Employer of Record in Honduras

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of another company. This allows businesses to hire employees in a foreign country without needing to establish a local legal entity. The EOR takes on the responsibility for all formal employment tasks, including running payroll, administering benefits, handling tax deductions and filings, and ensuring full compliance with the host country's labor laws and regulations. This structure simplifies international hiring and reduces the administrative burden and legal risks for the client company.

How an EOR Works in Honduras

When you partner with an EOR in Honduras, the EOR becomes the legal employer of your chosen candidates. Your company retains full control over the employee's day-to-day work, responsibilities, and performance management. The EOR handles all the complex administrative and legal aspects specific to Honduran employment. This includes drafting compliant employment contracts, registering the employee with local social security and tax authorities, processing monthly payroll in Honduran Lempira (HNL), calculating and remitting income tax and social contributions, managing statutory benefits like vacation, sick leave, and public holidays, and ensuring adherence to local labor code requirements regarding working hours, termination procedures, and severance pay.

Benefits of Using an EOR in Honduras

Utilizing an EOR offers significant advantages for companies looking to expand or hire in Honduras without setting up a local subsidiary.

• Rapid Market Entry: Hire employees quickly without the time and expense of registering a local entity, which can be a lengthy process.
• Reduced Legal and Compliance Risk: The EOR assumes responsibility for navigating complex and ever-changing Honduran labor laws, tax regulations, and social security requirements, protecting your company from potential penalties and legal issues.
• Simplified Payroll and HR Administration: Offload the burden of running local payroll, managing benefits, and handling HR administrative tasks specific to Honduras.
• Focus on Core Business: Free up internal resources by letting the EOR manage the complexities of international employment, allowing your team to focus on strategic growth and operations.
• Access to Local Expertise: Benefit from the EOR's in-depth knowledge of the Honduran employment landscape, ensuring best practices and compliance.

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

Honduras offers a growing job market with key industries including agriculture, manufacturing/textiles (maquila), tourism, BPO/call centers, construction, and retail/services. While a large, youthful workforce exists, skill availability varies, with general labor readily available but specialized technical skills being more limited. Effective recruitment requires a mix of online job boards, social media, local agencies, employee referrals, and university career services, tailored to the specific role and industry. Companies can benefit from a cost-effective workforce, market expansion opportunities, local expertise, and time zone advantages.

However, challenges exist, including bureaucracy, skill mismatches, infrastructure variations, candidate expectations, and competition in certain sectors. Solutions involve partnering with local experts, investing in training, utilizing appropriate recruitment channels, conducting market research, and developing a strong employer brand. A structured recruitment process is essential, involving defining the role, determining compensation, choosing channels, sourcing candidates, screening applications, conducting interviews, performing background checks, extending offers, and onboarding. Typical hiring timelines range from 4-6 weeks for entry-level roles to 8-12 weeks (or longer) for specialized positions.

Partnering with a local recruitment agency or Employer of Record (EOR) can significantly streamline the hiring process. When selecting an agency, consider their experience, industry specialization, network, understanding of local laws, recruitment process, communication, fees, and client references.

| Factor | Description

Employers in Honduras must fulfill social security and payroll tax obligations, contributing to IHSS and INFOP based on employee salaries. For 2025, employer rates are 7.0% for health, 3.5% for disability and old age, and 1.0% for INFOP, with employee rates generally lower. These contributions are calculated on gross salaries up to set ceilings and are essential for funding social benefits.

Additionally, employers are responsible for withholding income tax (ISR) from employee wages, applying progressive rates from 0% to 25% based on income brackets:

Employers must remit monthly withholding taxes and file annual income tax returns, with deadlines set by the tax authorities. Employees may claim deductions such as social security contributions, medical, education, and mortgage expenses, supported by documentation. Foreign entities and workers should consider tax treaties, permanent establishment rules, transfer pricing, and expatriate taxation, often requiring professional guidance to ensure compliance and optimize tax liabilities.

Honduran labor laws mandate minimum leave entitlements to protect employees' rights. Employees earn paid annual vacation based on their length of service: 10 days after 1 year, increasing to 12 days after 2 years, 15 days after 3 years, and 20 days for 4 or more years. Vacation must be taken within six months of qualifying, with employers holding the final decision on timing. Public holidays are observed nationally, with employees entitled to paid time off; working on these days typically warrants double pay.

Key leave data for 2025 is summarized below:

Additional leave types include bereavement, study, sabbatical, and marriage leave, often with specific durations and conditions. Employers must adhere to these legal standards to ensure compliance and foster positive employee relations.

Honduras mandates a comprehensive set of employee benefits, including social security, Christmas and 14th-month bonuses, paid vacations, severance pay, family allowances, and maternity/paternity leaves. Employers must contribute to the Honduran Social Security Institute (IHSS), which covers healthcare, disability, and occupational risks. Key mandatory benefits are summarized below:

Most companies, especially larger ones, supplement mandatory benefits with optional offerings such as private health insurance, life insurance, transportation allowances, performance bonuses, and wellness programs to attract and retain talent. Private health insurance is common, providing broader coverage than IHSS, with costs shared by employer and employee. Retirement plans often include voluntary private pension schemes alongside the basic IHSS pension, with larger firms more likely to offer comprehensive packages.

Understanding these mandatory and optional benefits enables employers to develop compliant, attractive compensation packages suited to their workforce size and industry.

Honduras' labor laws aim to protect workers' rights, covering employment contracts, working conditions, safety, and dispute resolution. Employers must follow specific termination procedures, providing just cause and adhering to notice periods based on employment duration, with severance pay calculated at one month’s salary per year of service.

Workers are protected against discrimination based on gender, age, religion, disability, sexual orientation, and other factors, with enforcement handled by the Ministry of Labor. The standard workweek is 44 hours over six days, with overtime paid at 25% above regular wages and limits on overtime hours. Paid vacation increases with tenure, from 10 days after one year to 20 days after four or more years.

Employers must ensure workplace safety through risk assessments, safety equipment, employee training, emergency plans, and regular inspections. Dispute resolution is facilitated via mediation, labor courts, or arbitration, providing multiple avenues for fair conflict resolution.

Employment agreements in Honduras are essential for formalizing employer-employee relationships, with laws requiring specific clauses to ensure legality and enforceability. The main contract types include indefinite-term, fixed-term, project-based, and part-time agreements, each suited to different employment needs. Key clauses must cover identification, job description, compensation, work schedule, work location, benefits, contract duration, and termination conditions.

Probation periods typically last 30 to 90 days, allowing employers to assess employee suitability, with the possibility of termination without full severance during this time. Confidentiality and non-compete clauses are common; non-compete agreements should be reasonable in scope and duration (usually 6 months to 1 year) and may require employee compensation to be enforceable.

Modifications and terminations must follow legal procedures: changes require written consent; just cause is needed for termination without severance, while voluntary resignation generally requires 15-30 days' notice. Severance pay is mandated if termination is unjustified. The following table summarizes key employment agreement aspects:

Remote work in Honduras is expanding, with employers recognizing benefits such as access to broader talent pools and higher employee satisfaction. Although there is no specific legislation for remote work, existing labor laws apply equally to remote and on-site employees, covering employment contracts, labor rights, occupational health, and employer obligations to provide necessary tools and support. Employers should clearly define remote work terms in individual contracts, ensure compliance with the Honduran Labor Code, and prioritize health and safety, including ergonomic workspace guidance.

Flexible work arrangements available include full-time remote, hybrid, flextime, compressed workweeks, and job sharing, allowing adaptation to business needs. Data protection is critical; companies must enforce security policies, use VPNs, encrypt data, and train employees on cyber threats, ensuring compliance with Honduran data laws. Equipment and expense policies should specify provision or reimbursement for necessary tools and home office setup, with clear documentation. Reliable connectivity and robust cybersecurity measures are essential, supported by cloud solutions and technical support to maintain productivity and security.

In Honduras, salary levels vary widely by industry, role, experience, and location, with annual salaries ranging from HNL 120,000 for customer service representatives to HNL 700,000 for software developers. Key salary ranges include:

Employers must comply with minimum wage regulations, which vary by sector, company size, and region, with example monthly wages such as 7,500 HNL for small agricultural firms and up to 10,200 HNL for large service companies.

Additional compensation components include mandatory bonuses like the 13th and 14th month pay, vacation bonuses, transportation, meal allowances, and performance bonuses. Salaries are typically paid monthly via bank transfers, with employers responsible for statutory deductions. Salary trends indicate gradual increases aligned with economic growth, inflation, and skills demand, especially in technology, healthcare, and finance sectors, requiring companies to adapt compensation strategies for remote work and talent attraction.

Terminating employment in Honduras requires strict compliance with labor laws to avoid legal risks. Notice periods vary based on continuous service: less than 3 months requires no notice, 3-6 months mandates 1 week, 6 months-1 year 2 weeks, 1-2 years 1 month, and over 2 years 2 months. Employers can opt to provide longer notices. Severance pay includes one month’s salary per year of service (capped), plus proportional vacation, Christmas bonus, and potentially additional indemnities, with calculations dependent on salary and tenure.

Honduran law differentiates between termination with and without just cause. Just cause reasons include dishonesty, violence, breach of contract, or abandonment, while without cause requires notice or payment in lieu and full severance. Procedural compliance involves written notice, documentation, timely final payments, possible release agreements, and sometimes notifying labor authorities. Employees are protected against wrongful dismissal through potential reinstatement, back pay, damages, and legal recourse. Employers should seek legal guidance to ensure lawful termination practices.

Independent contracting and freelancing in Honduras are expanding, offering businesses flexibility and access to specialized skills while providing individuals with autonomy and diverse opportunities. As global connectivity increases, companies are increasingly engaging independent professionals for various projects. Understanding the legal framework is crucial to avoid misclassification, which can lead to legal and financial penalties. The distinction between an employee and a contractor is based on factors such as control, integration, economic dependence, and payment structure. Misclassification can result in obligations for back pay, benefits, and penalties.

A formal contract is essential for managing independent contractor relationships, including elements like scope of work, payment terms, and intellectual property rights. Contractors are responsible for their own taxes and insurance, requiring registration with the Honduran tax authority and managing income and sales tax obligations. Common industries utilizing independent contractors include technology, creative services, consulting, construction, agriculture, education, healthcare, and professional services. These sectors benefit from the specialized skills and flexibility that independent contractors provide.

Honduras provides various visa options for foreign workers, primarily including Business, Tourist, Work (Permiso de Trabajo), Temporary Residence, and Permanent Residence visas. The Work Visa is essential for employment, requiring a formal job offer and employer sponsorship. Employers should be aware that navigating the visa and work permit process can be complex, and many foreign companies use an Employer of Record (EOR) to streamline hiring and compliance.

Key visa details are summarized below:

Employers should stay updated on legal requirements and consider using an EOR to facilitate compliance with Honduran labor laws and immigration procedures.