Navigating employment termination in Peru requires careful adherence to specific legal procedures and entitlements. Peruvian labor law is designed to protect employees, making it crucial for employers to understand the requirements for lawful dismissal, notice periods, and severance obligations. Failing to follow the correct process can lead to significant legal challenges, including claims for wrongful dismissal and substantial financial penalties.
Employers operating in Peru must be aware of the distinct rules governing different types of termination, whether initiated by the employer or the employee, and the specific conditions under which employment can be ended while remaining compliant with local regulations. Understanding these nuances is key to managing a workforce effectively and mitigating potential risks.
Notice Period Requirements
In Peru, the standard requirement for terminating an indefinite employment contract by the employer is to provide a written notice of termination. This notice period allows the employee time to seek new employment.
The general rule for the notice period is:
- 30 calendar days: This is the standard notice period required for most employees under indefinite contracts.
However, it is important to note that if the termination is based on serious misconduct (just cause), no notice period is required. The termination is effective immediately upon proper notification following the disciplinary procedure.
Severance Pay Calculations
Severance pay in Peru is primarily linked to the concept of compensation for arbitrary dismissal (termination without just cause). When an employee is terminated without a legally valid reason, they are entitled to specific compensation in addition to their standard final pay entitlements.
Final pay entitlements upon any termination typically include:
- Compensación por Tiempo de Servicios (CTS): A mandatory deposit made by the employer twice a year into a bank account for the employee, calculated based on salary and length of service. The employee is entitled to the full amount accumulated upon termination.
- Vacation Pay: Payment for any accrued but untaken vacation days.
- Bonuses (Gratificaciones): Pro-rata payment of the mandatory July and December bonuses based on the time worked during the respective semester.
- Profit Sharing (Participación en las Utilidades): If applicable to the company, the pro-rata share of profits earned during the fiscal year up to the termination date.
Compensation for arbitrary dismissal is calculated as follows:
- 1.5 monthly salaries for each full year of service, capped at a maximum of 12 monthly salaries.
- Fractions of a year are paid proportionally.
- The calculation is based on the employee's last full monthly salary.
| Component | Calculation Basis | Notes |
|---|---|---|
| Compensation for Arbitrary Dismissal | 1.5 x Last Monthly Salary x Years of Service (or pro-rata) | Capped at 12 monthly salaries |
| CTS | Full accumulated amount | Deposited bi-annually |
| Vacation Pay | Pro-rata for accrued, untaken days | Based on daily salary |
| Bonuses (Gratificaciones) | Pro-rata for time worked in the current semester | Based on half-monthly salary per month |
| Profit Sharing | Pro-rata share of company profits for the fiscal year up to termination (if applicable) | Varies based on company performance/rules |
Grounds for Termination
Peruvian law distinguishes between termination with just cause and termination without just cause (arbitrary dismissal).
Termination with Just Cause:
This occurs when there are valid, legally recognized reasons for dismissal related to the employee's conduct or capacity. Grounds for just cause are strictly defined by law and include:
- Serious Misconduct:
- Failure to comply with obligations arising from the employment contract.
- Serious indiscipline.
- Insubordination.
- Serious damage to company property.
- Repeated poor performance after written warnings.
- Theft or dishonesty.
- Harassment (sexual or moral).
- Abandonment of work.
- Capacity Issues:
- Repeated poor performance despite training and warnings.
- Physical or mental incapacity that prevents the employee from performing their duties, provided reasonable accommodations cannot be made.
Termination Without Just Cause (Arbitrary Dismissal):
This occurs when an employer terminates an employee's contract without a valid reason recognized by law, or without following the correct legal procedure for termination with cause. This type of termination triggers the obligation to pay the compensation for arbitrary dismissal as detailed above.
Procedural Requirements for Lawful Termination
Terminating an employee for just cause in Peru requires strict adherence to a specific legal procedure to be considered lawful. Failure to follow these steps can result in the dismissal being deemed arbitrary.
The general procedure involves:
- Notification of Charges: The employer must send a written communication to the employee detailing the specific charges or reasons for the potential dismissal (e.g., specific instances of misconduct, dates, times).
- Employee's Right to Defense: The employee must be given a period (typically 6 calendar days, though this can vary based on internal regulations or collective agreements) to respond in writing to the charges and present their defense.
- Employer's Evaluation: The employer must evaluate the employee's response and any evidence provided.
- Final Termination Letter: If the employer decides to proceed with the dismissal after evaluating the defense, a final written termination letter must be issued. This letter must clearly state the just cause for termination and the effective date.
- Payment of Final Dues: The employer must calculate and pay all final entitlements (CTS, vacation, bonuses, etc.) to the employee upon termination.
| Step | Description | Key Requirement |
|---|---|---|
| 1. Notification of Charges | Employer informs employee in writing of specific reasons for potential dismissal | Must be detailed and specific |
| 2. Employee Defense | Employee provides written response to charges | Minimum 6 calendar days for response |
| 3. Employer Evaluation | Employer reviews employee's defense and evidence | Fair and objective assessment |
| 4. Final Termination Letter | Employer issues written notice of dismissal with just cause and effective date | Must clearly state the legal grounds for termination |
| 5. Payment of Final Dues | Employer calculates and pays all final entitlements | Must include CTS, vacation, bonuses, etc. |
For termination without just cause (arbitrary dismissal), the procedure is simpler in terms of steps, but it immediately triggers the obligation to pay the compensation for arbitrary dismissal. A written notification of termination is still required.
Employee Protections Against Wrongful Dismissal
Peruvian law provides strong protections against wrongful or arbitrary dismissal. An employee who believes they have been unfairly terminated can challenge the dismissal through the labor courts.
A dismissal is considered wrongful or arbitrary if:
- There was no just cause for termination.
- A valid just cause existed, but the employer failed to follow the correct legal procedure for dismissal.
- The termination is discriminatory.
If a court finds that a dismissal was arbitrary, the employee has the right to choose between two remedies:
- Reinstatement: The employee can request to be reinstated to their previous position, with payment of back wages from the date of dismissal until reinstatement.
- Compensation: The employee can opt to receive the compensation for arbitrary dismissal as calculated by law (1.5 monthly salaries per year of service, capped at 12).
In addition to these remedies, an employee may also seek damages for moral harm in certain cases, although this is less common than claims for reinstatement or standard compensation. Understanding these protections is vital for employers to ensure compliance and avoid costly legal disputes.
