee to 75.00% of the basic salary for 20 days.
- 5 months to 1 year of employment service entitles the employee to 75.00% of the basic pay for 40 days.
- 1 year or more of employment entitles the employee to 75.00% of the basic pay for 60 days.
Maternity Leave
In El Salvador, female employees are entitled to receive up to 16 weeks of paid maternity leave, calculated at the rate of 75.00% of their regular wages. The employee must provide a medical certificate confirming the pregnancy status and expected due date.
Employees must take at least six weeks of leave before the expected due date and up to 10 weeks after the child is born. The employee can request to extend the maternity leave if there are any pregnancy-related illnesses/complications.
For health and safety reasons, the employee cannot be assigned any physical work after the 4th month of pregnancy.
Other Leave
Bereavement Leave: Employees who have suffered the loss of an immediate family member are entitled to one day of paid leave bereavement leave.
Termination
Notice Period
The notice period is stipulated in the employee’s employment contract/collect agreement and is not a statutory obligation. However, it is a common practice to request that an employee provides a minimum of 7 days’ notice once they have completed their probation.
Severance Pay
El Salvador’s probationary period depends on the type of role and is stipulated within the employment agreement. In general, probation periods can be no more than 30 days.
Visa
Overview
All foreign nationals seeking to work in El Salvador must obtain a Work Permit and a Temporary Residence Permit in the country.
The Work Permit and Temporary Residence Permit are valid for an initial period of one or two years and can be extended for up to five years.
Nationals of Central American countries can apply directly for permanent residence.
Nationals of Spain or Latin American, Spanish-speaking countries can apply for permanent residency after one year of holding a Temporary Residence Permit.
All other foreign nationals can apply for permanent residence after three consecutive renewals of their Temporary Residence Permit.
Employee Background Checks
Legal and Background Checks
As part of the legal and background checks in El Salvador, an employee can request a criminal, education and employment record verification.
Last updated on April 30, 2023.
If you have any queries or suggestions, reach out to us at irene.jones@neeyamo.com
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