Laws and Policies in El Salvador

Employment Contracts in El Salvador

Employment is governed by the Salvadoran Labor Code and related regulations.

Contract Requirements

• Contracts can be verbal or written, but written contracts are strongly recommended and standard for professional roles.
• Contracts should clearly include:
  • Job title and duties
  • Salary and payment frequency
  • Working hours and workplace
  • Benefits and bonuses
  • Probation period
  • Termination and notice terms

Types of Contracts

• Indefinite-term contracts (most common)
• Fixed-term contracts (for temporary needs or defined projects)
• Part-time contracts

Probation Period:

• Usually 30 days unless otherwise agreed by law (common practice).

An EOR ensures contracts meet Salvadoran Labor Code requirements, especially for benefits, overtime, and termination.

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Working Hours in El Salvador

• Standard workweek (daytime):
  • 8 hours per day
  • 44 hours per week (5.5 days)
• Night work:
  • 7 hours per day
  • 39 hours per week

Overtime

• Overtime is limited and paid at a minimum of 200% (2x) the regular hourly rate.
• Work on weekly rest days or public holidays is paid with additional premiums (often double pay).

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Employee Leave in El Salvador

Annual Leave

• Employees are entitled to 15 days of paid vacation after 1 year of continuous service.
• During vacation, employees receive a 30% vacation bonus on top of regular pay.

Sick Leave

• Sick leave pay is shared between employer and social security, depending on duration and eligibility.
• The employee must present a medical certificate from an approved doctor or social security system.

Maternity Leave

• 12 weeks of paid maternity leave (six weeks before and six after birth).
• Paid at 100% of salary, funded jointly by the employer and Salvadoran Social Security Institute (ISSS), if requirements are met.

Paternity Leave

• 3 days of paid paternity leave granted to fathers after childbirth.

Public Holidays

There are 10+ paid public holidays, including:

• New Year’s Day
• Holy Week (selected days)
• Labor Day
• Independence Day
• Christmas

Employees working on public holidays are entitled to enhanced pay.

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Employee Benefits in El Salvador

Mandatory Benefits

1. 13th-Month Bonus (Aguinaldo)
   • Mandatory year-end bonus.
   • Amount depends on length of service:
     • 1–3 years: 10 days’ salary
     • 3–10 years: 15 days’ salary
     • 10+ years: 18 days’ salary
2. Social Security Contributions
   • Provide access to health coverage and pensions.
3. Paid Leave
   • Annual leave, public holidays, maternity/paternity leave, and sick leave per Labor Code.
4. Severance & Notice
   • Statutory entitlements apply on termination without just cause.

Social Security & Pension (Approximate)

• Employer contributions:
  • Social Security (ISSS): ~7.5% of salary (capped)
  • Pension (AFP): ~7.75% of salary
• Employee contributions:
  • Social Security: ~3%
  • Pension: ~7.25%

(Exact rates may vary slightly based on law updates and caps; EOR handles correct calculations and remittances.)

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Payroll & Tax Requirements

Payroll Currency

• USD (official currency used for salaries and contracts).

Income Tax (Employees)

• Progressive personal income tax on employment income, typically from 0% to 30%, depending on annual earnings.
• Employers must withhold income tax at source (PAYE).

Payroll Cycle

• Salaries are usually paid monthly, though biweekly payments are also used in some industries.
• Employers must issue payslips showing gross pay, deductions, and net pay.

An EOR manages all tax withholding, social security filing, and end-of-year reporting.

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Employment Laws and Labor Compliance in El Salvador

Employment is regulated mainly by the Labor Code of El Salvador and enforced by the Ministry of Labor.

Core Legal Requirements

• Minimum wage varies by sector (e.g., commerce, industry, agriculture).
• Written contracts strongly recommended for all employees.
• Mandatory social security and pension registration.
• Strict rules on working hours, overtime, holidays, and bonuses.
• Clear limitations on termination without just cause.

Termination & Severance

• Termination must be based on just cause (performance, misconduct) or without cause (which triggers severance).
• Severance Pay (Indemnización):
  • Generally equal to 30 days’ salary for each year of service (or proportional for partial years) when terminated without cause.
• Lack of proper cause or documentation can lead to disputes and claims.

Non-Discrimination & Equality

Workers have the right to unionize and engage in collective bargaining.

Laws prohibit discrimination based on sex, religion, race, political opinion, or social origin.