Laws and Policies in Guatemala

Employment Contracts in Guatemala

Employment relationships are governed by the Guatemalan Labour Code.

Contract Requirements

• Contracts can be oral, but for professional, long-term, or foreign employers, written contracts are strongly recommended.
• A written contract should include:
  • Job title and description
  • Workplace (on-site / hybrid / remote)
  • Salary and payment schedule
  • Working hours and overtime rules
  • Leave entitlements
  • Duration (indefinite or fixed-term)
  • Probation (if applicable)
  • Termination and notice conditions

Types of Contracts

• Indefinite-term contracts – most common form of employment
• Fixed-term contracts – allowed for temporary or project-based roles
• Part-time contracts
• Probation: not strictly defined in the Labour Code but often agreed in the contract (e.g., 1–3 months).

An EOR ensures that contracts meet Labour Code requirements and clearly define both statutory and additional benefits.

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Working Hours in Guatemala

Under Guatemalan labour law:

• Maximum standard workweek: 44 hours for daytime work
• Typical schedule: 8 hours/day, Monday–Friday, plus half-day on Saturday, depending on company policy.

Overtime

• Overtime is allowed up to 10 hours per week in many cases.
• Overtime pay: 150% (1.5×) of the normal hourly rate is common under law and practice.

Rest Periods

• At least 12 hours of rest between working days.
• At least one paid rest day per week, usually Sunday.

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Employee Leave in Guatemala

Annual Leave

• Employees are entitled to 15 consecutive working days of paid annual leave after completing 12 months of continuous service with the same employer.
• Leave is typically taken in one block; splitting or accumulating is restricted unless work conditions require it.

Sick Leave

• Sick leave is paid either by employer or social security (IGSS) depending on the reason and duration.
• Common structure:
  • Sick pay at 50% of regular pay, with the duration depending on length of service:
    • 1 month of paid sick leave: 2–6 months’ service
    • 2 months: 6–9 months’ service
    • 3 months: 9+ months’ service

Maternity Leave

• 12 weeks (84 days) of maternity leave:
  • 30 days before birth
  • 54 days after birth
• Pay is generally at 100% of salary, financed primarily by IGSS if contribution conditions are met; otherwise, the employer covers pay.

Paternity & Other Leave

• Paternity leave is not extensively codified but some employers grant a few paid days as policy.
• Other common statutory leaves:
  • Marriage leave: 5 paid days
  • Bereavement leave: 3 paid days for death of spouse, parent, or child

Public Holidays

Employees are entitled to paid time off on national public holidays (e.g., New Year’s Day, Labour Day, Independence Day, Christmas), with extra pay or compensatory rest if required to work.

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Employee Benefits in Guatemala

Social Security (IGSS)

Employers and employees must contribute to the Guatemalan Social Security Institute (IGSS), which funds: health, disability, maternity, and pension benefits.

• Employer contribution: 12.67% of monthly payroll
• Employee contribution: 4.83% of monthly salary

These rates generally have no formal cap on earnings for contributions, though some guides mention operational caps for certain programs.

Other Statutory / Common Benefits

• Aguinaldo (13th month bonus): year-end bonus, commonly 1 month’s salary (or as defined by law/collective practice).
• Bono 14 (14th month bonus): mid-year bonus, usually equivalent to 1 month’s salary (statutory in Guatemala).
• Severance pay in some termination cases (see below).

Market-Competitive Extras

To attract talent, employers often add:

• Private medical insurance (top-up to IGSS)
• Meal and transportation allowances
• Performance or sales bonuses
• Training and education support
• Life and accident insurance

An EOR helps design compliant and competitive benefit packages for Guatemalan employees.

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Payroll & Tax in Guatemala

Payroll Currency & Cycle

• Salaries are paid in Guatemalan Quetzal (GTQ).
• Typical payroll frequency: monthly.

Individual Income Tax

Employees are taxed under a progressive system with relatively low rates:

• 5% on income up to GTQ 300,000 per year
• 7% on income above GTQ 300,000

Employers must withhold income tax at source and remit it to the tax authority.

Employer Payroll Obligations

• Withhold income tax (PAYE) on salaries.
• Withhold employee IGSS (4.83%) and remit along with employer IGSS (12.67%).
• Respect minimum wage rules by sector and geographic area.
• File monthly/annual payroll reports as required.

Your EOR manages all registrations, calculations, and filings to keep payroll fully compliant.

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Employment Laws & Compliance in Guatemala

Key regulations:

• Guatemalan Labour Code
• Social Security (IGSS) regulations
• Health & safety standards
• Anti-discrimination and human rights provisions

Termination Rules

Termination must follow Labour Code rules and fall under a valid cause or employer decision with appropriate compensation.

• Notice & Severance:
  • In many cases of termination without just cause, employees are entitled to severance pay, often calculated based on the last monthly salary and years of service.
  • Termination for just cause (serious misconduct) may avoid severance but must be well-documented and legally justified.

Unfair dismissal can lead to claims for reinstatement or financial compensation.

Non-Discrimination

Employers must avoid discrimination based on:

• Gender
• Ethnicity or race
• Religion
• Political opinion
• Union membership
• Other protected grounds

Internal Work Regulations (“Reglamento Interior de Trabajo”) are mandatory for employers above a certain size and must be filed with the authorities.

An EOR ensures policies and processes align with these requirements.