Employer of Record in El Salvador

An Employer of Record, or EOR, is a service that helps you hire employees in El Salvador without setting up a local legal entity. The EOR becomes the legal employer for your team members in the country. They handle HR tasks like payroll, taxes, benefits, and compliance with local labor laws. This lets you focus on managing your team's daily work and growing your business. For companies looking to hire in El Salvador, an EOR like Rivermate can simplify the process.

How an Employer of Record (EOR) Works in El Salvador

Using an EOR in El Salvador streamlines hiring and manages employment compliance for you. The process is straightforward.

1. You Find the Talent: You select the candidate you want to hire in El Salvador.
2. The EOR Hires Them: The EOR legally hires the employee on your behalf through a compliant local contract.
3. Onboarding Starts: The EOR manages the onboarding process, making sure all paperwork is correct.
4. Payroll and Benefits are Handled: The EOR takes care of salary payments, taxes, and social security contributions. They also manage employee benefits.
5. You Manage Your Team: You direct your employee's day-to-day tasks and responsibilities.
6. Ongoing Compliance is Ensured: The EOR stays up-to-date with El Salvador's labor laws to keep your employment practices compliant.

Benefits of Using an EOR for Hiring in El Salvador

Using an EOR to hire in El Salvador gives you a significant advantage. It allows you to build a team in the country quickly and efficiently, without the usual complexities of international expansion.

• Enter the Market Faster: You can hire employees in days, not the months it can take to establish a legal entity.
• Reduce Costs: Avoid the high costs associated with setting up and maintaining a local company.
• Ensure Legal Compliance: EORs are experts in local labor laws, reducing the risk of non-compliance and misclassification.
• Simplify HR and Payroll: All payroll, tax, and benefits administration is managed for you, saving you time and resources.
• Focus on Your Business: With the administrative burden lifted, you can concentrate on your core business goals and managing your team.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in El Salvador 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 El Salvador.

Hiring in El Salvador can be a great move for your business. The country has a growing pool of skilled professionals, especially in cities like San Salvador and Santa Ana. Plus, with the U.S. dollar as the official currency and similar time zones to the United States, collaboration is easier. To get started, you'll need to understand the local labor laws.

Employment contracts & must-have clauses

It's best to have a written employment contract in Spanish. While oral agreements are allowed, a written contract provides clarity for both you and your employee.

Your contract should include these key details:

• Full names, nationalities, ages, and addresses of both you and the employee.
• A clear description of the job and the services the employee will provide.
• The location where the work will be performed.
• The contract's duration, specifying if it's for a fixed term or indefinite.
• Working hours and the daily schedule.
• Salary details, including the amount, payment method, and how often the employee will be paid.
• The date the contract is signed.
• Signatures of both parties.

Probation periods

In El Salvador, you can include a probation period of up to 30 days in the employment contract. During this time, either you or the employee can end the contract without cause. If the 30 days pass and neither party has terminated the agreement, the contract automatically becomes indefinite. You can't use a probation period if you rehire the same employee for the same role within a year.

Working hours & overtime

The standard workweek in El Salvador is 44 hours, usually eight hours a day. Overtime work is paid at 100% of the employee's regular salary.

Public & regional holidays

Employees in El Salvador are entitled to paid time off for national holidays. The recognized public holidays for 2025 are:

Hiring contractors in El Salvador

You can also hire independent contractors for project-based or short-term work. This can be a flexible way to bring in specialized skills. However, it's important to classify workers correctly.

An independent contractor is self-employed, controls their own work, and often uses their own equipment. They are not covered by labor laws that apply to employees, such as minimum wage, paid leave, and severance pay.

Misclassifying an employee as an independent contractor can lead to serious consequences. If a Salvadoran authority determines a worker is actually an employee, you could be responsible for back payments of social security contributions, benefits, and taxes, as well as potential fines.

An Employer of Record (EOR) can help you avoid these risks. An EOR acts as the legal employer for your workers in El Salvador. They handle compliant contracts, payroll, taxes, and benefits. This ensures you follow local labor laws while you focus on managing your team's day-to-day work.

In El Salvador, you'll find a workforce accustomed to a straightforward payroll system. The official currency is the US dollar, which simplifies payments for many international companies. A unique aspect of compensation is the "Aguinaldo," a Christmas bonus paid in December. The amount of this bonus depends on how long an employee has worked for your company.

Payroll cycles & wage structure

You can pay your employees on a weekly, bi-weekly, or monthly basis. Monthly is the most common cycle. You should make payments by the last day of the pay cycle or one business day after.

An employee's salary has a few key components:

• Basic Salary: This is the fixed part of their pay.
• Allowances: These can include funds for housing or travel.
• Bonuses: Performance-based bonuses are a common part of compensation.

Overtime & minimums

The standard work week in El Salvador is 44 hours, typically eight hours a day for five and a half days. Any hours worked beyond this are overtime. You must pay employees 200% of their regular salary for overtime hours.

Minimum wage is not a single national rate. It varies by the sector of the economy. For example, the minimum wage for workers in industry and commerce is different from that for agricultural workers.

Employer taxes and contributions

As an employer, you are responsible for several contributions. These are calculated as a percentage of an employee's salary.

Employee taxes and deductions

Employees also contribute to social programs through payroll deductions.

Income tax is also withheld from an employee's pay. This is done on a progressive scale, with rates from 0% to 30% depending on income.

In El Salvador, the law requires you to provide a basic set of benefits and leave for your employees. Many companies choose to offer more than the minimum to attract and keep the best talent. Understanding both the required and optional benefits will help you create a competitive compensation package. This ensures you comply with the law and build a strong team.

Statutory leave

The law in El Salvador sets out several types of mandatory leave.

• Annual leave After one year of continuous work, employees get 15 days of paid vacation. They receive their basic salary plus an additional 30% for this period.
• Sick leave For the first three days of an employee's sickness, you pay their full salary. After that, the social security system (ISSS) pays 75% of their salary.
• Maternity leave Female employees receive 16 weeks of paid maternity leave. This is typically six weeks before birth and ten weeks after. The ISSS covers 75% of the employee's salary during this time.
• Paternity leave Fathers get three days of paid leave, which they must take within 15 days of their child's birth.
• Other leave The law also provides for paid time off for marriage and the death of a family member.

Public holidays & regional holidays

Your team in El Salvador is entitled to paid time off for national holidays. Some regions also have their own local holidays.

Keep in mind that each town also celebrates its own patron saint, which may lead to local business closures.

Typical supplemental benefits

To build a competitive benefits package, you can offer more than the legally required minimum.

How an EOR can help with setting up benefits

Setting up a compliant and competitive benefits plan in a new country can be complex. An Employer of Record (EOR) simplifies this process for you.

An EOR already has a legal entity in El Salvador, so you don't need to set one up. We handle all the legal requirements for you. We make sure your benefits package complies with all local labor laws.

We can also advise you on what supplemental benefits are common in your industry. This helps you offer a package that attracts top talent. An EOR manages the administration of all benefits, from enrolling employees in social security to managing payroll deductions. This frees you up to focus on growing your business.

When you part ways with an employee in El Salvador, you need to follow a specific process. The country's labor laws protect employees, so it's important to handle terminations correctly. This involves understanding notice periods, severance pay, and the proper legal procedures.

Notice periods

If you terminate an employment contract without a legally just cause, you must provide the employee with a notice period. The length of this notice depends on how long the employee has worked for you.

If you don't provide this notice, you must pay the employee their salary for the notice period. During the notice period, the employee continues to work under the same terms and conditions.

Severance pay

When you terminate an employee without just cause, you must pay them severance, known locally as "indemnización". This payment is mandatory.

Here’s how you calculate severance pay:

• The standard is 30 days of ordinary salary for each year of service.
• For periods of less than a year, you calculate the payment proportionally.
• "Ordinary salary" includes the base wage plus any regular benefits.

You must pay severance in addition to other final payments. These include accrued vacation time and the proportional Christmas bonus ("aguinaldo").

If you terminate an employee for a "just cause," such as serious misconduct, you generally do not have to pay severance. However, you must have strong evidence to support your reason for dismissal.

How Rivermate handles compliant exits

Navigating employee terminations in a different country can be complex. We make sure every step of the offboarding process is compliant with Salvadoran labor law.

Here’s how we help you manage exits:

• Clear Documentation: We ensure you have the correct documentation to support any termination, especially in cases of dismissal for just cause.
• Accurate Calculations: We calculate all final payments, including severance, vacation pay, and any other entitlements, to ensure your employee receives everything they are owed.
• Proper Procedure: We follow the required legal procedures, such as notifying the employee and, if necessary, the Ministry of Labor. This helps you avoid legal disputes and potential penalties.
• Final Settlement: We prepare a final settlement document that clearly outlines all payments. This document, signed by both you and the employee, serves as proof that all obligations have been met.

We handle the complexities so you can focus on your business. We make sure every termination is managed professionally and in full compliance with local laws.

Navigating the visa and work permit process in El Salvador requires a clear understanding of the local regulations. For anyone looking to work in the country, a temporary residence permit and a work permit are essential. These are typically sponsored by an employer in El Salvador. The process involves gathering several documents and can take a few months to complete.

Employment visas & sponsorship realities

An Employer of Record (EOR) can be a practical solution for hiring employees in El Salvador, especially if your company doesn't have a local legal entity. An EOR can legally sponsor work permits for foreign nationals.

Here's what you need to know about the process:

• Employer Sponsorship is Key: A legally registered company in El Salvador must sponsor the foreign employee.
• EORs Can Sponsor: An EOR acts as the legal employer and can handle the sponsorship process.
• Required Documents: The application process requires a number of documents from both the employee and the employer. These typically include:
  • A valid passport.
  • A signed employment contract.
  • Proof of a clean criminal record.
  • A letter from the employer justifying the need to hire a foreign worker.
• Processing Time: Be prepared for a processing time of 2 to 7 months for the entire work permit and residency process.

Business travel compliance

For short-term business visits, the requirements are more straightforward. Many nationalities can enter El Salvador for business purposes for up to 90 days without a visa. U.S. citizens, for example, do not need a visa for stays up to 90 days but will need to pay a $12 tourist card fee upon entry.

Here are some key points for business travelers:

• Permissible Activities: Business travel regulations allow for activities like attending meetings, negotiations, and conferences.
• Required Documents: Even for short trips, it's wise to carry:
  • A passport with at least six months of validity.
  • Proof of financial solvency.
  • A letter of invitation from a company in El Salvador.
  • A return ticket.
• Visa Requirements Vary: Visa requirements depend on your nationality, so it's important to check the specific rules for your country before you travel.