Employer of Record in Aruba

Hiring employees in Aruba requires a clear understanding of the local legal framework and employment regulations. Businesses looking to expand into the Aruban market have several avenues for engaging talent, each with distinct implications for compliance, cost, and administrative overhead. Navigating these options effectively is crucial for a smooth and successful international expansion.

To hire employees in Aruba, companies typically consider these options:

• Establishing a local legal entity, which involves significant time, cost, and administrative effort to register and maintain.
• Partnering with an Employer of Record (EOR) like Rivermate, which handles all local employment responsibilities on your behalf.
• Engaging individuals as independent contractors, though this requires careful classification to avoid misclassification risks under Aruban law.

How an EOR Works in Aruba

An Employer of Record (EOR) simplifies the process of hiring in Aruba by acting as the legal employer for your workforce, while you retain full control over day-to-day management. In Aruba, an EOR takes on critical responsibilities, ensuring your operations remain compliant.

• Payroll processing and tax withholding in accordance with Aruban tax regulations and social security contributions.
• Benefits administration, including managing mandatory health insurance, pension schemes, and leave entitlements.
• Compliance with Aruban labor laws concerning employment contracts, working hours, minimum wage, and termination procedures.
• Handling all statutory filings and reporting requirements with local government agencies.
• Onboarding and offboarding employees, ensuring all local legal requirements are met.

Benefits of Using an EOR in Aruba

For companies seeking to enter the Aruban market without the complexities of establishing a local entity, an EOR offers substantial advantages. It allows businesses to focus on strategic growth while the EOR manages the intricate details of local employment.

• Expedited market entry without the need for extensive legal and administrative setup.
• Reduced administrative burden and operational costs associated with managing a local entity.
• Guaranteed compliance with Aruba's specific employment laws, social security, and tax regulations.
• Mitigation of legal and financial risks related to international employment and potential misclassification.
• Increased flexibility to scale your workforce up or down based on business needs, without long-term commitments to local infrastructure.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Aruba includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Aruba.

Employers in Aruba must contribute to social security, healthcare, accident insurance, and potentially tourism levies, with approximate rates in 2025 being 10.0% for AOV/AWW, 6.5% for AZV, and variable for accident insurance, based on gross salaries. They are also responsible for withholding income tax from employees' salaries according to a progressive system with brackets: 7% up to AWG 29,161, 19% for AWG 29,162–58,321, 25% for AWG 58,322–87,481, and 28% above that. Employers must file monthly declarations of payroll taxes and income tax withholdings by the 15th of the following month, with annual reconciliations due early the next year.

Employees benefit from deductions such as pension contributions, mortgage interest, medical, education, and childcare expenses, which can reduce taxable income. Foreign workers and companies face additional considerations, including tax treaties, expatriate benefits, and social security agreements, which require careful compliance and professional advice to optimize tax obligations and avoid double taxation.

Aruba's salary landscape varies by industry and role, with tourism, financial services, and trade sectors offering different compensation levels. Key annual salary ranges include Hotel Managers (AWG 80,000–120,000 / USD 44,444–66,667), Accountants (AWG 55,000–90,000 / USD 30,556–50,000), and Marketing Managers (AWG 60,000–100,000 / USD 33,333–55,556). The minimum wage in 2025 is AWG 1,785.50 (~USD 991.94) monthly for general workers, and AWG 1,339.13 (~USD 743.96) for young workers aged 16-17.

Compensation packages often include bonuses such as a 13th-month salary, vacation allowances, performance bonuses, and allowances for transportation or meals, especially in hospitality. Salaries are typically paid monthly via direct bank transfer, with detailed payslips required. Salary trends indicate rising wages driven by increased demand for skilled professionals, cost of living adjustments, and evolving employee benefits, with forecasts predicting continued growth in high-demand sectors.

Aruba's labor laws mandate minimum paid vacation leave based on work schedule: 20 days for five-day workers and 24 days for six-day workers annually. Vacation days accrue throughout the year and should generally be used within that period, with some agreements offering more generous benefits. Employees are also entitled to paid time off on public holidays, which include dates like New Year's Day, King’s Day, Labor Day, and Christmas, with additional pay if working on these days.

Employees qualify for paid sick leave upon providing a medical certificate, typically receiving around 80% of their salary during leave. Maternity leave usually lasts about 12 weeks with full or partial pay, while paternity leave is shorter, often a few days to a week, with full pay. Adoption leave is also available, though specifics vary. Other leave types such as bereavement, study, sabbatical, and marriage leave may be granted depending on employment agreements.

Aruba's employee benefits are governed by legal mandates and market practices. Mandatory benefits include paid vacation, public holidays, severance pay, social security contributions, maternity and sick leave, and health insurance coverage (via AZV and employer contributions). Employers often enhance these with optional benefits such as supplemental health insurance, life insurance, pension plans, performance bonuses, training, transportation, and meal allowances to attract and retain talent.

Health insurance is a key component, with the government providing basic coverage through AZV, while many employers offer supplemental plans. Retirement benefits include the mandatory social security pension (AOV) and optional supplementary pension plans, with contribution rates and vesting periods varying. Benefit packages tend to be more comprehensive in larger companies, often including extensive health, pension, and development options, whereas small firms typically meet only legal minimums.

Employers must ensure compliance with labor laws, including contribution remittances, and should tailor benefits packages to remain competitive and meet employee expectations for comprehensive coverage and professional growth opportunities.

In Aruba, employment agreements are essential legal documents that define the employment relationship, ensuring clarity on job duties, compensation, and termination. They must comply with specific legal standards to be valid, covering contract types, clauses, probation periods, and termination rules.

Aruban law recognizes two main contract types:

Employers should be aware of legal requirements, including mandatory clauses, probation periods, and proper termination procedures, to prevent disputes and ensure fair treatment.

Aruba currently lacks specific remote work legislation; existing labor laws apply equally to remote and on-site employees. Employers should include clear remote work terms in employment contracts, covering working hours, performance expectations, and health and safety responsibilities. Standard work hours are 8 hours/day and 40 hours/week, with overtime regulations in place. Employers are responsible for ensuring remote workers' health and safety, including ergonomic support. Termination procedures are consistent with local labor laws.

While employees do not have explicit legal rights to remote work, they can negotiate arrangements such as flextime, compressed workweeks, job sharing, telecommuting, and hybrid models. Employers should fairly consider employee requests and avoid discrimination. Key flexible work practices include:

Employers should establish performance monitoring and ensure fair treatment of remote workers to foster productivity and compliance.

In Aruba, employment termination laws require employers to follow specific procedures, including providing written notice, adhering to statutory notice periods based on employee tenure, and maintaining proper documentation. Notice periods vary from 1 month for employees with less than 5 years of service to 6 months for those with 25 or more years. During this period, employees continue working and receiving their salary unless waived by the employer, who must still pay benefits.

Severance pay is mandated when terminating without just cause, calculated as one month's salary per year for the first 10 years, plus half a month's salary for each additional year. For example, an employee with 15 years of service is entitled to 12.5 months of severance pay. Grounds for termination include both with and without cause, with just cause requiring serious misconduct such as theft or gross insubordination.

Employers must follow procedural steps—notice in writing, proper severance calculation, and timely final pay—to ensure lawful termination. Employees are protected against wrongful dismissal, with claims possible on grounds such as discrimination, retaliation, or breach of contract. Proper documentation and compliance are essential to mitigate legal risks.

Aruba's economy is witnessing a growing trend towards freelancing and independent contracting, aligning with global shifts towards flexible work arrangements. This trend is significant for businesses in Aruba, which are increasingly engaging independent contractors for roles in consulting, creative services, and technical support. Key to these engagements is understanding the legal and tax frameworks to ensure compliance and effective collaboration. Misclassification of workers can lead to liabilities such as back taxes and fines, making it crucial for employers to distinguish correctly between employees and independent contractors based on factors like control, integration, and financial risk.

Contracts play a vital role in defining the relationship between businesses and independent contractors in Aruba. Essential elements of these contracts include scope of work, compensation, confidentiality, and intellectual property rights. Properly structured agreements help protect both parties and clarify ownership of any intellectual property created during the engagement. Independent contractors are responsible for their tax obligations, including income tax and turnover tax, and should register with Aruban tax authorities. They are also advised to secure their own insurance coverage, as they are not covered by the engaging party's policies.

Independent contractors are prevalent across various sectors in Aruba, including tourism, technology, marketing, consulting, construction, healthcare, and finance. These sectors benefit from the specialized skills and flexibility that freelancers offer, allowing businesses to adapt to project demands and operational needs efficiently. The table below outlines key considerations for engaging independent contractors in Aruba:

Aruba requires most foreign nationals, excluding Dutch citizens, to obtain a work permit to work legally. The process is overseen by the Department of Labor Affairs, with employers responsible for initiating applications and demonstrating that no suitable local candidates are available. Key documentation includes a valid job offer, educational credentials, medical and police clearance certificates, and proof of health insurance. The typical processing time ranges from 2 to 4 months, with fees subject to change.

There are several visa types relevant to foreign workers: Short-Stay Visa (up to 90 days), Long-Stay Visa (over 90 days, necessary for work permits), Work Permit (employer-specific), and Residence Permit (long-term residence). Long-term residents may apply for indefinite residence after five years of continuous legal stay, provided they meet criteria such as a clean criminal record and financial independence. Family members can join via dependent visas, requiring marriage or birth certificates, proof of dependency, and medical insurance.

Employers and employees must comply with legal obligations, including maintaining valid permits, adhering to labor laws, and reporting employment changes. Non-compliance can lead to penalties such as fines, deportation, or future entry restrictions.