Hire in Peru through our Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire employees in countries where they don't have a legal entity, effectively expanding their global reach without the need to establish a local subsidiary.

In the context of Peru, an EOR can be particularly useful for foreign companies looking to tap into the country's diverse talent pool or expand their operations in South America. By partnering with an EOR, businesses can navigate Peru's complex labor laws, tax regulations, and cultural nuances more easily, while focusing on their core operations.

How Does EOR Work?

When a company decides to use an EOR service in Peru, the process typically unfolds as follows:

1. The client company selects the candidate they wish to hire in Peru.

2. The EOR becomes the legal employer of the worker, handling all administrative tasks such as payroll, tax withholding, and benefits administration.

3. The client company maintains day-to-day management of the employee, directing their work and setting performance expectations.

4. The EOR ensures compliance with local labor laws, manages employee contracts, and handles any HR-related issues that may arise.

5. The client company reimburses the EOR for the employee's salary and associated costs, plus a service fee.

Benefits of Using an EOR

Employing an EOR in Peru offers several advantages:

1. Rapid Market Entry: Companies can quickly hire talent in Peru without the need to establish a legal entity, significantly reducing time-to-market.

2. Compliance Assurance: EORs are well-versed in Peru's labor laws and regulations, ensuring that the client company remains compliant with local requirements.

3. Risk Mitigation: By taking on the legal responsibilities of employment, EORs help shield client companies from potential legal issues related to employment in Peru.

4. Cost-Effectiveness: Using an EOR can be more economical than setting up and maintaining a local subsidiary, especially for companies testing the Peruvian market or hiring a small number of employees.

5. Cultural Bridge: EORs often have a deep understanding of local business practices and cultural norms, helping foreign companies navigate potential cultural differences.

6. Flexibility: Companies can easily scale their operations up or down without the complexities of managing a local entity.

7. Focus on Core Business: By outsourcing administrative and legal tasks to the EOR, companies can concentrate on their primary business activities and strategic goals.

In conclusion, an Employer of Record can be a valuable partner for companies looking to expand into Peru, offering a blend of local expertise, compliance assurance, and operational flexibility. This solution allows businesses to tap into Peru's diverse talent pool and growing economy while minimizing risks and administrative burdens.

Peru's employment landscape is characterized by a young workforce, predominantly concentrated in urban areas, with a significant informal sector. The country has made strides in education, but a skills gap persists, particularly in technical and vocational areas. The service sector is the largest employer, followed by agriculture and mining, with a growing demand for digital skills across industries.

Overview of Labor Laws

Peru's labor laws aim to protect workers' rights while providing a framework for employment relationships. Key aspects include:

• Contracts: Both fixed-term and indefinite contracts are permitted, with specific regulations for each type.
• Working hours: The standard workweek is 48 hours, with overtime pay required for additional hours.
• Minimum wage: Peru has a national minimum wage that is periodically reviewed and adjusted.
• Leave: Employees are entitled to paid annual leave, sick leave, and maternity/paternity leave.
• Termination: Specific procedures and severance pay requirements apply for different types of termination.

Cultural Considerations

Understanding Peruvian workplace culture is crucial for successful employment relationships:

• Work-life balance: Family values are important, and there's a growing emphasis on balancing work and personal life.
• Communication: Indirect communication is preferred, with a focus on building personal relationships and trust.
• Hierarchy: Respect for authority is common, though some modern workplaces are moving towards more collaborative structures.
• Flexibility: Informal work arrangements are prevalent, allowing for adaptability to family needs.

Challenges of Direct Hiring

Employers face several challenges when directly hiring in Peru:

1. Navigating complex labor laws and regulations, which can be time-consuming and require local expertise.
2. Managing the high level of informality in the labor market, which can complicate recruitment and compliance.
3. Addressing the skills gap, particularly in technical and vocational areas, which may require investment in training and development.
4. Adapting to cultural norms and communication styles that differ from those in other countries.
5. Ensuring compliance with local tax and social security obligations, which can be intricate and subject to frequent changes.
6. Balancing the need for formal employment structures with the prevalence of informal work arrangements in the local culture.

Understanding these aspects of Peru's employment landscape is essential for companies looking to establish a presence in the country or hire local talent.

Peru's payroll and tax system is comprehensive, designed to support social welfare programs while ensuring fair contributions from both employers and employees. The system encompasses various elements, including social security, pensions, healthcare, and income tax. Understanding these components is crucial for businesses operating in Peru and for employees working in the country.

Employer Contributions

Social Security Contributions (ESSALUD)

Employers in Peru are required to contribute 9% of an employee's gross salary to ESSALUD, the national social health insurance system. This contribution ensures medical coverage for workers and their families. Notably, employers can potentially offset 25% of their ESSALUD contributions if they provide employees with private health insurance.

Pension Contributions

Employers have two options for pension contributions:

1. National Pension System (ONP): This requires a 13% contribution of the employee's gross salary.
2. Private Pension System (AFP): The contribution rate is approximately 12.4% of the gross salary, covering personal pension accounts, disability/survivor insurance, and AFP management fees.

Both systems require payment by the date the employee's salary is due.

Compensation for Time of Service (CTS)

Employers must provide compensation equivalent to one month's salary for every full year worked, pro-rated for partial years. This typically amounts to about 9.72% of the salary, including interest. CTS acts as a severance provision for employees, with payment deadlines on May 15th and November 15th.

Additional Employer Responsibilities

Employers in high-risk sectors may need to obtain additional workplace accident insurance. They are also responsible for withholding income tax from employee salaries and remitting it to the tax authorities.

Employee Contributions

Mandatory Deductions

1. Income Tax (Impuesto a la Renta): This is a progressive tax with rates ranging from 8% to 30%, based on income brackets.
2. ESSALUD (Social Health Insurance): Employees contribute 9% of their gross salary to the public healthcare system.

Optional Deductions

1. Private Pension Funds (AFP): Employees can opt to contribute to a private pension fund, which is tax-deductible up to a specific limit.
2. EPS (Private Health Insurance): Employees may choose to enroll in private health insurance and have contributions deducted from their salaries.

Additional Deductions

Employees can deduct a portion of certain expenses, including:

• Up to 30% of annual rent
• Up to 30% of independent professional services
• Up to 15% (or 25% in 2021 and 2022) of hotel, bar, and restaurant expenses
• Up to 50% (in 2021 and 2022) of tour guide, tourism, and artisan services

These deductions are subject to specific limits and requirements.

Understanding these payroll and tax obligations is essential for both employers and employees in Peru. It ensures compliance with local regulations and helps in effective financial planning. However, as tax laws can change, it's always advisable to consult with local experts or refer to the official website of the Peruvian Tax Authority (SUNAT) for the most current information.

Peru offers a comprehensive benefits package for employees, combining mandatory benefits required by law with optional perks that employers can provide to attract and retain talent. As an Employer of Record (EOR), Rivermate manages these benefits, ensuring compliance with local regulations while allowing companies to offer competitive packages to their workforce in Peru. This approach simplifies the process for businesses expanding into the Peruvian market, handling the complexities of benefits administration and legal requirements.

Mandatory Benefits

• Social Security contributions (9% of monthly salary) to Essalud for healthcare coverage
• Enrollment in the National Pension System (ONP)
• 30 calendar days of paid vacation annually
• Paid leave for official Peruvian holidays
• 365 days of paid sick leave (first 20 days covered by the employer, then by social security)
• 98 days of paid maternity leave (49 days prenatal, 49 days postnatal)
• Paid paternity leave (duration may vary)
• Two annual bonuses, each equivalent to a month's salary (typically paid in July and December)
• CTS (Compensación por Tiempo de Servicios) contributions for severance or additional income

Optional Benefits

• Private health insurance with expanded coverage
• Life insurance plans
• Wellness programs or gym memberships
• Profit-sharing schemes
• Flexible work arrangements (remote work, flexible hours)
• Childcare assistance or on-site facilities
• Educational assistance or tuition reimbursement
• Meal vouchers or subsidies
• Transportation allowances
• Company-organized social events and team-building activities

By leveraging an EOR like Rivermate, businesses can easily navigate the mandatory benefits landscape while also incorporating optional perks to create attractive employment packages in Peru. This approach ensures legal compliance and helps companies stand out in the competitive job market, fostering employee satisfaction and retention.

Terminating an employee and managing the offboarding process in Peru requires careful attention to legal requirements and cultural norms. Understanding the intricacies of this process is crucial for employers to ensure compliance and maintain positive relationships with departing employees.

Grounds for Dismissal

In Peru, employers can terminate employment based on three main categories:

1. Conduct-related causes
2. Capacity-related causes
3. Objective causes

Conduct-related causes include repeated tardiness, absences, serious misconduct, and intoxication at work. Capacity-related causes involve a decline in performance or inability to adapt to changes. Objective causes encompass economic, technological, or restructuring reasons.

Notice Requirements

When terminating an employee, employers must follow specific notice procedures:

• For conduct-related causes, provide a written notice stating the grounds for dismissal at the time of termination.
• For capacity-related causes, issue a written explanation and allow the employee 30 calendar days to improve before ending employment.

Severance Pay

In cases of dismissal without cause or due to force majeure, employees are entitled to severance pay. This is calculated at one and a half month's pay for each full year of service, with a maximum of twelve months' pay.

The Offboarding Process

Documentation

Ensure all necessary paperwork is completed, including:

• Termination letter
• Final paycheck calculation
• Transfer of benefits documentation

Exit Interview

Conduct an exit interview to gather feedback and maintain a positive relationship with the departing employee.

Company Property

Collect all company property, including:

• Access cards
• Laptops and other devices
• Uniforms or branded items

Knowledge Transfer

Facilitate a smooth transition by:

• Documenting the employee's responsibilities
• Arranging handover sessions with relevant team members

Final Pay and Benefits

Process the employee's final pay, including:

• Salary up to the last day of work
• Any accrued vacation pay
• Severance pay, if applicable

Communication

Inform relevant parties about the employee's departure:

• Update internal systems and directories
• Notify clients or vendors, if necessary
• Announce the departure to the team, respecting privacy as appropriate

By following these guidelines, employers can navigate the termination and offboarding process in Peru effectively, ensuring compliance with local laws and maintaining professional standards throughout the process.

Peru, with its rich cultural heritage and growing economy, has become an attractive destination for foreign workers seeking new opportunities. Understanding the visa and work permit requirements is crucial for those planning to work in this South American country.

Types of Work Visas

Peru offers several types of work visas for foreign nationals:

1. Temporary Work Visa (Visa de Trabajo Temporal): This visa is for those with a job offer for a specific period, usually up to one year.

2. Resident Work Visa (Visa de Trabajo Residente): For long-term employment, typically valid for one year and renewable.

3. Designated Worker Visa: Designed for employees of foreign companies assigned to work in Peru for a limited time.

Work Permit Process

To obtain a work permit in Peru, follow these general steps:

1. Secure a job offer from a Peruvian employer.
2. The employer must apply for a work permit on your behalf with the Ministry of Labor.
3. Once approved, apply for the appropriate work visa at a Peruvian consulate in your home country.
4. Upon arrival in Peru, register with immigration authorities and obtain a foreign resident card (carné de extranjería).

Key Requirements

When applying for a work visa and permit, you'll typically need:

• Valid passport
• Job offer letter or employment contract
• Criminal background check
• Medical certificate
• Proof of qualifications (diplomas, certificates)
• Passport-sized photos

Important Considerations

• Work permits are usually tied to a specific employer and job position.
• Changing employers may require a new work permit application.
• Some professions may require additional certification or recognition of qualifications.

Timeframe and Validity

The processing time for work permits and visas can vary, but it generally takes 2-3 months. Most work visas are initially valid for one year and can be renewed annually.

By understanding these requirements and following the proper procedures, foreign workers can smoothly transition into the Peruvian job market. Always consult with the Peruvian embassy or a qualified immigration lawyer for the most up-to-date information, as regulations may change.